Published at 2020, January 10th
Sustainable development and thriving businesses mean companies need to measure their impact ASAP (as soon as possible). Let’s take a closer look at why risk mitigation means sustainability doesn’t depend on businesses being merciful.
A World With Constant Challenges
I believe the reader would agree with me, at least up to some degree, that the world isn’t really doing great right now – when has it really? In fact, as I write down this paragraph, the hard thing isn’t really to put together a list of things that aren’t going well. Rather, the challenge is to select some of the most relevant ones to prove my point without leaving you exhausted or depressed.
The odds that global warming stays below a 2ºC temperature increase before 2100 aren’t good. CO2 emissions have been rising over the last years they need to go down by 7,5% every year until 2030, starting… ASAP – in 2020. There’s scientific consensus that we only have a short window of opportunity to reverse it before it reaches a point of no return. And the consequences of it aren’t a thing of the future, as we’ve been recently watching with the floods in Venice or the worst fires ever in Australia. Just this time, let’s not speak of the falls on biodiversity and corals, dying soils, ocean pollution, microplastics or air pollution.
On what concerns society and international relations we see tensions increasing in the Middle East. There’s the (even if remote) chance of a III world war started by confronts between the US and Iran. France is watching its longest public transportation strike ever due to social discontentment with possible changes in retirement pensions. Brexit is about to happen and its consequences (especially in the no-deal scenario) are hard to predict at this point.
Technology has its own threats too. Scandals of users’ data being stolen. Fake-news that manipulate elections. The improvement of automation and AI that threatens to change the employment scenario. The run to be a the forefront of the 5G network that is affecting commercial trades between the US-China.
Businesses Play A Decisive Role In Improving Our Society
These and other (potential) problems are not something we can just close our eyes to, we need to solve them for the long (and quality) survival of our species, you would agree. According to Deloitte’s study, Millennials believe governments (36%), followed businesses (20%), are the institutions most responsible for improving social mobility and progress.
Companies are the second institutions most expected to take a stake at helping to solve some of the most prominent problems of society and the planet. Not doing so has business risks we will further discuss. That’s why they should “shake” themselves to quickly get away from the limb zone they are at.
This “shake” means leaving that place of not being either profit-driven organizations (following a business as usual mindset) nor true impact-driven; the latter meaning triple-bottom-line oriented corporations with a clear vision on what their negative impacts are and how to turn them around. Nowadays, being in a “nowhere zone” is not only bad for society and the planet – but also a risk for businesses.
Impact Measurement Requires Strategy And Detail
Broadly mentioning the changes businesses wish to contribute to isn’t enough. Having a short, simple page pdf document or an interactive animation or video on a well-designed website without mentioning key issues with the depth they need/deserve isn’t enough.
For instance, recycling is only the basics – and many argue, not even the solution, but rather a never-ending way of fixing a larger problem. Volunteering is nice but isolated has a minimal contribution to larger problems. Don’t get me wrong, these are nice initiatives, but without a broader plan that frames them and tells their impact story, there’s even the risk they are seen as greenwashing.
We’ve seen the population is expecting brands to show proof of their impact and be more transparent on the causes they support. By postponing to do so, organizations are leaving room for different business risks.
Corporations: Start Doing Impact Measurement Because It’s Good (Business)
Yes, the planet and society need corporations (as well as other actors) to help them get back on track. But don’t get me wrong, they don’t need business charity. In fact, it’s businesses that need to be aware of the risks of not contributing to higher causes. One of these risks is reputational – which means losing stakeholders’ trust and loyalty. Other risks can be regulatory, followed by competitiveness and financial risks.
Let’s take the example of plastic, whose huge negative impacts are for long known. In Europe, single-use plastics will be forbidden starting in 2021. Now let’s imagine companies A and B. Both produce and sell plastic cutlery, plates, and straws for over 10 years and they operate in the European market.
In 2015, company A worked on assessing its negative impact. They had a superficial idea but they went deep into the impacts of plastic and decided to do something about it. Following their impact strategy, they started producing the same type of products but using different raw materials – bamboo and sugarcane. As a result, they started operating on a new market and building a market share there. Company B stayed the same and kept its nice profit margins.
In 2019, the EU passed a law forbidding single-use plastics from being sold from 2021 onwards (this part is not fiction). For company A this meant reducing its product portfolio and scaling up its non-plastic products. But for company B, that didn’t assess its impact and anticipate the plastic risk, it meant huge stress. They had to find out new ways of prospering, whether to use different raw materials and which, whether to still use plastics and the same machinery but create other types of (non-disposable) products…
It’s precisely to avoid situations like this one that investors are increasingly asking for impact mitigation plans before they jump on board. This means impact strategy is connected with better chances of investment too. So companies looking for capital injections should mind the increasingly higher odds of investors asking for impact strategies and proactively start developing them. In fact, BlackRock, one of the largest investment firms in the world, even started using the term sustainable investment. But what is impact measurement about after all?
The World Of Measuring Impact
To understand more in-depth how the process of measuring impact works to better understand the process organizations need to go through you can take a look at our impact measurement definition.
Put simply, organizations need to identify their key impacts and their causes and consequences. After this, they need to identify who are their targets and create their theory of change diagram. Doing so will help them understand what outcomes will contribute either to getting closer to their desired goals true or away from unwanted risks. These outputs are made of outputs, and other the first and the latter need be measured (often using surveys) via specific indicators to assess and evaluate progress being done.
To get more specific, a measure of social satisfaction with the education system can be the frequency with which students attend classes. An environmental metric can be the amount of CO2 emissions or water contamination. There are endless indicators and metrics and organizations can either try to use standard metrics (which makes comparisons easier). They can also choose their own or use a mix of both.
Depending on their resources and impact strategy stage, organizations decide how to measure their impact. They also choose who to involve in the process – from the management (for budgets) to operational workers (for local expertise) or external advisors (to help design, implement and/or to critically evaluate the process).
Embrace Impact Measurement, And Do It Fast
Accurately showing how they are addressing the environmental and social negative issues coming from their activities plays a very important role in avoiding business risks. Meanwhile, doing so can also unlock new ideas for value creation and facilitate growth and expansion to new markets.
Everyone talks about <impact> nowadays. Not mentioning it means missing out. But mentioning it without truly doing, or doing it right is risky, especially from a reputational perspective.
Measuring impact may be something easily postponed. It means gathering different stakeholders, spending time, energy and money looking for alternatives, measuring changes and evaluating them. There’s even the risk of the need to change business value-chains – the last thing needed in fast-paced, super demanding work environments. Due to all of this, postponing impact measurement may be seductive at first. But mind the example of companies A and B. And remember that procrastinating about it and not having a starting date can be fatal on the long run.
[Image credits for Shutterstock on hammer]