SDG reporting: an analysis of corporate sustainability leaders

1. Introduction

In recent years, sustainable development has become a strategic goal for business and governments. This trend has been encouraged by the launch of the United Nations (UN) sustainable development goals (SDGs) in 2015 (United Nations, 2015), which has constituted a new framework to address the most urgent global issues and ensure sustainable progress considering five pillars, to better asses the 17 goals: planet, people, prosperity, peace and partnerships, also known as the 5 P's. Likewise, the SDGs initiative represents a shared vision of the great global sustainability challenges that can guide organizations in defining their roadmap to contribute to sustainable development.

The UN understand that business is a key player in achieving the SDGs, both locally and internationally. In this regard, more and more companies are committed to the SDGs and communicate their contribution publicly to their stakeholders. On this particular issue, a question arises about whether the corporate reporting regarding SDG implementation is merely symbolic or truly strategic (García-Meca and Martínez-Ferrero, 2021). On the one hand, in the academia, this question is gaining momentum and there are a large number of recent studies that explore how companies address the SDGs in their sustainability reporting (Avrampou et al., 2019; García-Meca and Martínez-Ferrero, 2021; Izzo et al., 2020; Lopez, 2020; Van der Waal and Thijssens, 2020). On the other hand, different international organizations (GRI et al., 2015; GRI, UN Global Compact, 2018; Adams, 2017) have developed frameworks to support companies in the operationalization of SDGs.

In spite of these developments, in the academic literature has been coined terms such as SDG-washing or rainbow-washing, which are related to a symbolic approach of the SDG reporting (Heras-Saizarbitoria et al., 2022). In contrast to these terms, the SDG integration at the company level could be defined as the way in which the SDGs are “operationalized in the organization in a measurable, accountable and assessable manner” (Heras-Saizarbitoria et al., 2022, p, 319) with the aim of defining organizations' practices in the framework of the corporate sustainability strategy that can contribute to the achievement of SDGs. Nonetheless, empirical research is at a very early and underdeveloped stage and further studies are needed to evaluate the integration of SDGs in the management system (Borin de Oliveira Claro and Ramajo Esteves, 2021).

In this context, the main objective of this study is to explore the commitment at the highest decision-making level and the integration of SDGs in corporate reporting by means of the materiality analysis and key management elements (targets, actions and key performance indicators – KPIs). For that end, this study has focused on a sample of companies that have a leading position in sustainability of a specific region that share the same culture, language and regulatory framework. These companies have integrated social and environmental issues, as well as SDGs, in their public communication and they have been considered as benchmarks in terms of sustainability in the region. The results of this study help to promote a real implementation of the SDGs considering the consistency of the SDG information and its levels of integration in the management system. This study contributes to discourage the symbolic approach of the SDGs and promotes a complete and comprehensive perspective in the communication of the real strategy and performance on the contribution toward sustainable development.

This paper is divided in five sections. After this introduction, a review of the literature is provided. The third epigraph includes information on the sample, variables and methods used in the empirical section. The fourth section presents the results, while the final one summarizes and discusses the main findings of the study.

2. Literature review

The concept of “SDG reporting” has received an increasing interest in the literature in recent years. SDG reporting facilitates to plan, implement, measure and communicate the SDG business efforts (Rosati and Faria, 2019). In this respect, businesses have many reasons to include SDGs in corporate agendas: from integrating stakeholder's expectations and the major societal concerns into the business, to developing and design sustainable business models that provide business solutions to societal problems, to manage sustainability global risks or to create innovation and investment opportunities (Avrampou et al., 2019; Consolandi et al., 2020; Izzo et al., 2020; Vildåsen, 2018).

In spite of the potential interest of companies to integrate SDGs in their corporate strategies, recent literature calls into question whether SDG reporting is merely symbolic or truly strategic (García-Meca and Martínez-Ferrero, 2021).

On the one hand, from a theoretical point of view, impression management approach (Leary and Kowalski, 1990) may explain the symbolic approach of SDG reporting, since companies may report their contribution to the SDGs with the aim of positively influence stakeholder's perceptions about corporate behavior and to improve their reputation, rather than to create changes in management process and practices to achieve the SDGs. This approach usually applies in environments, like the SDG context, with a lack of regulation and with an absence of accepted means to show a substantial contribution to the “common good”.

