The impact of the United Nations Sustainable Development Goals on corporate sustainability reporting

Firms’ engagement with the SDGs

Despite their fairly recent launch, the SDGs ¹ have generated considerable scholarly attention. As a high-level measure of the volume and breadth of this research, Nakamura and colleagues (2019) constructed a co-citation network from more than 10,000 SDG-related articles found in Web of Science. In addition to illustrating the increasingly dense network of knowledge around the SDGs, their analysis also suggests two somewhat distinct research clusters—one focused on health/health care and the other on the balance of the SDG topics. Using a similar bibliometric approach, but with a narrower focus on 266 articles in management journals, Pizzi and colleagues (2020) highlighted the dramatic growth in this research area and identified four themes—technological innovation, developing countries, nonfinancial reporting, and education.

Complementing these broad overviews are studies on engagement with specific SDGs. These studies range from the use of specific technologies in the pursuit of specific SDGs (e.g., using satellites to track slavery, in service of SDG 8, Boyd et al., 2018) to the creation of SDG-inspired frameworks for specific industries (e.g., building assessment and management, Alawneh et al., 2019). Such specialized studies also foreground the deeply transdisciplinary nature of SDG research, with specific studies clustering around themes as diverse as ecotourism, renewable energy, antimicrobial resistance, and physical activity and health (Nakamura et al., 2019).

Within this impressive body of SDG research, management scholars have carved out some distinct areas for contributions, driven by our ability to work across levels of analysis and embrace complexity (Howard-Grenville et al., 2019). A recent special issue of Academy of Management Discoveries (2019) highlights this potential with studies ranging from market-level analyses (e.g., tempering enthusiasm for using financial instruments for managing catastrophe risks, Etzion et al., 2019) to organization-level analyses of processes for making progress on specific SDGs (e.g., the role of collective agency in creating and sustaining two community-based enterprises in rural Germany, Hertel et al., 2019).

Our reading of this rapidly emerging area of research suggests an interesting and important gap. Specifically, the survey-based efforts (e.g., PricewaterhouseCoopers [PwC], 2015; Salvia et al., 2019; van Zanten & van Tulder, 2018) provide a general base-case for our understanding of firms’ engagement with SDGs by showing some important (if not particularly surprising) patterns, including an uneven prioritization across SDGs and “cherry-picking” of those that may be easiest to make progress on (Heras-Saizarbitoria et al., 2021). In contrast, other research in this area has focused on the processes deployed by organizations or institutions to grapple with specific SDGs (Bode et al., 2019) or examines specific mechanisms that facilitated more general SDG efforts (Williams et al., 2019). It is at the intersection of these two streams that we see an opportunity to merge the depth of these latter studies with the scale and cross-SDG nuance of the former ones.

In doing so, we seek to help eschew the “Winchester Mystery House syndrome” (Davis, 2015; Howard-Grenville et al., 2019), which puts SDG research at risk when we end up “adding too much complexity and novelty rather than building something that clearly and coherently contributes to a well-defined problem” (p. 358). Instead, we contribute a straightforward pre–post analysis of the sustainability reports of large firms, the sort of firms whose scale will be critical for driving meaningful change toward broad-based sustainability, to see if these systematically changed after the UN’s launch of the SDGs, and then we follow this with an examination of the sectoral and geo-institutional patterns within this broader analysis.

Linking sustainability reporting to the SDGs

Sustainability reporting represents an important pathway for firms to communicate their sustainability practices to stakeholders (Kolk, 2010; Reynolds & Yuthas, 2008). Increasing public scrutiny of firms’ actions—as they seek to generate positive social and environmental externalities beyond those related to economic performance (Leyva-de la Hiz et al., 2021; Wartzman & Tang, 2019)—has made firms pay increasing attention to their sustainability practices and communication.

Sustainability practices are articulated in sustainability reports as an accountability mechanism that supports firms’ legitimacy to operate (Cho et al., 2018; Cho & Patten, 2007). Furthermore, sustainability reporting is an important organizational practice by which firms communicate and signal their sustainability commitment and priorities to their stakeholders (Shinkle & Spencer, 2012). Publishing sustainability reports is a way firms respond to such stakeholder pressures by communicating their aspirations and progress (Bebbington & Unerman, 2018; Cho & Patten, 2007; Reynolds & Yuthas, 2008). Sustainability reporting is largely voluntary and less prescribed than its financial counterpart (Berliner & Prakash, 2015; Kolk, 2003), so while certainly imperfect, these reports offer valuable insights on firms’ sustainability efforts, both realized and aspirational (Christensen et al., 2013).

