Measuring Impact: Balancing motivation and regulation
A quick analysis of the current landscape of impact reporting
Over the past few years, it has become glaringly obvious that our current economic system cannot continue in perpetuity. Its linear structure and extractive nature are burning through resources, including raw material and human capacity, faster than we replenish it. We are in the middle of the impact-based economic evolution as seen in the nearly $70 billion being funneled into ESG funds since 2016 (HBR). Businesses that want to survive and contribute to an inclusive future are investing in SDG and ESG-based strategies. To build something better, we must dis-assemble and analyze the pieces of the current system to rearrange, adjust, and add where necessary.
But how do we do this in an evidence-based, transparent, and motivating way? Many organizations and institutions are building frameworks and methodologies geared toward standardizing and accurately reporting impacts. It is a great first step but wrought with complexities and lessons on the way to wide adoption.
Why Measure Impact?
As of 2021, about 60 % of global consumers indicated they heavily factor in a company’s sustainability impact when considering their purchasing decisions. A transparent snapshot of where your company is and what it’s doing to achieve its sustainability goals leads to customer loyalty. Similarly, employees across the globe have expressed a desire to work at a sustainable company. If you want to attract and retain world-class talent, create a mission and game plan that will inspire meaning and action. Lastly, it will soon be required. ESG laws and regulations will only continue to become more stringent. Companies that get a head start will not only reap the benefits but also help define the standards and best practices.
Challenges with Current Measurement Frameworks
Limited to Harm-Reduction Many of the current frameworks have their roots in accounting and financial reporting. Their aim is to reduce the potential risk from activities like using child labor or polluting local water sources. And while the motto of every sustainable company is to “first, do no harm”, this approach to measuring impact leaves businesses that are built for social and environmental good searching for a way to tell the story of their positive impact.
Complex and Hard to Use Another challenge is that current frameworks, “fail to capture the complex, systemic nature of social and environmental systems, and indeed that of business organizations themselves. Yet measurement is both necessary and inevitable.” Building these frameworks means developing proprietary metrics and in doing so uncovering the depth of complexities of the current system. Measures across sectors are complex and inconsistent and have yet to be captured adequately.
Not a Basis for Comparison Perhaps one of the biggest challenges with current frameworks is that it is hard for stakeholders — those employees, customers, and shareholders reading Corporate Sustainability Reports or company mission statements — to assess whether the company is indeed doing the right thing. While many will give a company a score, it is only for a portion of their impact, typically just carbon footprint.
Conclusion Impact reporting is here to stay. However, the current landscape leans heavily toward a data-driven approach which has its limitations. Storytelling reporting fills the gaps in current reporting standards in a way that humanizes the mission and motivates the broader stakeholder community. If you’re already utilizing data-driven impact reporting consider augmenting your strategy with a storytelling approach. If you are new to the impact-reporting realm and looking for a place to start, 17 Ways Impact Report is a great first step.
More on Impact Reporting :
- Call for ESG — Empowered Consumers Call For Sustainability Transformation
- Get Started on your impact reporting journey with 17 Ways
- Learn more about the United Nations Sustainable Development Goals
