Opinion: Why ESG matters for businesses in public health and development

The pandemic has upended global health and development as we know it. Not only has it stalled progress made on the Sustainable Development Goals, it has sapped the budgets of many governments working toward them, making it an increasingly uphill battle. The potential result will mean more people falling into poverty, more lives lost, and greater inequality, primarily affecting the world’s most underserved populations unless swift action is taken by both the public and private sectors.

Today, nearly halfway through the 2030 agenda timeline, the United Nations — together with its partners — is faced with the task of simultaneously addressing the ongoing pandemic and ensuring gains made on the SDGs are not reversed; all while trying to build back better and more equitably with significantly fewer resources. The U.N. has predicted an annual funding gap of $2.5 trillion to achieve the SDGs, which has been exacerbated by the pandemic.

Against this backdrop, it’s clear that the broader ecosystem of players — including the private sector —must all do their part if we’re to make progress on our shared blueprint for prosperity for people and the planet, now and into the future.

The good news is that corporations, including biopharmaceutical companies like Pfizer, are further aligning their core business strategies and social purpose with the SDGs through the adoption of their own and external environmental, social, and governance, or ESG, frameworks. This concept is rooted in the idea that if companies can create value for all stakeholders — employees, patients, communities, suppliers, civil society — they are more likely to succeed while also helping to tackle the complex challenges facing our world today.

From purpose to action

To understand where we’re headed, it’s helpful to reflect on how we got here. During the time of the Millennium Development Goals starting in the early 2000s, the private sector’s role in this agenda was largely focused on philanthropic efforts. Cut to 2015 and the adoption of the SDGs — for many companies, including Pfizer, initial efforts to help advance this new agenda in a meaningful way were challenging.

Translating a framework of 17 goals and 169 targets designed for governments into a corporate lexicon of key performance indicators that can be measured and reported came with its own set of challenges.

However, this shift toward shared value and corporate responsibility that links social and environmental initiatives to commercial strategies was a stepping stone to today’s mobilization around ESG. To accelerate private sector momentum, some global development organizations predicted that achieving the SDGs could open $12 trillion of market opportunities and create 380 million new jobs, and that action on climate change would result in savings of about $26 trillion by 2030.

Socially responsible investors, including institutional shareholders, began pushing companies for more concrete impact reporting as the 10-year countdown for achieving the SDGs — dubbed the “Decade of Action” — came into view. This was recognized in 2019 by the CEOs of 181 major employers, including Pfizer, who signed onto a new definition of the purpose of a corporation.

These actions have all contributed to where we stand today — in a watershed moment for aligning corporate SDG-linked activities with ESG.

An inflection point for ESG

As the world faces an unprecedented set of challenges there is growing recognition that these issues cannot be tackled alone. Paired with an increased expectation for companies to lead with purpose and a widespread interest in ESG among investors, policymakers, corporate leaders, as well as millennials and Generation Z-ers, today’s landscape is a vital inflection point to build the SDGs into core business strategies.

But why should we believe this will support collective action toward the SDGs? Because of three important changes:

• Institutional investors are aligning their ESG investment criteria with the SDGs. For example, in 2020, BlackRock launched a new global ESG fund focused on the integration of ESG information into investment processes and aligning its priorities to the SDGs.

• Companies are tying ESG to executive compensation. Nike and Mastercard are just two of several major companies to formally link executive compensation to global development targets through ESG frameworks, and there will inevitably be many more.

• Private capital financing for ESG-related projects is dramatically increasing. According to JP Morgan, the overall market for green, social, and sustainable bonds is estimated to grow 49% to around $690 billion in 2021. Issuers of ESG bonds are required to report on the impact of their use of proceeds, often tying outcomes to SDG targets.

What is needed to continue this momentum? And what will determine the scale to which ESG will help achieve the SDGs by 2030?

• Greater dialogue between policymakers and investors, with the goal to inform policymaking that will incentivize companies to invest in solutions that advance the SDGs. For instance, a policy ban on internal combustion engines after 2030 could help to drive private sector innovation and investment.

• Show, not tell. Companies need to be more explicit in their communications that ESG is embedded into their core business and that they are being held accountable for progress. At Pfizer, we recently launched our inaugural 2020 ESG Report, which outlines how we seek to address the needs of all stakeholders. Not only are we tracking against our purpose to deliver breakthroughs that change patient’s lives, but also against our ethical decision-making and environmental goals, such as to become carbon neutral across our internal operations by 2030.

• Measurement matters. Standard-setting bodies, such as the Global Reporting Initiative, Sustainability Accounting Standards Board, and the International Financial Reporting Standards Foundation, must assure their standards and metrics — which are increasingly used by companies for ESG reporting — are designed to demonstrate progress toward the SDGs.

As the world continues to grapple with the ongoing pandemic and the clock ticks on the SDGs, it’s clear that ESG issues are inextricably linked, and that the private sector must play an active role in addressing them individually and collectively.

ESG frameworks provide an opportunity to align corporate, global public health, and development goals and to take on the shared responsibility of advancing health and prosperity for all — something we can all get behind.