Incorporating Impact in Business
“It is not our part to master all the tides of the world, but to do what is in us for the succour of those years wherein we are set, uprooting the evil in the fields that we know, so that those who live after may have clean earth to till.” — Gandalf, The Lord of the Rings
Impact investing is steadily growing in prevalence and Africa is no stranger to its proliferation. Zambia hosted the Impact Capital Africa conference in October, second of its kind in the country, as a statement of investors’ confidence in investing in local businesses that create and live impact.
In preparation for the conference, we held a workshop on ‘Impact’ with over 25 companies. There is clearly an interest from the corporate side to understand what ‘impact’ means to them, how they can benefit from it and how they can implement it in their business. In my interactions with various companies, I could not help but notice that the perception of ‘impact’ varies greatly from company to company. So, in an effort to lend a voice to the discussion I will begin my discourse on what it is and how businesses can establish and brand themselves as the impact propagators that most of them already are and venture forward in this brave new world of changemakers.
Basic description of impact and why it matters
Impact, from an investment perspective, is a positive outcome resulting from investment that is purposeful, specific and measurable. The result could be a social one like improving sanitation and thus living conditions of a specific group of people or improving livelihoods through job creation. It could also be an environmental outcome like a clean energy project reducing CO2 emissions.
With so many social and environmental ills like poverty and deforestation, it is ever more apparent that governments, charities, NGOs and other such non-profits will not be able to resolve them alone and neither should they do so by themselves. Private sector involvement is necessary to address the issues we currently face.
How businesses can know they are creating impact
It’s quite interesting that a majority of companies I’ve encountered that are looking for investment are, to a varying extent, already creating impact without realising it. One way of understanding the impact of businesses is to take a look at the Sustainable Development Goals, SDGs, which are widely used guidelines for ‘impact’ through sustainable development. A business can identify the elements of their business process or product that contribute to the broader SDGs and then more specifically to the sub-targets of each goal. This makes it easier to communicate ‘impact’ to potential stakeholders.
In the same way that sales volumes are useful in informing strategy, so is the data from a company’s impact creation. Impact data can feed back into business decisions and strategy, which can help companies to validate or realign their approaches to various areas of their business, for instance their client targeting or procurement strategy.
How impact affects business
Impact is increasingly good for business. With the growth of the impact investing industry, it could open doorways to new funding opportunities that are focused on profitable social and environmental businesses. Also notable is the increase in sustainable consumption which creates a larger market for eco-friendly businesses. Just last week, the European Investment Bank (EIB) announced that it will step back from financing fossil fuel energy projects, an uptick in the trend of large investors towards sustainability.
Where do we go from here?
In reality, impact is something that so many companies care about and, without conscious effort, create already. The next step then becomes understanding their own ‘impact’ footprint and optimising it so that they can deliver and communicate it efficiently and deliberately as a part of their business model. Impact can come in handy as a strong visual differentiator among competitors as the consumption paradigm steadily shifts towards greener products and services.
“Excellence is never an accident. It is always the result of high intention, sincere effort, and intelligent execution; it represents the wise choice of many alternatives – choice, not chance, determines your destiny.” – Aristotle