SDGs (Sustainable Developn1ent Goals) are global goals set out by the United Nations, and there are currently 17 SDGs help guide companies and organizations through achieving sustainable development practices.
ESG is a rating system used by companies to measure their environmental and social credentials, providing guidelines in helping determine whether a product/ service is contributing positively (positive externalities) to the environment, society, and governance of an organization.
The main differences are as follows:
- SDGs focus on long-term solutions and are at a more high level, focusing on specific targets around the world.
- ESG measures how well a company is performing in terms of its social and environmental responsibilities throughout its operations and holds companies accountable for their actions.
SDGs work together with ESG by providing guidelines on how an organization can achieve sustainable development goals within their company, products, and services.
More and more ESG reports have referred to UN SDGs over the past years. As of 2020, nearly 30% of listed companies sampled have applied UN SDGs as the cornerstone of their ESG work. Beyond a simple, static reference to UN SDGs in ESG reports, companies have also identified key UN SDGs that are mapped to their businesses and set related targets. Further, the 17 goals were integrated into actual ESG practice to set up, guide, communicate and report companies’ ESG strategies, targets and activities, thus forming a long-term mechanism for ESG transformation.