Impact: The New Narrative For Long-Term Business Growth
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When all the UN Member States adopted the Sustainable Development Goals in 2015, this marked the beginning of a journey aiming to unite all actors under the same umbrella in driving an equitable future for all, enabling thriving economies and living in harmony with the environment.
Ever since, sustainability has started to be more and more under the spotlight: governments are integrating it into their agendas, academia is embedding it in educational curriculum, and consumers are more conscious in their choices. Over the past year, we have also witnessed a steady growth at a global level in sustainability commitments made by business leaders, in the social enterprise ecosystem, and in impact investment.
With this, impact is quickly becoming a buzzword in demonstrating the value generated by organizations across all sectors and industries, beyond the economic returns, through the lens of social and environmental indicators of performance. However, as traditionally impact was attributed to the non-profit sector, as opposed to the financial focus of businesses, and as sustainability is often associated with environmental impact, or at the completely opposite pole to financial sustainability, the impact space is overwhelming and confusing. Let’s look at how impact can enable business performance.
What does impact mean?
Before delving into the topic, it is important to establish how impact can be defined in a business context. If we take the dictionary definition, impact represents the effect or influence of an action, which for an organization can be extrapolated to a change generated by its model, be it through the solution it brings to the market, within its supply chain, or inside the organization. Impact goes beyond the immediate outputs of activity, and so, the process of quantifying it can be complex and challenging. However, if we frame impact in the current context of the Sustainable Development Goals, this enables organizations to speak in a universal language, and empowers them to become agents of change.
Impact as the foundation of business strategies
At the core of any business model sits value creation for all they interact with; customers, employees, suppliers, partners, shareholders being just some key stakeholder examples. And so, impact starts by defining the purpose of the existence of an organization in the wider context, its “why” statement. This will support an organization to steer away from only the financial metrics and integrate societal and environmental performance indicators. Deriving from this, an organization can establish and build around its core purpose a value-based organizational culture, operational processes, and commercial (sales and marketing) strategies.
Impact as a lever of innovation
We live in a world shaped by technology breakthroughs and digitalization that enables us to perform and communicate better and faster, while at the same time, experiencing a transition to new and innovative business models that transforms the status quo. When a business integrates impact performance indicators within its model, thus setting baselines and targets, it unleashes its innovation capabilities in pursuing the achievement of these. There are numerous examples of impact-related innovation that made a clear commercial and financial sense for the businesses that incubated them, most revolving around circular approaches, product diversification, or personalization for underserved markets or asset sharing and usage-based pricing.
Harnessing communications to drive impact
It is no secret that from the most incipient stages of corporate responsibility, which took the form of volunteering, donations, or philanthropy, organizations have utilized such initiatives as means of showcasing how they give back to the communities, and engaging with their consumers. Communication sits at the foundation of developing bonds between organizations and its stakeholders, and impact-driven business strategies can enhance the engagement levels. Rather than only focusing on the direct impact generated by an organization through its sustainability strategy, impact communications offer the unique opportunity to educate and inspire stakeholders to take part in the sustainability movement, setting the foundation of a shared purpose for all.
Impact-focused business models
Social entrepreneurship is growing globally at a fast pace, and with it, the impact investment market follows, having also almost doubled since 2015. Having impact at their core and generating financial returns, social enterprises have a unique role in transforming the business ecosystem. They often have as a foundation innovative approaches, based on the creation of new technologies, that address a wide spectrum of societal needs, from water and energy access to social inequalities, poverty alleviation, and financial inclusion. Social innovation is also encouraged by government grant programs, incubators, and accelerators within the UAE, which confirms the increasing investment appetite in impact-focused businesses.
Although still in its beginnings, the momentum is quickly building up, and the new decade ahead could represent a turning point for businesses as we know, and lead to impact being the new narrative shaping business as usual. Transformations always take time, and the transition to impact-oriented business strategies will also evolve over the coming period. It all starts with awareness and creating the business case to take action, based on all impact levers– economic, social, and environmental.