Sustainable Innovation


5 reasons to start measuring social impact

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Companies taking the lead 

In January politicians, leaders of multinationals, entrepreneurs and scientists gathered at the World Economic Forum in Davos to discuss today’s societal challenges. It is encouraging to see that the private sector is taking a leading role in defining plans to mitigate climate change, ensure health and safety and move towards a circular economy. Companies employ the most employees in the world and have the largest investment and innovation capabilities. Nowhere else such significant impacts on society can be made as by companies if they run their business in a responsible way. Think about sustainable sourcing policies, careful choice of materials, eco-design, production methods, creation of jobs and good working conditions.

Why should you start measuring social impact?

All impacts organisations have on society can be summarized as ‘social impact’. These can be from economic, environmental and social perspectives. How to measure this impact? How to identify the best opportunities for a maximum positive social impact? Where do companies create most impact? How to shift to new more sustainable consumption patterns? How to define priorities, and how to track progress?  Measuring impact has surfaced in recent years as a new important perspective in doing business. There are five reasons why:

(1) Underpinning company mission: An increasing number of companies have defined company aspirations and targets that explicitly refer to the social impact they aim to achieve. Philips aims to improve the lives of 3 billion people with health care solutions. DSM wants 65% of its products to have a measurably better environmental or social impact (Eco+ or People+). Underpinning these missions are  essential to monitor and manage performance.

(2) Requests for transparency: External stakeholders set higher expectations on transparency than before. Reporting financial and non-financial results are becoming common practise. Companies are not only asked to be transparent about their profits and revenues, but also to inform the general public about the status of ‘externalities’ such as the safety, health and employee engagement of their staff as well as the green house gas emissions of their sites.

(3) Consumer expectations: A large majority of consumers expects that companies take responsibility for healthy, safe and decent working conditions under which products are being produced. Two thirds of all consumers sense responsibility to purchase products that support environmental or societal goals (Globescan). Half of all consumers state they are even prepared to pay more for products that have a clear environmental or social benefit (Nielsen). Producers of goods or services that want to tap into this pull will need to come up with evidence that shows the positive impact on society is not biased, but real.

(4) Changing investor preferences: The investor community increasingly steers on the social impacts of investments. Before, most investors applied an exclusion policy, avoiding certain sectors. Nowadays investors increasingly steer their portfolio based on performance on several Environmental Social and Governance factors (ESG). For companies this is a reason more to track and manage these factors more closely.

(5) Employee engagement: Last but not least, the ‘sense of purpose’ of a company has become the most important reason for Millenials to work for that company (Deloitte). And this not only accounts for the Generation Y. Many people like to work for a company that has a social mission in its headlines. It inspires people to get up in the morning.

Impact measurement important for companies to flourish

Measurement of social impact is still in its early stages. There are ongoing discussions how to do this, and how to monetise externalities. Integration of impact measurement results in business cases is expected, and even on company balance sheets in the future. There is much to be explored, and much to gain. The progress in the coming decade will be instrumental to have better insights in the real social impact of companies, and be able to steer, for a healthy planet, a prosperous society and companies that flourish.

– by Karen Maas (Academic Director Impact Center Erasmus) and Jacobine Das Gupta (DSM Corporate Sustainability) published previously in Dutch: NRC Live Impact Day

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