By Christian Jahn, Executive Director of the Inclusive Business Action Network (iBAN)
Companies should weigh sustainability impact alongside profit when determining business priorities. Not only is business in a unique position to drive sustainability, but there are also financial and social incentives to do so.
With the impact investment market poised to reach the $1 trillion mark, companies would be remiss not to show they mean business when it comes to long-term sustainability and mitigate “impact-washing” risks. Improved measurement and valuation will help companies reach their sustainability goals by setting high standards, and importantly see impact investment reach its full potential of meeting the needs of underserved populations.
One way companies can show that business growth and social impact go hand in hand is to improve data transparency and encourage more information sharing. The global healthcare company Novartis has designed a method to convert business activities’ economic, ecological, and social impacts into a common unit. That way the units can be easily compared and trade-offs can be made. For example, Novartis has used the method to consider the potential cost of carbon and water in their supply chain, and the corresponding financial risks.
Quantifying its environmental footprint provides Novartis with insights to eliminate environmental blind spots and expose risks such as overconsumption and pollution. This method, which they have called Impact Valuation, helps quantify what has previously seemed unquantifiable.
Gathering precise information is critical for companies in the face of mounting pressure to embrace sustainability from consumers and investors. This coincides with a need for ambitious standards that will make tangible and long-lasting positive impacts on society. For instance, Unilever has the ambitious target of net zero emissions from its products by 2039 – from the sourcing of the materials they use, up to the point of sale of products in stores.
To continue raising the bar on sustainability standards there needs to be greater transparency. Take carbon footprint – transparency on this can accelerate the global race to zero emissions. To this end, Unilever aims to communicate the carbon footprint of every product they sell and work with other businesses to standardize data collection.
Global initiatives have been set up with the exact purpose of improving metrics and data through collaboration. Under the leadership of the G7, the Impact Taskforce has set up a workstream to focus on accelerating transparency and global harmonization of reporting standards. They see this as key to achieving the United Nations Sustainable Development Goals and a Just Transition towards a climate-neutral economy.
Similarly, both the Impact Management Platform and the International Sustainability Standards Board provide a global baseline of sustainability standards and guidance to coordinate efforts and mainstream the practice of measuring impact.
By supporting companies with their impact metrics and reporting, initiatives like the ones above can raise sustainability standards and also help unleash investment to help companies achieve their goals.
This was the case with Ebun Feludu’s social impact company JAM The Coconut Food Company which works with small-scale coconut farmers in Nigeria. Starting the company with her own funds, Ebun is now in a position to receive funding from impact investors. For Ebun, “impact investors want to see impact”. To show impact, Ebun tracked her progress by measuring the number of women trained and employed, and the value-added to the coconuts the company processes. With this data, Ebun was able to attract investor interest. Similarly, “outcome-based financing” takes into consideration donors and investors who are increasingly focused on measurable outcomes as the starting point for further or next funding or investment.
We all have a part to play in creating better futures. Businesses can – and must – be a major driver in helping make this a reality. By ensuring the company’s sustainability efforts are more informed, more transparent, and more aligned, their collective efforts can deliver even greater impacts to this end. Only by working together can we build a more sustainable future.