The increasing attention that the SDGs are receiving worldwide (UNGC & Accenture Strategy, 2016) may create normative pressure on firms, thus shaping both the content and form of their reporting. The institutional theory distinguishes different types of pressures exerted over organizations, namely cognitive, regulative, and normative (Campbell, 2007). Using this distinction, the SDGs represent a source of normative pressure because the implementation of such goals is voluntary and rooted in what stakeholders believe the firm should do. Despite sometimes being a constraint, such pressure may also be viewed by firms as an opportunity to disclose their sustainability practices and gain legitimacy in pursuit of market share (Yin & Zhang, 2012; Zhu & Sarkis, 2007).

Recent work shows that such change in reporting due to normative pressure exerted by the SDGs is more than just a theoretical possibility. For instance, Bebbington and Unerman’s (2018) analysis of SDGs in accounting and Pizzi and colleagues’ (2021) study of Italian firms showed how the SDG orientation of reporting is related to certain governance dimensions. Similarly, Rosati and Faria, in a global sample of 90 countries, looked at which institutional (2019a) and organizational (2019b) factors influenced the adoption of the SDGs in firms’ sustainability reports. Given this increasing evidence of meaningful normative pressure exerted by the SDGs, we seek to contribute to this promising line of research by conducting a systematic analysis of changes in firms’ sustainability reports following the launch of the SDGs.

Data sources

To answer our research question, we collected two sustainability reports for each of the firms in our sample: one published prior to and another after the launch of the SDGs. Sustainability reports provide substantive information to corporate stakeholders (Rost & Ehrmann, 2017), improving the transparency on corporate social and environmental practices (Bebbington, 2014). We acknowledge previous research on signaling and image theory in corporate sustainability (Bansal & Kistruck, 2006; Cho et al., 2018; Hossain et al., 2019). However, in recent times, firms increasingly recognize the link between sustainability and financial performance (Knox, 2020), stakeholders exercise increasing pressures and punish irresponsible behaviors (Nason et al., 2018), and both auditing (Boiral et al., 2019) and the use of formalized and comparable reporting practices (e.g., GRI) have increased. These efforts have collectively improved the connections between reporting and real practices, especially for publicly traded, global firms.

We collected sustainability reports from publicly available databases and corporate websites when necessary. We used the following criteria for the data collection: for the “pre–SDG” reports, we included the most recent pre-2015 report, which included reports covering 2011 to 2014, and for the “post-SDG” report, we included the most recent report prior to 2020 (the year of our data gathering), which included reports covering 2016 to 2019. We downloaded both reports for 190 firms, for a total of 380 reports. We excluded 30 firms from the original sample of 220 because at least one of the two reports was not available online. We removed 28 reports (both reports for 14 firms) because at least one of their reports was not published in English or contained nonreadable characters when transformed into a text file format, and we removed 24 additional reports (both reports for 12 firms) because the firm shifted from separate sustainability reporting to integrated reporting, confounding the comparison of the two reports. After these adjustments, our final dataset included 164 firms based in 23 countries from the North American, European, Asia Pacific, and Latin American regions.

Firm categorization

As part of our analysis, we categorized the firms in the sample along three dimensions: industry sector, natural resource intensity, and geo-institutional context. The distribution of our sample across these dimensions is presented in Table 1.

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Table 1.

Distribution of sample among firm categories.

		Anglo-Saxon	Asia Pacific	Continental European	Total
High intensity	Energy-Utilities	1	4	15	31
	Industrials-Materials	17	12	20	40
Low intensity	Communications-IT	7	16	8	20
	Consumer Products	13	11	16	24
	Financials-Real Estate	8	5	11	49
	Total	46	48	70	164

Methodology

To assess the alignment of corporate sustainability reporting to the SDGs, we performed CATA on our sample of reports to quantify the use and patterns of SDG-related terms. CATA has seen growing application in organizational research over the past decade, in part due to its ability to extract and quantify content from firm-level, archival, narrative documents in a manner that can be more efficient and objective than traditional qualitative analytical methods (Payne et al., 2011; Short & Payne, 2020). For example, it has been used to analyze long-term orientation in firms (Brigham et al., 2014), corporate social responsibility reporting (Meyskens & Paul, 2010), and a variety of other organizational constructs. Our analysis consisted of three phases:

SDG language quantification

As our source for the “language of the SDGs,” we accessed the UN Sustainable Development website (UN, 2015a) and downloaded the descriptions for each of the 17 goals as raw text documents. To quantify this SDG language, we processed these 17 documents using the open-source Tf-idfVectorizer routine from SciKit-Learn (Pedregosa et al., 2011). The Tf-idfVectorizer computes the term frequency (Tf) for each term within each document from a group of documents, modified by an inverse document frequency (idf) that reduces the score as terms occur more commonly across documents in the group. Thus, this weighting captures both the frequency of each term in a document and the specificity or uniqueness of that term to that document versus the rest of the documents in the group. If a term does not occur in a document, that term receives a score of zero for that document. The results are output in separate columns (or vectors) for each document. For a detailed description of the open-source Tf-idfVectorizer program routine and its features, an excellent online reference guide is available from the developer (Scikit-Learn, n.d.).