Accordingly, several recent studies (Avrampou et al., 2019; Schramade, 2017; Izzo et al., 2020; Van der Waal and Thijssens, 2020) demonstrate that many companies use SDG reporting as a symbolic reporting since they fail to show a complete integration of the SDGs into the corporate strategy. In particular, Avrampou et al. (2019) reveal a limited overall performance in reporting on their contribution to the SDGs. Mhlanga et al. (2018) highlight that companies do not identify their SDG priorities under a consistent approach, since they pick the more favorable SDGs regardless of if they are material or not, i.e. they adopt “cherry-picking” practices. Schramade (2017) shows substantial different percentages among the companies that mention the SDGs in reports or on the website, those that integrate the SDGs into strategic decisions and the companies that provide performance indicators on the SDGs. Similarly, the PWC (2018) study on information reported by global companies, concludes that 72% of companies mention the SDGs in their corporate or sustainability reports, but only 23% detail SDG indicators or goals. Likewise, Van der Waal and Thijssens (2020) and Izzo et al. (2020) conclude that business participation in the SDGs is more symbolic and intentional than substantive. Heras-Saizarbitoria (2022: 325) after exploring the SDG reporting of 1,370 organizations, underline that “in most of the cases, the SDG only serve to add color and fancy icons to the reports in a trend towards ‘SDG icon-picking’ that may point to impression management and SDG-washing”. These results are related to the concept of “Rainbow Washing” since, in sustainability reports, companies only show a cosmetic integration of the SDGs in the business and a lack of performance indicators to track the progress in achieving the SDGs.

On the other hand, the substantial SDG reporting is based on the stakeholder theory (Freeman, 1984). In fact, the SDG initiative is supported by a broad range of stakeholders (García-Meca and Martínez-Ferrero, 2021; Lopez, 2020): regulators, investors, governments, consumers and companies, among others. In this regard, the integration of SDG in corporate strategy may offer a holistic and reconciliatory approach from different perspectives and expectations of stakeholders that can influence the outcome of a company.

From an empirical perspective, García-Meca and Martínez-Ferrero (2021) find evidence about a significant impact of SDG reporting on firm performance in those firms that operate under high levels of social scrutiny and stakeholder pressures about ethical and environmental issues. In addition, Borin de Oliveira Claro and Ramajo Esteves (2021) show that a substantial sample of Brazilian enterprises address the SDGs in their corporate strategies. Moreover, exploring motivating factors, these authors find the materiality assessment as a remarkable factor, since companies think that SDGs should be considered material based on the stakeholders' interest. Likewise, Lopez (2020), after exploring the integration of the SDGs in corporate web and CSR Report, in a sample of Spanish multinational companies, reveals that there is an integration of the SDGs in the corporate strategy although there is a lack of indicators to measure their contributions to SDGs.

In this context, further academic research into SDG reporting is needed to better understand how the companies are integrating the SDGs in their management system, how they are communicating their SDGs contribution to their stakeholders and which best practices can they adopt to contribute to a real SDG corporate implementation and reporting (Bebbington and Unerman, 2018; Silva, 2021).

Different international organizations (GRI et al., 2015; GRI, UN Global Compact, 2018; Adams, 2017) have provided tools and frameworks to support companies in the integration of the SDGs in their management systems. Specifically, Global Reporting Initiative (GRI), United Nations Global Compact (UN Global Compact) and World Business Council for Sustainable Development (WBCSD) (2015) developed a guide to help companies to align their strategies and to manage their SDG contribution. More recently, this guide has added an annex to link the SDGs and GRI Standards (GRI, UN Global Compact, WBCSD, 2020). In addition, GRI and UN Global Compact developed a guide to integrate the SDGs in the Sustainability Reporting (GRI and UN Global GRI, UN Global Compact, 2018). Similarly, a framework was also proposed for contributing to the SDGs based on the integrated reporting (Adams, 2017). In all these frameworks, common steps are the identification of priority/material aspects related to SDGs, the integration in the management system and the reporting phase.

Despite the above-mentioned frameworks to operationalize SDGs at company level, the research on how companies communicate their contribution to SDGs has not been thoroughly explored (García-Meca and Martínez-Ferrero, 2021; Lopez, 2020), neither the commitment nor the integration of SDGs in corporate reporting (Heras-Saizarbitoria et al., 2022), which will be empirically addressed in this study.

