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The Impact Trend

Richard Hardyment

One of the big topics that Corporate Citizenship is focusing on in 2016 is impact. Lots of companies talk about their impact – but what does it actually mean? And why are so many interested in it?

Dictionary definitions are of little help – even confusing. If you look up ‘impact’ you get expressions like “the striking of one thing against another” or “forcible impinging”. Not exactly what a responsible business practitioner might be looking for.

Impacts are the short and long-term changes that a business creates. Companies generate change for individuals, communities, and wider society.  They are made up of social, environmental and economic aspects – and they can be positive (like increased incomes or new skills) or negative (like environmental losses).

Impacts are often defined with reference to their younger siblings: inputs and outputs. LBG – the global standard for measuring corporate community investment – distinguishes between:

  1. INPUTS – the resources a company puts in
  2. OUTPUTS – what happens as a result
  3. IMPACTS – what changes for society, the business or the environment

 

THREE TRENDS FOR IMPACT

So why all the fuss about impacts? Well, there are three big trends that are buffeting all companies. They explain why this buzzword is shooting up corporate agendas.

Firstly, lots of external audiences are asking some tough questions of big business. Senior management might be hauled up before a Senate Committee and given a grilling about job losses or executive pay. A brand might start trending on Twitter for all the wrong reasons – like a new campaign exposing a supply chain scandal. Having robust data on the positive and negative impacts of a business can help to anticipate and respond to some of these challenges more effectively. As we like to say, you can’t have a dialogue without data. Investors, too, are wising up to the importance of impact.  According to Marc J. Epstein, co-author of Measuring and Improving Social Impacts: A Guide for Nonprofits, Companies, and Impact Investors, there are tonnes of people that want to know about how money is being spent by business. But the biggest sign of all this will surely come out of the UN later this year. The new indicators for the Sustainable Development Goals will be a fascinating wake-up call for business. Why? Because companies are going to be asked: how are you measuring your contribution to the Global Goals?

The second big trend is an internal one for companies. As part of the professionalisation of corporate social responsibility (CSR) in recent years, it’s simply no longer acceptable to just write cheques, launch projects and leave the consequences to others. If it’s not stakeholders banging down the door, it is colleagues asking for data to justify budgets, motivate employees, refresh the strategy or create a rigorous report. And let’s not forget that a critical component of impact assessment is calculating the return for the business. The onward march of measuring business benefits is one of the sturdiest trends for CSR this decade.

Finally, perhaps the greatest shift of all is in the boundaries of CSR. Back in the 1990s and early 2000s, many companies were content to focus their strategies and reporting on what’s termed their direct operations. That’s the factories and offices owned by the business, and staff directly employed. Today, there is scarcely a serious multinational remaining that can get away with such a narrow world view. Instead, it’s all about the value chain. Distant supply chain components and changing customer needs are shaking up sustainability. The shift to indirect and knock-on effects is re-crafting how companies define, measure, plan and report on their impacts.

So impacts are rising in importance. Corporate Citizenship will shortly be releasing research that charts what these shifts really mean for companies – and what business can do to change their impacts.

Richard Hardyment is Head of Research at Corporate Citizenship and specialises in identifying long-term trends that shape responsible business practices.

 

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