Step 2 is to evaluate which sustainable development issues are most relevant to the enterprise's stakeholders. Many recommend you do this step without filtering for what's relevant to the goals of the business. Instead, you want to simply understand all potential impacts from the point of view of the person experiencing them. The idea is to surface which changes the company can affect that have either the biggest risk or biggest opportunity for impact on people and planet. Who will experience those risks or opportunities? From this exploration, you will emerge with a set of SDG Outcomes, you can work towards. Each SDG Outcome starts with a WHAT/ WHO combination and includes the change, the increase or decrease, that you want to affect. Let's start with how you can identify your WHATs. A good first step is to become more familiar with the SDG goals and their targets. As you look at the SDG goals and targets, you can start to identify those that could be most relevant to your enterprise based on two entry points. First, Risks to people in the environment, or negative impacts. And 2nd, Beneficial products, services or investments, or positive impacts. One way to identify all of the most relevant goals, is to conduct a value chain analysis. In a value chain analysis, you document all the inputs and outputs to the enterprise along its value chain and ask who they might be impacting and in what way. Your enterprise is undoubtedly already having many kinds of impact. The goal of a Value Chain exercise is to surface which of those are most important, troublesome, or have the most potential for change through the least effort. Start with a visual of your enterprise's value chain. Consider questions like, how are raw materials collected, how equitably paid and safe are your suppliers? What are the ways that your inbound logistics, including transport and storage of materials, affect workers or the environment? Continue your analysis through the chain, including company operations, distribution, product use, and product end life. At each step, make a list of the WHAT impacts that seem most significant. Make sure you consider both kinds of impacts: Positive impacts you can increase as well as negative impacts you can reduce or avoid. Here's an example from a UN Global compact / PRI / GRI publication called "In Focus: Addressing Investor Needs in Business Reporting on the SDGs." You can see the company considered two positive WHAT impacts, living wage for workers, SDG 8, and responsible consumption, SDG 12, through recycling opportunities for consumers. On the negative side, they identified areas where they can reduce harm related to soil degradation, dangerous working conditions, and wastewater effluents, SDGs 15, 3 and 6. As you think about impacts, again, divide your analysis into two parts. For positive impacts, ask how can the company apply its skills and capabilities to develop products, services or investments that contribute to the achievement of the SDGs? For negative impacts, ask what are the most severe negative impacts on people and the environment that are linked to the company's operations and value chain. Which SDG goals and targets do these impacts relate to? Be sure to consider any human rights issues along the chain as well, and at this stage, avoid filtering out impacts based on how easy they would be to address. You just want to make a full list. There are a number of tools that can help facilitate this process. The SDG Action Manager, developed by B Lab, is an online tool for exploring how an enterprise's operations may relate to the SDGs. Based on geography and industry, an enterprise can get a view into the positive impacts created by their operations, supply chain and business model and the risk areas for each SDG. The SDG Action Manager also enables an enterprise to set goals and track improvement. Another useful resource is the SDG Industry Matrix, developed by the UN Global Compact and KPMG, which reviews likely SDG intersections for seven industries. Finally, the Impact Beacon, developed by City Light Capital, helps an enterprise define the sectors, issues, impact areas, and outcomes they want to influence and tells them which SDGs match. Initial industries include environment, education, and safety and care, and others will be added over time. Let's turn to one of our enterprise examples, the chain of maternity clinics in South Africa. After considering the value chain for her business model, Grace has identified some positive impact she wants to increase and some negative impacts on people and planet she wants to mitigate. Now, let's move to identifying your WHO. Pay close attention to this part of the process, as it is often overlooked in current practice, yet is essential for the SDG assurance processes. In addition to conducting a value chain analysis or using one of the tools that help determine what impacts are most likely important to the enterprise based on its industry. It's critical that you incorporate the view of the enterprise's broader set of stakeholders to understand what is most important to them. These are the WHO's that aligned with each WHAT. Most of the standards that are emerging around sustainable development, put stakeholders at the center of the consideration of priorities and actions. What do we mean by stakeholders? We like the definition provided by Social Value International: Stakeholders are those people or organizations that experience change as a result of your activity. These can be individuals, groups, communities, or the planet, directly or indirectly affected, with intended or unintended consequences. One way to identify stakeholders, is to go back to the value chain and make a list of who is most materially affected by actions in each step of the chain. Potential direct stakeholders include, management, workers, owners and investors, suppliers, community members, environment, distributors, partners, and customers. You'll see this list