A Business Framework for Global Impact

Oct 5, 2016 10:35 AM ET

A Business Framework for Global Impact

by John Hodges, managing director, Infrastructure and Finance, BSR (Business for Social Responsibility) 

As Managing Director for Infrastructure and Finance at BSR (Business for Social Responsibility), one of the world’s leading nonprofit business networks and consultants dedicated to sustainability with over 250 member companies, I interact with the heads of corporate sustainability for Fortune 500 companies on a daily basis. What is fundamental to these conversations, as well as to my regular conversations with the responsible investing community, is the increasing desire for companies to better understand the broader environmental and social impacts they are having, both positive and negative. 

What I mean by “broader” are those impacts that are outside a company’s own walls. Measuring and describing real world impacts is not easy – developmental and non-profit organizations still struggle with how to do it most effectively. Having spent most of my career as a development economist at the World Bank and at other sustainability-focused organizations, I know firsthand that analyzing sustainability impacts can be a mixture of art and science.

The process for evaluating impacts, however, is relatively the same whether from the perspective of a developmental organization, a non-profit, or a for-profit company. The basic approach is to understand the progression from inputs to outputs, to outcomes, and ultimately to impacts.

Companies spend a lot of time in their sustainability reports discussing inputs and outputs, and in some cases outcomes (e.g. my company’s recent shift to only purchasing certified sustainable wood which means more sustainably managed forests which means reduced deforestation). The place where companies are struggling most is to analyze how these outcomes can lead to real world impacts at scale (e.g. reduced deforestation creates a cleaner watershed and less waterborne disease).

The Global Reporting Initiative (GRI), the standard that the majority of the world’s companies follow in their sustainability reports, has four main principles for disclosing sustainability information: completeness, materiality, stakeholder inclusiveness, and sustainability context. The last one of these, sustainability context, is my personal favorite. I find understanding a company’s sustainability context to be fundamental to understanding its corporate sustainability impacts.

The concept of sustainability context is simply that companies should present sustainability efforts in the context of wider economic, environmental, and social conditions and trends at the local, regional, or global level. It gives all stakeholders the scale and understanding of the sustainability challenge at hand and the efforts needed to make a real world difference.

The World Bank and other developmental organizations focus on sustainability context. For example, before making any investment, the World Bank evaluates the broader sustainability challenges of its client countries and then articulates how the investment will create positive or mitigate negative sustainability impacts within that context. In my opinion, for-profit companies can do a better job of similarly analyzing the big-picture sustainability context when making business decisions.

A key concern is that without a sustainability context stakeholders are simply left wondering if a company’s sustainability impacts are actually a big deal or not. For example, Coca-Cola Corporation uses approximately 300 billion liters of water a year to make their products. The company has sustainability goals, which they are meeting, to replenish water resources and reduce water waste directly related to their operations.

That seems like a big deal, especially as 300 billion is a large number, Coca-Cola products are found everywhere in the world (I can personally vouch for North Korea), and global water scarcity is an increasing challenge. Stakeholders, including responsible investors, would be interested in what large-scale effect Coca-Cola’s efforts will have on regional or even global water supply resources and sustainability. Furthermore, they would be interested in any efforts being made to collaborate with others beyond Coca-Cola’s own water footprint for even greater impact and scale.

Read John's complete article & his Bio at- www.greenmoneyjournal.com/october-2016/a-framework-for-global-impact