SDGs vs ESGs: What is the Better Measure of Sustainability?
As sustainability has become a top value indicator for investors and a key decision-making factor for consumers, companies are searching for effective ways to measure and prove their sustainable contributions. But with so many subjective interpretations of what constitutes a “measure of sustainability,” and the difficulty in quantifying certain actions, what is the best way to track and report sustainability? Here we compare the Environmental, Social, and Governance (ESG) ratings and UN Sustainable Development Goals (SDGs) framework—from how they were established to how they are being leveraged by businesses—and determining which provides you with the best, most objective measure of your sustainable efforts.
What is the ESG measure of sustainability?
Investopedia defines Environmental, Social, and Governance (ESG) criteria as a “set of standards for a company’s operations that socially conscious investors use to screen potential investments.
- Environmental criteria consider how a company performs as a steward of nature.
- Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates.
- Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.”
Brokerage firms and mutual funds now use ESG ratings to guide “sustainable investing”. Unfortunately, ESG criteria may not be the measure needed to define sustainability. In the article The World May Be Better Off Without ESG Investing the Stanford Social Innovation Review argues that “the bar for what constitutes a good corporate citizen is abysmally low and may have made ESG investing, arguably the hottest trend in investing today, a greater force for destabilizing society and the planet than if it didn’t exist at all.”
What is the SDG measure of sustainability?
In 2015, the United Nations member states worked together to create 17 Sustainable Development Goals (SDGs). According to the United Nations, “the Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including poverty, inequality, climate change, environmental degradation, peace and justice.” The goals aim to improve health and education, reduce inequality, and spur economic growth while tackling climate change and preserving oceans and forests. The 17 Sustainable Development Goals are defined in a list of 169 SDG Targets. 231 unique Indicators track progress towards these Targets. The 17 SDGs are integrated. There is a recognition that action in one area may impact results in other areas and a balance in development is required to make progress.
Which measure of sustainability is objective?
A comparison of the attributes of Environment, Social and Governance (ESG) versus Sustainable Development Goals (SDG) demonstrates that the SDG criteria is standardized and clearly defined and therefore is the better measure of sustainability.
Further, our own research shows that SDGs are the most commonly used framework for sustainability reporting from the top patent holders.
A new, objective measure of sustainability
To meet corporate demand for an objective measure of sustainability, LexisNexis® Intellectual Property Solutions has directly and explicitly mapped all technological topics that encompass patentable inventions to the framework of the United Nations Sustainable Development Goals, targets and indicators*. The LexisNexis® PatentSight® innovation analytics platform makes sustainable-focused innovation identifiable, searchable, and trackable through mapping the global patent system to the UN Sustainable Development Goals.
A group of LexisNexis patent search experts objectively mapped technology areas with active patenting activity to the UN Sustainable Development Goals, their targets, and their 231 unique indicators. Searches and search topics for this mapping are based on the goals, indicators and metadata of the individual UN SDGs. In an iterative approach, all underlying searches were reviewed and modified according to their results regarding SDG compliance before finally being implemented into the PatentSight® analytics tool.
The SDG patent mapping helps corporations through:
- Measurability: Patent data is an important source to measure a company’s contribution to a sustainable world. Innovation has been identified as a key contributor to more sustainability.
- Transparency: Including patent data in the SDG evaluation process helps to shed more light on the effort companies put into becoming SDG compliant and avoids “green washing”.
- Valuation: Patent data in combination with the Patent Asset Index™ reveals real champions and allows stakeholder as well as shareholder a better decision-making process.
- Accessibility: PatentSight has mapped its global patent database to SDG-related tech-fields. This enables non-patent experts to easily access their fields of interest and gain valuable insights for their analyses.
Watch the On-Demand Webinar Calling for Action: How to Track and Measure Sustainable Innovation and Investments to learn how you can gain an unparalleled view into the global innovation landscape and empower decision-making for opportunities in sustainable technology.
Read When IP Meets Sustainability: Mapping Patents to the United Nations Sustainable Development Goals to learn more.
*There are four SDGs not directly connected to technology and thus cannot be associated with patents.
Want insights into how sustainably focused you and your competitors are?
Conduct objective patent analyses against the United Nations Sustainable Development Goals (UN SDGs) using LexisNexis® PatentSight®.