The Sustainable Development Goals as new business norms: A survey experiment on stakeholder preferences

Highlights

• The implementation of the SDGs increases stakeholders' preferences for companies.

• Businesses benefit from implementing SDG initiatives.

• A gap exists between the stakeholders' preferred SDGs and companies' priorities.

• Increasing stakeholders' awareness is effective in closing the gap.

Abstract

The Sustainable Development Goals (SDGs) were set by the United Nations General Assembly in 2015 to work towards a sustainable society in which economic prosperity is achieved and social and environmental concerns are met. Under the SDGs, businesses are expected to assume increasingly active roles. However, little is known about the relationship between the preferences of stakeholders and businesses' contributions to the SDGs. This study, therefore, investigates whether the SDGs can function as business norms by examining stakeholder support for sustainable practices. Specifically, the study examines preferences for companies that contribute to the SDGs and the effects of raising awareness regarding the inherent nature of the SDGs on stakeholders' preferences. To this end, we used a nationwide online survey dataset conducted in Japan (n = 6043) and employed a combination of conjoint analysis and an information treatment experiment. The results showed that implementing the SDGs increased stakeholders' preferences for companies. However, a gap existed between the stakeholders' preferred SDGs and the companies' priorities concerning the SDG implementation. The findings suggest that increasing stakeholders' awareness is effective in closing the gap.

Introduction

Sustainable development (SD) has been an important social topic since its emergence in the early 1980s. SD aims to “meet the needs and aspirations of the present without compromising the ability to meet those of the future” (The World Commission on Environment and Development, 1987). However, despite the joint international efforts to achieve a sustainable society, the world faces numerous challenges, including poverty, climate change, and inequality. To tackle these challenges, in September 2015, all United Nations' member states agreed on the Sustainable Development Goals (SDGs), a collection of 17 global goals requiring governments, companies, and citizens from both developed and developing nations to work together for a sustainable world by 2030. The SDGs are not legally binding but are viewed as responsibilities that everyone must fulfill (United Nations Development Programme, 2017).

Under the SDGs, businesses are expected to assume increasingly active roles (GRI and United Nations Global Compact, 2018; Scott and McGill, 2018) by “apply[ing] their creativity and innovation to solve SD challenges” (United Nations, 2015). While investing in these goals will likely economically benefit businesses (Business and Sustainable Development Commission: BSDC, 2017), the private sector will have to mobilize considerable resources towards advancing the SDGs (United Nations Secretary-General, 2019). The SDGs can play a vital role in encouraging a norm change towards sustainable development (Fukuda-Parr and McNeill, 2019). However, some authors are concerned that the SDGs might be used for “SDG-washing,” that can be meeting societal expectations without actually contributing towards SD (Buhmann, 2018; Ethical Corporation, 2019a; Kim, 2018). Moreover, Vandemoortele (2018) argues that the SDGs lack the precision and clarity needed to meet sustainability challenges. Despite these critical views, we assume that the SDGs can act as norms to promote sustainability. This approach is supported by the recent developments in introducing the SDGs into the private sector.

Five years after the adoption of the SDGs, companies have begun embedding the goals into corporate practice. A global survey targeting senior business practitioners indicated that the number of companies integrating the SDGs into strategy increased from 60% in 2017 to 71% in 2019 (Ethical Corporation, 2019b). However, as all G20 countries face significant challenges in achieving the SDGs, substantial transformations in various areas (e.g., education, energy systems, land use, urban development) and the long-term involvement of different stakeholders are required (The Bertelsmann Stiftung and Sustainable Development Solutions Network:SDSN, 2018). Significant changes in the way businesses think and function are required to meet sustainability challenges (Bocken et al., 2015) and reach the SDGs by 2030 (Ohno et al., 2019). In addition, the dominant business model, which is focused on short-term economic value, has to be reconsidered (Scheyvens et al., 2016). The SDGs require businesses to consider “integrating sustainability into the core business and embedding targets across functions” (SDG Compass, 2015). As such, SDG-related activities must be profitable and go beyond charity. More importantly, ensuring the creation of economic value may motivate businesses to support the SDGs.

Extant studies have highlighted the importance of involving stakeholders in business strategies (Freeman, 1984; Freudenreich et al., 2019; Hörisch et al., 2014; Parmar et al., 2010) and sustainable business models by emphasizing multi-stakeholder engagement (Geissdoerfer et al., 2018), which has received increasing attention from both research and practice (Lüdeke-Freund and Dembek, 2017; Scheyvens et al., 2016). Companies need to address the issue of creating value for all stakeholders (Hörisch et al., 2014). To achieve this, they need to understand stakeholders' motivation as a prerequisite for sustainability and financial performance (Lee and Raschke, 2020) and also promote innovation (Tantalo and Priem, 2016). In this context, we argue that businesses can create value when stakeholders support sustainable practices. For example, if a jobseeker prefers a company that contributes to the SDGs and chooses to work for that company, the company can create value from its SDG contribution. This type of value creation through stakeholder support can have a normative effect and lead the SDGs to become a new norm for business practice (Fukuda-Parr and McNeill, 2019). However, little is known about the relationship between stakeholders' preferences and business contributions to the SDGs. Furthermore, despite theoretical contributions on businesses' actions towards sustainable development, only a few studies which revealed preferences of stakeholders have been conducted. This study, therefore, to fill this gap on existing literature exploring whether investing in the SDGs is beneficial for businesses by examining stakeholders' preferences for SDG contributions (i.e., a company contributes to sustainability under the SDG framework). It also discusses whether the SDGs can function as new business norms for standard corporate practice.

To encourage companies' sustainability-related decisions and actions, it is necessary to consider stakeholders' sustainability mindset, create mutual sustainability interest among them, and empower them by integrating education, regulation, and sustainability-based value creation (Hörisch et al., 2014). In this study, we look at how sustainability mindsets are created through education, specifically by raising awareness. We also assess whether stakeholders (i.e., consumers, investors, and jobseekers) support companies that contribute to the SDGs and whether increasing stakeholders' awareness on the inherent nature of the SDGs increases their selection of products, stocks, and jobs offered by companies that contribute to the SDGs.

We employ an exploratory survey experiment and examine the Japanese stakeholders' stated preferences for businesses based on these businesses' SDG contributions. This study also combines conjoint analysis with an information treatment experiment, in which respondents were randomly assigned to different information treatment groups to measure the impact of SD education on their preferences. Hypothetical scenarios are used to estimate stakeholders' potential support for corporate practice, instead of real-life examples to eliminate factors (e.g., price, product features) that might influence stakeholders' preferences and examine the causal hypotheses on the multiple dimensions of stakeholders' preferences. Therefore, this study provides new quantitative evidence on whether the SDGs can become business norms and influence corporate practice towards pursuing sustainability.

The remainder of this paper is structured as follows. Section 2 reviews the literature on how sustainability concepts emerged in business and the SDGs, discusses the conceptual framework, and develops the hypotheses. Section 3 introduces the methodology, including experiment design and data collection. Section 4 presents the estimation strategy. The results are presented in Section 5. Section 6 discusses potential implications for both businesses and policymakers and whether the SDGs can function as new norms for corporate practice based on our experimental results. Finally, the conclusions are drawn in Section 7.