UN Pact Bolsters Social Reporting Momentum
Despite a late pullback from expected commitments to mandatory social reporting requirements, the new agreement could potentially drive private sector support for SDGs.
The UN has provided a boost to the reporting of social metrics as part of its efforts to accelerate its Sustainable Development Goals (SDGs) with the recently adopted Pact for the Future.
The pact – which was adopted by the 193 members at its UN General Assembly – has the core objective to “turbocharge” actions and investments supporting the SDGs and the Paris Agreement on climate change, which have seen “halting progress and missed milestones”.
According to the UN’s 2024 SDGs Report, only 17% of SDG targets are currently on track, with efforts hampered by an annual investment gap of US$4 trillion to achieve the SDGs.
The new pact forms part of a further attempt to address the lack of progress toward the 17 UN SDGs, following only limited improvement since world leaders signed up to UN Secretary-General António Guterres’ SDG rescue plan last year.
The pact’s five broad focus areas are sustainable development, international peace and security, science and technology, youth and future generations, and transforming global governance. Signatory countries have committed to 56 actions to achieve the SDGs by 2030.
“The pact doubles down on social sustainability, aligning with pension funds’ long-term financial goals,” Charlotte O’Leary, CEO of UK-based advisory firm Pensions for Purpose, told ESG Investor. “By improving transparency and comparability in social metrics, it empowers pension funds to make informed, socially conscious decisions [but] its success hinges on effective implementation, government support, and clear social indicators.”
The pact calls on the private sector, especially large corporations, to contribute to sustainability and protecting the planet, including the achievement of the 2030 Agenda (i.e. reaching the SDGs). It also expects adoptees to “encourage the contribution of the private sector to addressing global challenges and strengthen its accountability towards the implementation of UN frameworks.”
However, this marks a significant watering down of its original ambitions. The zero draft of the treaty explicitly called for mandatory sustainability reporting for large corporations, while as recently as July the second draft of the treaty called on the private sector, especially large corporations, to strengthening their reporting procedures.
Make it mandatory
Richard Gardiner, EU Public Policy Lead at the World Benchmarking Alliance (WBA) – which assesses large companies’ contributions to the SDGs – said the pact’s lack of mandatory reporting requirements for the private sector was a shortfall.
“Companies are getting quite scared of the transparency they’re sharing, because it shows that they’re not acting like they should,” he said. “There are certain things we need to mandate [and] if the goal is to get companies to act sustainably, one of steps they should be taking is mandatory reporting.”
Earlier this year, a taskforce established by the UK’s Department for Work and Pensions provided guidance on metrics pension funds should use to assess social risks in their portfolios, but there are no plans to introduced mandatory reporting. The EU has shelved plans to introduce a social taxonomy.
Ahead of the UN pact’s finalisation, a report from the WBA called on UN member states to mainstream mandatory reporting, as well as underlining its importance in getting accurate and comprehensive disclosures from corporates, leading to improved performance on social factors.
In the report, WBA said UN member states should endorse and incentivise the adoption of reporting standards among companies to promote transparency and accountability.
Co-authored by the Global Reporting Initiative (GRI), the report found that companies that published a GRI content index – which provides an overview of the organisation’s reported information in reports using the GRI Standards – had higher scores in WBA’s social benchmark, while those that scored zero in the benchmark did not publish an index.
“Governments must create a supportive environment for the pact, including mandatory social reporting, incentives for responsible companies, and investment in social infrastructure,” said O’Leary. “This will provide investors with reliable data, encourage better corporate behaviour and foster resilient communities, aligning with pension funds’ long-term goals.”
Gardiner added that there was a “clear logic” that if companies are given a mandate for a baseline amount of reporting standards, they will “automatically will start doing more”.
Last November, a report from the WBA found that companies were off-track to delivering the SDGs with a significant gap on required action. However, Gardiner said that the pact helped to re-emphasise the UN’s role as a “global norm setter” – particularly on SDG development policy – places a greater emphasis on the role of the private sector.
The pact is expected to be a key input into the World Social Summit next year in Qatar in November 2025, which is intended to underscore the “pivotal role” of social perspectives in achieving the SDGs.
Heightened action and attention
While progress toward achieving the SDGs has slowed, many businesses and investors have used them as a framework for measuring and demonstrating their positive social impact.
Nearly half of the 1,422 European companies responding to the UN Global Compact’s latest ‘European Private Sector SDG Stocktake’ claimed that incorporating SDGs into their activities had given them a competitive advantage.
According to the survey, the number of European companies actively integrating the SDGs into their business strategies is increasing, with 96% of respondents aware of the SDGs and 69% demonstrating in-depth knowledge.
According to recent research by Morningstar, 53% percent of North American, 58% of European, and 62% of Asia-Pacific asset owners said social factors had become more, or much more material over the past year.
Momentum on social disclosures is also building behind the Taskforce on Inequality and Social-related Financial Disclosures (TISFD). Last week, the European Financial Reporting Advisory Group (EFRAG) – the European Commission’s advisor on financial and sustainability reporting – signed a cooperation agreement with the TISFD Secretariat to advance the development and adoption of social-related financial disclosures.
Formally launched last month, the TISFD intends to heighten social-related information availability and reduce reporting burdens. The initiative aims to develop a set of recommendations to enable companies and investors better identify, assess, and report on inequality and social-related risks, opportunities, and impacts.
BNP Paribas recently released an ‘Equality Roadmap’ to address inequality across its investments, stewardship, and operations, with the issue underpinning and reinforcing social risks.
“There’s definitely a growing momentum behind social reporting” said Pensions for Purpose’s O’Leary. “Social issues are moving from being ‘nice to have’ to ‘must have’ when it comes to company reporting.”
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