One of the big problems in life is understanding achievements. We often find it fairly simple to look at the resources devoted to some activity. This isn’t always a terrible thing to look at because a pretty good correlation can exist between resource input and good things happening. Yet, this connection is far from perfect. Plenty of resources are wasted while plenty of great things are achieved on a shoestring. We want success rather than well-meaning (or cynical) gestures that commit resources to sustainability strategies. Given this how can we tell the impact of sustainable business? How should we think about its achievements?
Schönherr and Martinuzzi have a useful edited volume discussing how business fits with the UN Sustainable Development Goals, the goals are here. How can we measure progress towards the UN goals? They tackle a number of important ways to think about the problem. I will discuss three here:
- Level of Analysis,
- Materiality &
- The Path To Impact
The Impact Of Sustainable Business: Level Of Analysis
When seeking to understand impact, one of the first challenges is the level of analysis, i.e., where you are looking. One might be looking internally at a small project to improve a discrete task. We want to know if this well-defined activity is having an impact. One can look at the product or service level and ask: what can we do to improve the way a particular product is sold? Or one might look at a particular site. Is our location in Anytown doing a good job helping the local community?
Maybe you want to look at the entire company? How is the company doing on its company-wide net zero target?
At its most ambitious one can look at the entire value chain. This helps get away from worries that firms just get rid of, e.g., outsource, their bad bits and buy in what they need from third parties who don’t mind being unsustainable. The firm looks better shedding the environmentally destructive bits when they report their activities but the world hasn’t been improved in any way if someone else is just doing the harmful activities. A value chain analysis looks at everything that contributes to a sale, including the work of third-party vendors.
Materiality And The Impact Of Sustainable Business
Florian Findler in chapter 3 discussed the idea of materiality. This concept focuses the managers on what matters. Solving a minor problem shouldn’t be considered as important as solving a massive problem. This is a great idea to bear in mind. Not all achievements are equally impactful. In some ways improving a really dirty industry to just average might matter more for the world than finally achieving a goal in an already clean industry; improving from hardly any net carbon emissions to net zero. Even though achieving the goal is intuitively very welcome the bigger improvement is actually better for the world.
The Path To Impact
Findler also notes what I will call the path to impact. Impact is what happens in the world, not what happens within the firm. The author outlines four ways to consider what happens on the path to impact.
- Activity is done by the firm in the hope of achieving an end.
- Output is the immediate product of the activity within the firm.
- Outcome is the immediate impact upon the world outside the firm
- Impact is the long-term effect of the outcome on the world. Do lives really get better as a result of the activity?
It is critical to keep your eye on the last one, impact. Activity designed to make the world a better place is a good thing to see but long-term achievement is much, much better.
For more on sustainability see here.
Read: Norma Schönherr and André Martinuzzi (2019) Business and the Sustainable Development Goals: Measuring and Managing Corporate Impacts, Palgrave Macmillan