From a theoretical point of view, the previous study of Santos and Bastos (2021) highlight three corporate management approaches for integrating the SDGs. From a normative perspective, the integration of SDGs takes place at two levels: in terms of values, cultures and the role of leaders and in terms of engagement with the stakeholders. From an operational perspective, it is important the instruments that contribute to the implementation of sustainability like company targets, performance measurements or reporting indicators. Finally, focusing on strategy, the companies should consistently integrate sustainability in their core strategy and to consider it as a key factor for creating value and competitive advantages (Moneva et al., 2007). Although these approaches have been explored in an isolated way, more empirical evidence about the connection of the three perspectives (normative, operational and strategic) is necessary to better understand whether the companies are doing a comprehensive integration of the SDGs.

Contextual factors may generate pressures or incentives to integrate the SDGs in their area of influence (Santos and Bastos, 2021). Accordingly, previous research has achieved a consensus that those factors that impact sustainable development vary over time and geographical areas, among others (Borin de Oliveira Claro and Ramajo Esteves, 2021). Therefore, this study has been limited to a specific Spanish region, i.e. the Valencian Region. This is a region with the same culture, language and with the same regulatory framework. There are several studies on the implementation of the SDGs in Spanish companies in other regions of Spain. Specifically, the Madrid Business Confederation, with the collaboration of the Club for Excellence in Sustainability and Ernst and Young (EY) (2020), prepared a questionnaire to study the state of implementation of the SDGs in companies from Madrid. In the same vein, the Observatory of ODS (ESADE, 2020) focuses on its third report on the contribution of Spanish companies to the SDGs. However, in the Valencian Region, there is a very limited number of studies on the implementation of SDG in businesses. Up to now there is only one descriptive study entitled “The SDGs and the private sector: Opportunities for action in the Valencian Community” published by Generalitat Valenciana (2019) which was carried out by Red2Red Consultants supported by the Ministry of Transparency. This report highlights that 75% of companies know the initiative of SDGs, although 50% do not recognize precise knowledge about them. The companies surveyed recognize a close relationship between SDGs and the core business, given the high degree of connection between the main activity of the company and the SDGs. Nonetheless, no studies have been published in this area regarding the consistent integration of the SDGs in the sustainability management and reporting.

Accordingly, to fill the existing research gaps, this study aims to better understand the integration of SDGs in corporate reporting and the linked management systems of companies that are leaders in sustainability. Therefore, the research questions that guide the development of this study are the following:

If the answer to RQ1 is affirmative but not the answer to RQ2, it will evidence the merely symbolic presence of SDG reporting and management, having risks of “Rainbow washing”. On the opposite, if the answer to RQ2 is affirmative and this is not the case of the answer to RQ1, there is a risk of inconsistency and weakness in the real integration of SDG in the core of the company with a long-term perspective. Affirmative answers in both cases will indicate a consistent strategic position toward SDG management and reporting, including a strong commitment to sustainability and also consistent integration of SDGs in the company's management system.

3. Methodology and sample

This study presents an exploratory analysis on the degree of SDG commitment and SDG integration in sustainability reporting of Valencian companies that are leaders in sustainability. For that end, the study analyzes the information offered by companies on their corporate websites as a source of public, accessible and objective data. Specifically, this study applied a content analysis procedure. Content analysis is a research method used for interpreting data according to their context in an objective and rigorous way (Krippendorff, 1980). Content analysis methodology has been broadly applied in the context of sustainability reporting analysis (Manes-Rossi and Nicolo’, 2022).

The content analysis was conducted following a systematic process (Silva, 2021; Manes-Rossi and Nicolo’, 2022). First, this study selected the source of information. In this regard, this study collected the data from sustainability reports, integrated reports and corporate webs. The unit of analysis were themes, illustrations and infographics related to SDGs.

Second, this study defined an analytical framework of the commitment and integration of the SDGs in corporate sustainability reports, which was used as a scheme to codify the content. The selection of the variables of the proposed framework were based on the main international standards and guidelines for operationalizing the SDGs at the enterprise level (GRI et al., 2015; GRI, UN Global Compact, 2018; Adams, 2017), as well as, on academic studies focused on analyzing how substantive is the commitment of companies to contribute to the SDGs through sustainability reports (Schramade, 2017; Izzo et al., 2020; Van der Waal and Thijssens, 2020). Note that it is important to develop the categorization framework (see Table 1) from well-established standards and literature, since it must be rigorous, objective and relevant to answer the research questions (Manes-Rossi and Nicolo’, 2022).

Third, the step regarding the analysis and interpretation was carried out in November 2021 following Roman et al. (1999) process. Contents were analyzed by two of the authors and they compared the results after the extraction. In case of dissent, a third author entered into the process to decide the final classification.