Using an approach similar to that of Lavin (2019), we instructed the Tf-idfVectorizer to extract “terms” from the SDG description documents that consisted of each individual distinct word used in the 17 SDG descriptions, along with all sequential combinations of up to three words as they occurred in the SDG descriptions. For example, the phrase “global carbon dioxide emissions” would return the following nine distinct terms:

“global,” “carbon,” “dioxide,” “emissions,” “global carbon,” “carbon dioxide,” “dioxide emissions,” “global carbon dioxide” and “carbon dioxide emissions.”

The result was a list that consisted of 14,417 terms, of 1–3 words each, which became our SDG “vocabulary” list for subsequent analyses. This list, along with the resulting 17 SDG Tf-idf vectors, effectively became a numerical representation of the “language of the SDGs,” able to distinguish one SDG from another. ³ This is observable in Table 2, which lists the top 10 single-word terms for each SDG, based on the magnitude of the Tf-idf scores. Each group of terms shows a strong association with the corresponding goal, reflecting the efficacy of this CATA approach. Armed with these SDG terminology vectors, we now have the means to measure the “language alignment” of any document to each of the SDGs.

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Table 2.

Top 10 single-word terms for each SDG.

SDG 1No poverty	SDG 2Zero hunger	SDG 3Health and well-being	SDG 4Quality education	SDG 5Genderequity	SDG 6Clean Water and sanitation
Poverty	Food	Health	Education	Women	Water
Extreme	Hunger	Mortality	School	Girls	Sanitation
Living	Agricultural	HIV	Children	Violence	Drinking
Live	People	Aids	Skills	Equality	People
Day	Million	Diseases	Vocational	Sexual	Lack
People	Hungry	Deaths	Primary	Laws	Access
Children	Undernourished	Maternal	Learning	Gender	Defecation
Vulnerable	World	Children	Youth	Work	Scarcity
Poor	Farmers	Regions	Ensure	Political	Wastewater
Social	Help	Malaria	Training	Leadership	Hygiene
SDG 7Affordable clean energy	SDG 8Decent work econ. growth	SDG 9Industry, innov, and infrastr.	SDG 10Reduced inequalities	SDG 11Sustainable cities	SDG 12Responsible consumption
Energy	Labor	Manufacturing	Inequality	Cities	Consumption
Renewable	Employment	Infrastructure	Inequalities	Urban	Energy
Electricity	Growth	Industrialization	Income	Air	Food
Modern	Economic	Innovation	Social	Slums	Production
Access	Work	Industrial	Likely	Urbanization	Water
Efficiency	Decent	Resilient	Economic	Persons	Impacts
Clean	Pay	Research	Women	Transport	Sustainable
Cooking	Global	Developing	Policies	Safe	Lifestyles
Fuels	Workers	Development	Vulnerable	Number	Equivalent
Technology	Men	Income	Institutions	People	Environment
SDG 13Climate action	SDG 14Life below water	SDG 15Live on land	SDG 16Peace and justice	SDG 17Partnerships
Climate	Marine	Species	Violence	Debt
Change	Ocean	Forests	Children	Partnerships
Ice	Oceans	Desertification	Institutions	South
Temperature	Coastal	Biodiversity	Societies	Developing
Emissions	Fisheries	Wildlife	School	Development
Parties	Fishing	Land	Corruption	Developed
Sea	Subsidies	Ecosystems	Registration	Enhance
Global	Pollution	Halt	Child	Oda
Level	Biodiversity	Degradation	Peaceful	Technology
Framework	Acidification	Conservation	Forms	Building

SDG: sustainable development goal.

