Mainstreaming Impact in Corporations – A Change in Mindset

The world perception that social, economic, and environmental actions that a company makes are an add-on or a nice-to-have projects, separate from regular business operations is changing. While over the past two decades the discourse of climate change, for instance, left the sole space of discussion in international stages, such as the United Nations and the Conference of the Parties (COP), and it came closer to our lives as we started perceiving their effects on how we live – whether it is the change in small and large crops production that affect food security, or the overheating or overcooling in places where it did not occur many years ago. As we become more connected citizens, and access information in easier ways, it also becomes more accessible to see those impacts, the social inequalities, and the despair of vulnerable communities. We have come closer to the issues now, as we are constantly exposed to them, and not only seen in the news broadcast at the end of each day on the television as something that happens far from us. It is constantly on our mobile phones and social media. This approximation brings out the understanding that the responsibility to change and create a better world lies not only with governments, but also with us as citizens and the companies we work for. The challenges are multiple and complex. 

The change of mindset in companies has not been fully achieved, though, and requires a lot of convincing, particularly by the younger generations who are becoming senior managers. These are the ones putting pressure in mainstreaming positive impact in corporations. Furthermore, most of those companies that started considering impact (in its wider sense of how their operations affect positively or negatively the environment they operate in), they did it due to reputational issues rather than truly embedding this mindset in its core business. It starts from trying to provide compelling, albeit at times flawed positioning that they are doing good to maintain clients. Young consumers do not buy from companies or invest in companies that harm nature, exploit the poor and do not treat their employees well. And now that the word of what they are doing gets around quickly and organically, makes it difficult for the companies to hide if they do harm. 

One of the most recent and potentially impactful events that pushed companies towards this space was the introduction of the ESG concept. ESG stands for Economic, Social and Governance, and it is composed of a set of standards or compliance points on these areas that companies need to report on related to their operations depending on where they operate, especially if they are publicly listed. As ESG becomes more popular, it is certainly an advance, but we are not there yet. The positive point is that ESG got the business community indirectly talking about impact. The negative point is that there is still not a comparable or high bar for companies to deliver impact. ESG standards may vary depending on what the companies would like to report on without a purposeful commitment to change, and it can easily become a marketing tool, more than an actual impact promoter. And the in immediate scenario, it does not look like it is going to change because regulating ESG would be a complex task. 

Therefore, the solution would be to use the space and advances that ESG created but start looking beyond those standards towards impact. Impact in this case would need to be considered in the company’s strategic plan and core operations, filtering down to a framework with indicators that would allow us to track results and guide the operations purposefully. This does not mean that all companies would become social enterprises, but rather take seriously into account that if they want to continue in business in the long run these aspects need to be considered. Either because of their clients’ and consumers’ interests, the survival of their supply chain (which is likely to be more affected as they are smaller businesses), or the maintenance of their market relevance. 

The evidence is clear that impact and sustainability are the drivers of future economic success. They reinforce each other and are not competing priorities. It is time all corporations caught up with the trend. And to that effect, investment firms and asset managers have a key role to play in that space, as this change also requires capital. 

Soon I will share more about how this applies to the investment space.