includes the impact your enterprise has on indirect stake holders, such as that result from the organization's relationships with other entities like suppliers, distributors, partners, and subsidiaries. Each of these have their own set of stakeholders. Your enterprise might see a connection between its activities and the impacts on those indirect stakeholders. Let's return to our example of Grace's maternity clinics. Grace's list of stakeholders may include: patients and their families, management team, workers, including medical professionals, and other support staff, current investors, suppliers of medical equipment, contractors who build new clinics as she expands operations, local community members close to where she operates, and the environment. Once you have identified your enterprise's stakeholders, you need to effectively engage them to determine what outcomes are important to them and should be actively managed. This is important; you can't assume what is important to them or what impacts they are experiencing. You need to ask them; you want to use this process to identify views and concerns which relate to the company's current or potential impact across the SDGs. Stakeholder engagement should be inclusive, which means you have a special responsibility to include the perspectives of any underserved groups you identified. Social Value International has a helpful publication titled "Standard on Applying Principle 1: Involve Stakeholders," that explains options and processes for identifying stakeholders and meaningfully engaging stakeholders, including sample questions to ask. The report talks about how speaking to and involving people who experience change, is an essential part of the process, but they also acknowledge that speaking directly to stakeholders is not the only source of relevant information. Third party research may be complementary to what you hear from stakeholders or maybe a substitute if your stakeholders are particularly difficult to reach or if they don't feel comfortable sharing their opinions. Let's look at an example of how Grace approached engaging with her most important stakeholders. The enterprise had been doing exit interviews with all patients, but decided to add new questions to their intake process and also conduct some focus groups with families, post birth. They learned that transportation to the facility was an issue for some patients. They also learned that there were several post care issues that new mothers wanted help with, especially for those in low resource environments. They decided to repeat the focus groups annually in those low resource environments, in order to establish a strong feedback loop with their most vulnerable stakeholder groups. The management team conducted anonymous surveys and meetings with staff to understand impacts that were particularly important to them. They were unsurprised that wages came up as a high priority through this engagement, but in particular they learned that one segment of their workforce was particularly unhappy with pay. They were also surprised to find that workers expressed great desire to increase safety measures. Grace also engaged her investors to understand what impacts were most important to them. These conversations with investors reiterated for Grace just how important it is that she is serving vulnerable populations. Her investors predominantly invested because they want to have positive impacts on this population. Finally, Grace hired an outside party to make recommendations on how to more safely dispose of medical waste and reduce carbon emissions. After engaging stakeholders, Grace has fleshed out her chart. She has added safe workplace as a what outcome that her stakeholders have told her is important. Her outcomes now each include, WHAT and WHO and articulate the change the enterprise will seek to make. Grace has also documented how she will continue to engage with her most important stakeholders. Making it real: Brainstorm the key impacts, the WHAT your enterprise has on people in planet. Make sure you include both positive and negative impacts. Make a list of major stakeholders, the WHO your business impacts both directly and indirectly? What are the most significant? WHAT/ WHO combinations for your business? Which stakeholders potentially experience the worst impacts of your business and which potentially experience the best. Figure out ways to actively engage your stakeholders and truly listen to what they tell you about your business' impacts on them. Consider if there are stakeholders that are harder to engage with than others. Have any been silent? Why? Be especially considerate of underserved stakeholders or those with the least power. Consider what organizations or research can serve as a proxy for any hard to reach stakeholders. Drawing on 3rd party sources with expertise on your stakeholders may be particularly important if those stakeholders do not yet feel empowered to voice their views. Set up regular feedback loops to get ongoing insight into your stakeholders' evolving issues and needs. You'll want to repeat this process on a regular basis. After you've engaged stakeholders effectively, weigh each stakeholder by different factors, severity of negative impact, potential for positive impact, ease of meeting needs, feedback loop potential, power level or other factors. What insights or biases does this exercise bring out? Use this process to help identify gaps in the company's knowledge that require further investigation. Combined what you've learned into a list of SDG outcomes, the increase or decrease in your WHAT/ WHO combinations that you are aiming for. At the end of this step, you should have the enterprise's SDG outcomes expressed as WHAT/ WHO combinations that articulate the change, the increase or decrease you seek based on views of your stakeholders. Even better, is to establish ways to continually get feedback form your most affected or underserved stakeholders.
