When starting to work on impact measurement and valuation some years ago it felt great. Understanding the great potential of driving towards a new economic paradigm where basically all stakeholders would benefit provided a huge motivation and willingness to contribute. The first time listening to Sir Ronald Cohen and his vision of an impact economy caught me. The deep understanding of how impact-based decision making can provide huge benefits for societies, nature and immense strategic potential for companies at the same time.
Some years before I was born economic leaders published the Davos manifesto 1973 declaring “the purpose of professional management is to serve clients, stakeholders, workers and employees as well as societies, and to harmonize the different interests of the stakeholders.” Despite this commitment by important entrepreneurs, shareholder capitalism has ’successfully’ slowed down the transformation to stakeholder capitalism for another 50 years.
However, at the end of the 2010s, society, politics and business begun to realize that the social and ecological components should be given much higher priority when assessing business activities. The Fridays for future movement, consumers asking for transparency on companies social and ecological footprint and political actions like the European Green Deal underpinned the relevance for sustainability among economic and political leaders. We had what I would call a profound sustainability momentum.
For some years, the team I am allowed to work with has been building on this momentum seeking to convert it into reasonable action. We face one of the most complex stakeholder landscapes. But at the same time the number of supporters of a pivotal role of impact increases within societies, governments, standard setter, investors, NGOs and companies.
Impact Measurement and Valuation provides a detailed picture of your company’s value contribution to society. By bringing forth impact transparency along the whole value chain and own operations Impact Valuation easily enables more sustainable business steering leading to achieve the goals mentioned above. Since this transparency covers your own business activities and the entire supply chain – upstream, downstream, direct and indirect – it currently offers the most comprehensive and promising approach to sustainability management.
Unfortunately, there is no common understanding of impact and therefore no common understanding how standards or other regulatory means could pave the way for more sustainable business steering, by literally enhancing the opportunities but minimizing the threats.
“Impact can be defined as a change in one or more dimensions of people’s well-being directly or through a change in the condition of the natural environment. An impact can be actual or potential, intended or unintended, and positive or negative.”
Applying this definition some unique characteristics of impact quickly are clear:
The ecological and social potential of economic activity, which reduces its negative impacts and strengthens its positive impacts, is an indispensable perspective for the environment and society. At the same time, it’s indispensable for running a long-term sustainable business, given that investors, consumers and regulators, will not support businesses that only work at the expense of society and the environment.
Furthermore, it offers companies the opportunity of credible sustainability management. This in turn satisfies the interests of numerous stakeholder groups including current and future employees. Sonja Haut puts these arguments convincingly together in “THE CASE FOR IMPACT”.
Finally impact accounting takes all your companies’ externalities and the financial effects into consideration directly leading to future proof and sustainable business steering.
If all this is so obvious, why does it feel like the momentum is nowhere near as strong as it was a few years ago? It is the distracted attention!
The war in Ukraine, the immense tensions in the Middle East, other sources of conflict around the world, concerns about competitiveness, trade disputes, availability of energy supplies and much more have fundamentally limited the scope for structural sustainability discussions. In addition, current reporting and disclosure obligations present complex tasks. Even the thought leaders and pioneers of sustainable business management are bound by extensive compliance requirements. Quite rightly, these challenges demand attention, which is not inexhaustible among political and business leaders.
Even if the attention of relevant stakeholders for our advocacy efforts is limited, we believe in the absolute necessity of following this path. We at VBA see it as our task to help to regain the momentum. We will tirelessly explain the massive potential of impact valuation as a recognized standard for sustainability management and work to establish it. In the coming weeks, we will also be taking a closer look at certain aspects of the debate here in our blog. In addition to the prerequisites for sustainable corporate management, we will also discuss the aspects that are causing questions and a need for clarification among some of the discussion partners.
Author:
Roman Godau
Director Public Affairs at Value Balancing Alliance