The proposed framework to analyze the level of commitment and integration of the SDGs in the corporate sustainability reporting, consists of two variables and seven indicators, which are displayed in Table 1.

The first variable is focused on the commitment to the SDGs at the highest decision-making level. To integrate the SDGs into corporate strategy, the first requirement is that the top management makes explicit their commitment to sustainability and the SDGs. In this way, a message is communicated to the rest of the internal and external groups about the relevance that the SDGs represent for the organization and about their willingness to integrate them into the management system. For this end, this study analyzes whether the initial letter from the board chairman/CEO included in the report explicitly mentions the “2030 Agenda” or the “SDGs”, and whether it is signed by the board chairman/CEO which is understood as a higher level of commitment. This study will answer the RQ1.

The second variable refers to the SDG integration in the corporate sustainability reporting and includes five dimensions: the company's own perception, though the explicit SDGs contribution information related to its business model, the inclusion of SDGs in the materiality analysis, and the SDG deployment along management elements: targets, actions and performance indicators.

Given the nature of the data, these five dimensions were aggregated using fuzzy inference systems related to fuzzy set theory (Zadeh, 1965). The fuzzy logic methodology is especially suitable for measuring complex concepts, for aggregation scores and for integrating expert knowledge (Rivera-Lirio and Muñoz-Torres, 2010; Escrig-Olmedo, E. et al., 2014). Additionally, the unavailability of a long series information is not an obstacle for its application (Muñoz et al., 2008).

The fuzzy inference system used is Mandani type (Mamdani, 1974). Applying fuzzy maths [1], the information obtained regarding the percentage of companies that considers each SDG in their contribution to sustainability, their materiality analysis, actions and KPIs definition, was transformed into linguistic terms by using membership functions (triangular in this case), e.g. “Weak SDG consideration in the materiality analysis”. In the next step, it was necessary to design the so-called fuzzy inference rules, IF–THEN type. Following Kouikoglou and Phillis (2011), the set of inference rules and the consequent outputs, had been defined in such a way that contributes to giving the same importance to the five studied variables and their management and reflected the fact that whenever an input indicator was improved, the overall integration level was also improved. Consequently, 3⁵ IF-THEN rules were defined, mapping inputs with eleven outputs. The fuzzy sets related to the outputs varies from extremely weak (EW) to extremely high (EH). As an example, “IF contribution is WEAK, materiality is WEAK, action is WEAK, target is WEAK and KPIs is WEAK, THEN SDG Integration is EXTREMELY WEAK”. Finally, this fuzzy output was transformed into crisp number between 0 and 1 applying the centroid as defuzzification method (Jain and Singh, 2020).

In addition, this study calculated the correlation coefficients with the aim of enriching the consistency analysis between the above-mentioned variables regarding the level of integration. Both analyses will answer the RQ2.

The sample of this study is focused on a specific region with the aim of controlling external factors that can affect the integration of sustainable development issues into business strategies (Borin de Oliveira Claro and Ramajo Esteves, 2021). This study has been carried out analyzing Spanish companies with their headquarters in the Valencian Region, since they are subjected to the same regulatory context, with a high degree of commitment to sustainability in the public information and with an explicit reference to the SDGS in their CSR/sustainability reports, integrated reports or corporate websites. Moreover, this region offers an enabling environment to contribute to SDGs since these goals guide all public policies at regional level (UNDP, 2016). With the aim of selecting the benchmark companies in sustainability in the Valencian Region, this study first, selected the initial sample, consisted of those Valencian companies that are members of business clubs or foundations that promote corporate responsibility and sustainability (such as the CE/R + S of the Valencian Community or Fundación Étnor). In addition, the sample was extended with Valencian awarded companies in sustainability terms (e.g. Sustainable design by Global Fashion Awards; National Award for Excellent, Innovative and Sustainable Management, or Go! SDGs). In total, 40 Valencian companies, with public information on sustainability, were identified. Subsequently, the corporate websites of the 40 companies were reviewed in detail. Those companies that showed their commitment to the SDGs in an accessible way and to the three dimensions of sustainability were selected. Those companies that adopt a narrow approach to the sustainability, referring only to the ethic, gender or the environmental issues were not considered. The final sample consists of 20 companies which are included in Table 2.