Pressure and Patterns

Our full-sample results differ somewhat from the “cherry-picking” pattern of narrow engagement found in previous research by showing significant positive change in alignment across a fairly broad set of SDGs. Specifically, we found that alignment with 9 of the 17 SDGs significantly increased, 3 slightly increased, and 5 did not significantly increase after the UN’s launch of the SDGs. In this regard, it is worth noting that an absence of change does not necessarily indicate a lack of engagement with the given SDG. In Table 3, we can see that the language of SDG1 (No Poverty) and SDG4 (Quality Education) were not highly incorporated before nor after 2015. In other words, firms seem to not focus on discussing SDG1 and SDG4 in their sustainability reporting even after the launch of the SDGs. With respect to SDG2 (Zero Hunger), which had pre- and post-alignment scores that fell toward the middle of our range, our results show an increase in alignment, although it is not statistically significant. In contrast, SDG12 (Responsible Consumption and Production) shows a completely different picture and illustrates the value of examining both changes and levels of SDGs alignment. Specifically, while the change in language alignment was negligible, the relatively high pre- and post-scores indicate that this goal was already embraced by firms before 2015, and it continues to be among the priorities after 2015, suggesting the SDGs did not prompt a meaningful change in this area for the firms in our sample.

Overall, our results do fall short of the UN’s bold objective of driving meaningful change across all 17 SDGs. However, they do suggest a broadening pattern among firms in shifting their view of sustainability to something more, even if not wholly, integrated and systematic. In addition, the breadth of these positive changes is notable given that our “post” data are from not that long after the UN’s initial launch of the SDGs (2016–2019), and it may take more time for firms to report on their engagement with some of the SDGs that are more tangential to their operations, resources and capabilities (or simply take longer to measure progress on). In this regard, policymakers should monitor firms’ reporting on the SDGs to see if it continues to broaden into a truly systematic approach or if certain SDGs remain routinely under-addressed. In the latter case, firms may be able to help address these “orphan” SDGs through strategic partnerships or joint ventures with social ventures or NGOs focused on these areas.

Moving from our full sample to our industry sector analysis, more nuanced patterns of change emerge. For example, the sustainability reports of firms belonging to the Energy-Utilities group showed a positive change in alignment across six SDGs, thus supporting the centrality of the energy sector in sustainability-oriented change. While our results show that this group did not significantly increase alignment on SDG7 (Affordable and Clean Energy), there were positive changes in alignment on slightly more tangential SDGs, including SDG15 (Life on Land). This pattern, mirrored in other groups such as Consumer Products, suggests that these firms may be engaging with the SDGs with something akin to a “related diversification” strategy where they do go beyond simply “cherry-picking” by expanding their engagement to a broader set of SDGs that still connect to elements their expertise, yet fall outside of their core operations (e.g., an energy firm engaging with SDG 15 in addition to SDG 7).

Similar to our sector-based analysis, our natural resources intensity groups provided novel insights on SDG reporting patterns. Both groups show an increase in alignment across multiple SDGs, but with the low-intensity group showing broader scope with significant increases across seven SDGs as opposed to three SDGs for the high-intensity group. While some of these areas of improved alignment are not surprising (e.g., the High-intensity group improving on SDG 6 (Clean Water and Sanitation), others are less expected, such as alignment on SDG 11 (Sustainable Cities and Communities) increasing for the Low-intensity group but not the High-intensity group.

Finally, our analysis of geo-institutional groups shows that firms belonging to Anglo-Saxon and Continental-European groups exhibit significant positive changes in their SDG alignment scores, whereas the Asia-Pacific group showed limited differences between the pre- and post-scores. Whereas traditionally Continental-European firms have been more inclined toward environmental efforts than the Anglo-Saxon ones (Henisz, 2000; Kolk, 2010; La Porta et al., 1998), our analysis shows that both groups are fairly similar in their reporting alignment with the SDGs. This counter-intuitive result suggests the SDGs are reaching beyond the traditional hotbeds of sustainable business to countries like the United States where, if anything, formal regulatory pressures lessened during the timeframe of our “post” data (2016 to 2019). More generally, this pattern suggests that the normative pressure exerted by non binding goals (such as the SDGs) may be able to provide a lodestar for changes in sustainability-oriented business practices in the absence of, or as a complement to, other forms of institutional pressure such as changes in regulations.

While the dynamics at play may be multifaceted, our study demonstrates that a shift has indeed taken place in sustainability reporting, as reflected in changes in the alignment of language with respect to the UN SDGs. This exploration of the firm-SDG interface allows for a nuanced view of how firms in different industries, with different intensity levels of natural resource use and facing different institutional contexts, select among the SDGs to prioritize in their business practices. Ultimately, this provides a deeper understanding of business engagement with the SDGs than just studying the SDGs as a whole.

