A succession of seismic social events has escalated investor and other stakeholder interest in the ‘S’ of ESG. This has put the value that companies do, or don’t, deliver to society under the spotlight like never before.
The word most used by companies to meet this expectation and demonstrate their social value is ‘impact’. To get a sense of the extent of the focus on impact, I took the sustainability reports of three FTSE100 businesses at random. One contained the word impact 82 times, another 162 times and another, a relatively astonishing 257 times! That’s a lot of impact!
Or is it?
Unfortunately, dig deeper, and you find that while there’s a lot of talk about impact, there’s a lot of confusion about it too, with a distinct lack of consistency in approaches to, definitions of and communication around impact.
This is unhelpful.
Encouragingly, some businesses are working, both individually and collectively, to add more rigour and clarity to the practice. Three key areas that are being addressed and that any business looking to assess its wider impact will do well to consider are:
1. Show, don’t tell
There is a temptation by many businesses to talk about what they are doing, rather than what they achieve. Impact is what changes as a result of a business’s actions not the actions themselves.
If a business has developed a new product to improve the lives of disadvantaged people, has it worked? Have people used it and are their lives better as a result? If it has invested in diversity and inclusion training, what has been the effect on the workforce? Do people from minority groups feel more comfortable in the workplace as a result?
Such questions are important to ask and, crucially, move the discussion forward from assumption to knowledge – from simply assuming that because a business does something ‘good’ that the world is a better place, to actually knowing whether, and in what way, it is.
2. Don’t (just) show me the money
However purposeful a business may be, what continues to hold most sway are the financial results. In this atmosphere where money (usually) talks the loudest, there’s both a trend and temptation to boil wider social or environmental impacts down to financial values too. It’s certainly a route that pioneers in this area have taken like BASF and Crown Estate, who should be commended for their efforts.
However, such approaches have limitations, they can often rely on complex models of financial value as a proxy for actual, comprehensible impact data and only speak to a small, largely internal, financially oriented audience.
Tell the person in the street that your ‘human capital’ impact is +$10 billion, while your ‘water impact’ is -$5 billion, and they’ll have little clue whether what you’re achieving is good, bad or indifferent. Talk about the jobs created or the reduction in water-borne diseases achieved and they’ll have a better grasp.
So, while having one eye on the financial impact can have use, don’t always put it front and centre.
3. Have some principles
Assessment of societal impact is complex. The list of potential issues is huge. The need for credible data is paramount. So, approaches to assessing impact need to be robust. At Corporate Citizenship, through over 23 years of working with clients to get a better handle on the difference they make to society we’ve identified some key principles that any business looking to better understand how it is delivering impact, will do well to bear in mind:
- Focus: You can’t measure everything. Focus on the business’s most material impacts
- Alignment: Ensure your measurement objectives support your business objectives
- Clarity: Know your audiences and deliver compelling information to enable them to understand progress, achievements and challenges
- Practicality: Don’t measure for measurement’s sake. Data must have a practical application for the ongoing management of the business
- Authenticity: Ensure your data is aligned with, and can be set against external standards whether business-led initiatives like B4SI, issue-focussed standards (e.g. CDP) or global initiatives like SDGs.
Together, the above considerations can enable businesses that are looking to better understand their impact to take advantage of the experience of others, to avoid pitfalls and to improve their chances of success.
Source: CC Social Impact Feed