There is an increasing expectation of corporations to demonstrate the social and economic impacts they generate for communities throughout their value chain. This pressure is coming from people within these communities, local decision makers and wider financial markets.
Companies are responding to this challenge to varying degrees. Based on our recent review of the reports that companies have been publishing in this space, many are talking about the socio-economic impacts that they’re trying to create, but few have data to back this up, and even less have demonstrated the actual difference they have helped to generate. In order to move towards best practice, companies need to be able to show how they are contributing both economically and socially, how they are driving change, and why this is important in the local and global context in which they operate.
From an economic perspective, some companies report on metrics such as jobs supported (both directly, and indirectly through the value chain), taxes paid and the value contributed to local or national economies. Most reports stop there, missing a key opportunity; they are not showing the human element of their company’s impact. Being able to also demonstrate how you have contributed to communities and individual lives of those in your value chain is essential in showing the real difference being made on the ground. This could include areas such as increasing knowledge and skills, providing access to education, empowering women, improving productivity or supporting new entrepreneurs.
This is just as relevant and enriching to your story whether it be for improving relations with local communities working in and around your facilities, rural communities in your supply chain, or enhancing the case for investment and support from local/national government decision-makers to support your operations. Providing clear facts and figures about the performance of your social and economic impacts will also help communicate this story to investors – a key stakeholder for any business, and a sector which is increasingly looking to analyse non-financial indicators to differentiate high performing companies.
There are challenges to doing this the right way, such as setting the right scope for the assessment, ensuring you have sufficient levels and quality of data, and most importantly knowing what your key audience is interested in. However, taking the time and effort to truly understand the range of impacts your business operations and activities are having, and accurately demonstrating these in a way that emphasises the real, on the ground impacts, will help businesses in three key areas:
- Firstly, being able to not just tell, but demonstrate with facts and figures, the story of what you stand for as a business is engaging for customers, shareholders, employees and wider communities. It helps to build trust and a powerful reputation for your organisation;
- Secondly, being able to show your impacts accurately and transparently will give further confidence to investors and ratings agencies (financial and non-financial) about the total value your business is adding to society as a whole and the communities in which it operates;
- Lastly and most importantly, understanding the current impacts of your business, and where it has had success in the past, is the best platform to drive improvements and start identifying where the risks and opportunities are for your organisation in creating a future impact strategy – one that delivers greater impact for society and the business.
Economic and social impacts are both fundamental parts of the impact story, but in isolation neither is able to convey the true picture of what an organisation has achieved. By understanding the variety of impacts you’re contributing to, you’re setting yourself a strong position to improve the effectiveness of your operations, and also to communicate this progress with your stakeholders. Taking a holistic approach to impact measurement and reporting is both the right thing to do and an important step for driving meaningful business progress.