Limitations

Although this study sheds new light on the degree and scope of firms’ alignment with the SDGs in their sustainability reporting, it is not exempt from limitations that open interesting new research avenues. Perhaps, the most relevant one is the sample selection, where we intentionally examined the top performers of the S&P Global Sustainability Yearbook. This choice of top sustainability performers answers the UN call for leading firms, as they may be regarded as “major actors of change” (SDG Compass: The Guide for Business Action on the SDGs, 2015). Prior to this UN call, a number of scholars had acknowledged the role of such leaders in their industries, as they show other firms the path toward impactful environmental practices, at the same time that they push policymakers toward tougher regulations (Aragón-Correa, 1998; King & Lenox, 2001; Porter & Vander Linde, 1995), hence creating a first-mover advantage effect (Przychodzen et al., 2020). Another limitation is the size of the firms selected. Our analysis is based on large corporations, thus leaving small- and medium-sized enterprises (SMEs) aside. Further work could focus on SMEs to assess their sustainability efforts toward the achievement of the SDGs.

An additional limitation is our reliance on sustainability reports as our primary data source. The stakeholder-facing nature of such reports helped make the scale and rigor of our study possible, but these are also only one of many sustainability-related practices embraced by large firms. Beyond this (and as we detailed earlier), the relationship between reporting and actual outcomes can be somewhat murky in the context of sustainability. Given the high-profile nature of the firms we analyze here, it seems a full decoupling (i.e., reporting and actual sustainability outcomes being totally uncorrelated) would be unlikely. However, some degree of partial decoupling is probably inevitable, whether that be a tactical choice of a given firm or simply a function of the interacting complexities of the SDGs and the type of large firms captured in our sample. Either way, the degree of decoupling, and its associated patterns, form a promising topic for future research. In this vein, future studies could complement our work, which is based on secondary data, with more primary sources. For example, Salvia and colleagues’ (2019) work based on surveys, as well as Ike and colleagues’ (2019) analysis of a case study, both represent apt starting points for a more nuanced understanding of SDGs implementation.

Practical Impact and Conclusion

Our work presents some significant implications for managers and policymakers alike. The systematic changes in sustainability reporting by leading firms show that they may be making progress toward the achievement of the SDGs. However, our analysis also revealed that this change is uneven and incomplete. Specifically, although these firms do not appear to be only narrowly “cherry-picking” in their reporting, they are also not engaging with all the SDGs in a fully systematic way. This could be just a matter of time, but it could also represent organizational limits that make rigorously designing, implementing, and reporting change across all 17 SDGs difficult, if not largely impractical. In addition, our results suggest that efforts reliant on normative pressure alone may not be enough to truly achieve the kind of ambitious, transformative sustainability-oriented change aspired to by the SDGs.

If either proves to be the case, our results suggest that strategic partnerships or joint ventures, for example, between high and low natural resource intensity firms or energy-utility and consumer product firms, might allow for more progress, in a holistic sense, by allowing a certain degree of specialization on SDG engagement. Sparking, supporting, and scaling such creative collaboration would also clearly offer an opportunity for innovative managers and policymakers.

Given the influential nature of the firms we examined and the significant and fairly broad-based engagement with the SDGs they report, managers from firms with poor environmental and/or social commitments should strongly consider changing their practices. Specifically, our analysis suggests that we may be on a path where firms’ contribution to society is becoming the “new normal” even in the absence of binding regulations and that leading firms are increasingly willing to report such progress to stakeholders. Thus, stagnant firms may eventually lose their place in the market as their stakeholders come to expect such transparency and progress.

Although there is a growing tendency toward reporting progress on some SDGs, our results suggest others may be being left behind, hence needing direct policy support and/or creative approaches to partnerships. For example, the case of SDG1 (No Poverty) and SDG2 (Zero Hunger) provide a possible early-warning signal to policymakers, as it seems that firms themselves (at least in our sample), showed low and nonincreasing alignment with these goals. As such, our results suggest the UN should closely monitor engagement (or lack thereof) on these goals (and others showing similar trajectories) that are failing to show early traction among leading firms. In addition, the multi-dimensional nature of our study highlights the extent to which each of the individual SDGs is gaining traction among firms with varying characteristics, as illustrated in Figure 1. This may allow for more targeted interventions to accelerate engagement at key points along the firm-SDG interface.

Ultimately, our analysis shows that, just as excluding firms would likely doom any transition to broad-based sustainability, firms alone may not be able to make transformational progress across the expansive terrain captured by the 17 SDGs. Instead, our work suggests that the SDGs have spurred meaningful, if uneven, change in the sustainability efforts reported by leading firms and that other actors (e.g., governments, NGOs, and SMEs) need to foster and leverage this momentum to collectively make rapid progress on meeting our grandest challenges.