Business attraction efforts, investment promotion policies and incentive programs often are or can be designed to support sustainable development goals. Smart Incentives founder Ellen Harpel and Indiana University assistant professor Sarah Bauerle Danzman recently explored steps for making these connections.
In 2015, the UN member states adopted The 2030 Agenda for Sustainable Development that included 17 Sustainable Development Goals (SDGs). According to the Columbia Center on Sustainable Investment, the overarching objective is to “promote an inclusive, equitable and sustainable post-2015 global society.” Given the broad and interconnected nature of the SDGs, many global stakeholders, including the private sector, will need to play a role in order to make progress toward achieving these goals.
Specifically, the private sector is an important partner in helping provide jobs, investment and technology consistent with the SDGs. Investment promotion agencies (IPAs) and economic development organizations (EDOs) are on the frontlines interfacing with potential investors and nurturing projects that generate benefits for the locations they represent. They are likely to find themselves a) facilitating investments in projects expressly designed to support the SDGs (such as infrastructure or energy initiatives) and b) determining whether proposed business investments and FDI opportunities are consistent with SDGs.
On some levels, many SDGs and their related targets and indicators already share much in common with existing IPA/EDO goals and objectives. To take one example, Goal 8 under the SDGs is to support Good Jobs (Decent Work) and Economic Growth. Specifically, “Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment. Job opportunities and decent working conditions are also required for the whole working age population.”
Targets associated with this goal include economic diversification, technological upgrading and innovation, full and productive employment and decent work for all, and encouraging the growth of micro-, small- and medium-sized enterprises. These aims are consistent with most economic development work. Suggested indicators include GDP growth, average hourly earnings, and unemployment rate – also common metrics for economic development efforts.
On the other hand, aligning investment promotion or business attraction with SDGs can create potential contradictions. For instance, some of the World Bank’s Ease of Doing Business indicators, which many countries use to assess their business-friendliness, may discourage certain types of labor or environmental regulation that could help support the SDGs. Individual projects or investments may make gains toward certain SDGs but not others, leading IPAs and EDOs to make tradeoffs or set priorities among SDGs. Finally, even very good projects may have unintended consequences that affect sustainability and equity outcomes.
Private investment, including foreign direct investment, can contribute to sustainable development. The extent to which expected benefits actually come to pass depends on many factors, but IPAs and EDOs play an important role in identifying, facilitating, and supporting projects that can contribute toward the SDGs. And the SDGs, in turn, can be well-aligned with traditional economic development objectives.