The companies analyzed belong to a broad range of sectors. The sector most represented is “Consumer Goods” (25%), which are basically companies from the agri-food industry, followed by the “Consulting services and business creation’ sector (15%). Regarding the size of the companies included in the sample, 90% has more than 50 workers. Focusing on the type of companies, 15% of the sample are cooperatives and the rest are Public or Private Limited Liability Companies.

This study structures the analysis of the commitment and integration of each SDG in the corporate reporting of each company, also considering the belonging of the different SDGs to the prosperity, people, planet, peace and partnership pillars. According to the classification made by the United Nations (2015) and OECD Organization for Economic Co-operation and Development (OECD) (2017) where from the slogan “Transforming our world”, it relates the five pillars, “the 5 P's” of sustainable development with the SDGs, which are considered as “integrated and indivisible, with a global nature and a universal application”. The 17 SDGs can be categorized into five P's to better asses the 17 goals. The International Monetary Fund also follows this classification on its website (www.imf.org/en/Topics/SDG) and by the Public Administration of the Valencian Region in a monitoring map to evaluate the implementation of the SDG in this region. The inclusion of this perspective in the analysis will give more information regarding the approach adopted by the sustainability leaders in their SDG management.

4. Results and discussion

5. Conclusions

This study explores the soundness of the commitment that sustainability leader companies have regarding their contribution to SDGs, and the consistency in their integration within their management system. For that end, this study has examined the sustainability reported information of 40 companies located in a Spanish region with the same culture, language and within the same regulatory framework and finally has made an SDG content analysis of 20 of them. In advance, these companies had been identified as the leaders in sustainability management in the region.

On the one hand, the commitment to the SDGs has been analyzed exploring whether the initial letter from the board chairman/CEO included in the report explicitly mentions the 2030 Agenda or the SDGs, how it is addressed and whether it is formally signed at the highest decision-making level. On the other hand, the SDG integration in the corporate management has been examined by means of the definition of an integration score, based on the design of a fuzzy inference system, equally considering five selected domains: company's own perception regarding its contribution to SDGs; SDGs inclusion in materiality analysis; and SDGs deployment along management elements (targets, actions and performance indicators). The empirical analysis has been structured according to the classification made by the “the 5 P's” of sustainable development.

Regarding RQ1, the findings show that only 35% of the companies in the sample explicitly mention the 2030 Agenda or the SDGs in the initial statement of the reporting and none of them have signed the statement, which means a lack of formality regarding the SDG commitment at the highest companies' decision-making level. It implies a scarce adoption of a normative approach, where the leader's role is key for a real commitment of the organization that can be transmitted both internally and externally. This commitment would act as umbrella for a real involvement of the organization in SDGs deployment. Its absence calls the soundness of this involvement into question.

Focusing on the SDG integration in the reporting and management systems (RQ2), the analyzed companies show inconsistencies in their operational and strategic approach toward SDG deployment. In fact, the higher integration score obtained is 0.44, defined theoretically between a range from 0 to 1. In terms of pillars, the analysis does not show any predominant pillar considering all the SDGs. The most integrated SDGs are associated to the prosperity pillar (SDG 8 and 9), to the planet pillar (SDG 12), and to the people pillar (SDG 3 and 4). Partnership and peace pillars present a lower integration, being located respectively in intermediate and latter positions.

Despite these leader companies declare being close to certain SDGs, it is not reflected in an associated materiality analysis, targets or KPIs definition. This result is aligned with a symbolic approach in the SDG integration, since this own perception regarding the closeness to certain SDGs is not materialized in more tangible and operative management structures.

The findings of this study should be viewed considering potential limitations. On the one hand, the empirical analysis is conditioned by the sample and the availability of information. Large samples that include other regions are clearly needed to test the robustness of the results. On the other hand, several difficulties have been identified regarding the detail, access and possible comparison of the information, in the development of this study. In particular, the companies include the different information on sustainability under various items, such as “CSR”, “Commitment” or “Let's take care of the Planet”. In addition, the level of accessibility of this information is also very diverse. Furthermore, due to lack of more recent information constraint, the reports analyzed do not correspond to the same year, although the majority correspond to the year 2020, there are two that correspond to 2019 and one to 2018. This fact difficulties comparability and highlights the existence of a delay between the possible actions that the companies are implementing and what they are reporting. The way used for communicating their commitments to the SDGs are also varied and different. Some companies include them in a generic section, others have a specific section on their website or use different sections connected with sustainability aspects, and there is another group of companies that use Sustainability/CSR reports, being the GRI standard the most common.