How Can We Measure, Manage and Get the Most From Our Social Impact?

A1: Things that we have traditional considered social impacts are increasingly affecting the businesses bottom line. Stakeholders of all kinds (employees, customers, government) are asking business to address their footprint on this planet and its communities of people.

So business will need to only increasingly manage their impacts in this world. Well, in order to manage something it must be measured. I think over the next two decades we will see companies that measure and manage their ESG footprint in this world outperform those that do not.

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Hi Cameron - yes, this written discussion will kept up here for future reference.

Hi Luis, we love a bit of writing. Though many of our activities are spoken - today is written as its a great way for many people to contribute. We would love to hear from you too Luis.

A1. There is a clear business case for the mining sector in finding better ways to measure and report its socio-economic contribution to communities. Better measurement can focus company management action on what makes a difference to people, and catalyse investment. It requires creating a shared understanding of what benefits the sector can deliver and how, and has the potential to strengthen relationships with communities and other stakeholders.

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Business no longer has a choice… Shareholders, stakeholders and customers want companies to stand up on social impact and be visible

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I think there is a prior question around clarifying what we mean by social impact – does it include negative social impacts or only positive social impacts? The business case might vary depending on your answer to this, as do the challenges/ gaps in measurement approaches.

Hi everyone - I’m Justin Perrettson at Novozymes where I Head our Global Engagements work, looking across the business at how key sustainabilty and innovation trends and issues impact our actvities. As part of this I’m also involved with HelloScience, a collaborative innovation platform that aims to drive real world impacts linked to the SDGs.

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A1: I’ll take the chance to be the provocative one! When we say ‘business case’ we’re really saying ‘what’s the cost benefit for spending money on understanding our social impact’. But reframing it a little bit and stepping back, let’s consider that after 40 years of ‘unleashing the potential’ of business, capitalism is at risk of eating itself, with even the likes of Larry Fink and the Business Roundtable pushing for the recognition that there is more to life than shareholder primacy. If we recognise that businesses are social constructs that exist on the presumption of their societal benefits, any organisation that doesn’t understand their positive impacts is unlikely to be able to justify its existence in the future (beyond shareholder returns). The mounting pressure on corporations should encourage them to articulate and justify their role in society. Similarly, a company that doesn’t understand its negative impacts will not be able to mitigate risks or be ‘future fit’, while its investors will have no understanding of their own risk exposure. From an outsider point of view, if I heard someone asking these questions within a business, I would assume that they have had their head in the sand for the last 10 years and if possible, I’d want them to see that asking those questions is as sensible as asking ‘why is measuring profit and loss good for business and what is the business case for investing in the finance and accounting department?’

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Curious what you’ve done around stakeholder feedback/beneficiary feedback in determining what communities want to see.

Fully agree… I think we need to define what we mean by such a broad term and how it pertains to a particular organisation

Hi Luis - we’ll be doing some video-based and in-person events as well throughout the year. Stay tuned! For now, it would be great to hear your questions and insights in this written discussion.

Yes - I have thought about that for the second question too!

When it comes to “What is social impact” for me it’s the difference in the world because your organization exists. Both positive and negative. Intended and unintended.

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A1: My view is that every product has an impact, irrespective of whether it is specifically targeting positive outcomes or not. If we acknowledge that, the importance and the benefits of measuring social impact becomes clear, because:

• What you measure you can control: Robust measurement processes allow us to avoid products and services that have unintended negative outcomes for the communities we operate in

• We see impact performance becoming a differentiator and a meaningful new dimension of overall performance for all types of projects

o This can then help overcome barriers to social innovation – In a very simple manner, if you are pitching a product that carries ‘x and y risk/ return expectations’, it might not necessarily meet the required risk-return thresholds for your business. If suddenly you are adding one extra dimension and say this same product has the power to achieve this huge societal impact, then the discussion immediately shifts

• Client partnerships or products: You can capture business value from impact data and sell that as product in itself, or as an incentive for clients to join partnerships with you for example

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Good question - that’s a question I am being asked quite often. In my opinion, measuring social impact can fulfil a range of purposes. It can be used as a tool for strategic planning and continuous improvement, for communicating impact and attracting investment, or for making investment decisions. It also enables evidence-based analysis and decision-making for ongoing improvement and demonstrates accountability for progress and outputs of the project or intervention

For our site teams it is in particular important because it can help guide choices where we should spend time and money on. Often we implement programmes as a response to community requests without analyzing in detail which types of interventions have the highest impact - both for the business but also from the community’s point of view.

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As a final point, if people are fighting the good fight internally but hit brick walls on business cases - point them towards the raft of legislation coming out (particularly in Europe - see ECCJ) and try to convince them that the regulatory framework is potentially shifting significantly in the next 10 years. If companies aren’t able to articulate their social impact, they will a. not be able to convincingly argue a case against regulation and b. not be ready to provide information in future disclosure requirements when they come out (in part because measuring social impact is not a quick fix but a multi-year project to set up).
(https://corporatejustice.org/eccj-publications/16804-eccj-legal-brief-eu-model-legislation-on-corporate-responsibility-to-respect-human-rights-and-the-environment)

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Hi, Careen Abb, Positive Impact Finance Lead at the UNEP Finance Initiative. We work on mainstreming impact analysis and management within financial institutions.

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There is growing consensus that impact does not only mean positive social outcomes but also negative harm that must be measured and mitigated and managed.

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To Q1. Why is measuring social impact good for business? What is the business case for investing in measuring social impact?

Agree with Rabayl that social impact is a strategic matter for business. From a UNEP FI perspective, we’d go so far as to say that measuring social impact is good for business because without positive social impact there might be no need for business in the first place! We think understanding the business’ positive and negative social impacts and measuring them is the first step to understanding the place of social impacts in the business model – the more closely linked they are to value creation the stronger the business models – and the bigger the markets out there.

In the context of UNEP FI’s Positive Impact Initiative, we are promoting a holistic approach to impact analysis and measurement – i.e. considering social, economic and environmental impact areas holistically. The underlying thinking is that to make significant progress on the SDGs we need to understand and leverage on the interconnections between the impact areas. We’re devising a methodology to undertake such holistic impact analysis for financial institutions – as a self-assessment but also vis a vis clients and investee companies.

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yes, that’s especially important from a risk management point of view. Projects with positive impact can be a control to manage those risks.