The impact companies have on the world around them is gaining more and more attention globally in board rooms, strategy sessions and seminars. Overall, this trend is a sign of healthy development: companies strive to justify their right to exist to their various stakeholders – and those who succeed, gain competitive advantage in the eyes of consumers, employees, investors and clients.
However, more often than not, these discussions could do with a bit more structure and robustness of what exactly it is we are talking about. What is “impact”? How does it relate to “sustainability”? What’s the difference?
Measuring holistic impact of companies is difficult. It requires bringing together various categories and dimensions of impact, and entering the challenging and often tedious topic of comparing them against one another. Additionally, the how and what of things get easily mixed up.
In short, measures of sustainability typically aim to describe how things are done. For example, a company might describe their corporate governance processes and what kind of improvements have been made to them. To better address their business needs, however, an increasing amount of stakeholders of companies are also starting to ask about impact – what is done. This means focusing on the core business of the companies, not just their ways of working.
In addition to getting concepts right, one of the most common pitfalls in impact measuring is failing to measure both the costs and gains of a company.
Focusing only on minimizing negative impacts of companies easily leads to faulty conclusions. For example: “Because they produce less GHG emissions, every SaaS company is more environmentally friendly than any energy company”. But what about what they get done with the resources they use? The opposite is neither a shortcut to bliss: Focusing only on maximizing the upsides, as is sometimes done in sustainability-hyped marketing messages, leaves out the fact that there are costs involved in creating any solution.
We simply need to look at both at the same time: the net sum of the costs and gains a company creates. That is the only way to inform smart resource allocation for management, consumers, regulators and investors.
This is why in The Upright Project, we are building a new type of machine learning enabled quantification model to measure the net impact of companies. The aim is to create comparable data on what companies actually achieve and with what resources. We call the outcome net impact, as it aims to describe the net sum of the costs and gains.
We at The Upright Project represent just one example. The game is changing: new technologies enable outside-in analyses of companies and investments based largely on publicly available data. So what do forward-looking companies do in 2020 to position themselves smartly in the fast-changing impact discourse?
They look at both the resources they employ and the negative impacts they have, as well as the value they create with those resources, and openly communicate this equation to their stakeholders. It’s not just about being “nicer and greener”, but more and more about: what is our efficiency in turning resources into outcomes that matter?
Founder & CEO
The Upright Project