Innovation Forum Detroit | October 2-3, 2018
How business can measure the impact—and ROI—of corporate sustainability In partnership with the Erb Institute, Innovation Forum recently hosted a conference in Detroit that delved into the best ways to assess materiality, build a business case and deliver impact at scale. Participants from corporations, nonprofits and academia shared their approaches to measuring impact and return on investment (ROI). They focused on fully understanding impact so that they can better drive strategy, justify budgets and communicate progress. Individual sessions ranged from ways to make board members really care about sustainability, to improving worker well-being, to industry-specific case studies. Following are some of the key discussion points from the event.
We are moving from “do less bad” to “do more good.” The concept of business for good is slowly building momentum in the private sector. In the past, sustainability impacts often were born out of risk mitigation rather than strategy. Now, companies are moving from managing risk to innovating positive change. This includes more “circular economy” thinking, as well as going beyond certification to more thoughtful and deliberate analysis and assessment. Companies are trying to get more actionable information out of certification. And, through B Corp certification, companies are working to return value to all stakeholders, not just shareholders.
For investors, it’s good business to be sustainable. In an ideal world, “responsible investment” would simply be “investment.” So, what are investors looking for that will make a responsible investment the right investment? They want to analyze risk and return, the long- and short-term business strategy, and how the business innovates. Companies must mitigate their full risks, quantify how their actions make them a better company, and address environmental impacts in their supply chain and beyond.
Meeting people (and companies) where they are is critical. This includes stakeholders, shareholders, consumers and the C-suite. Participants agreed that sustainability should be fully integrated into the company’s core strategy, but people’s comfort levels with sustainable practices vary. Some companies need to walk before they can run, so they may not be ready for science-based targets yet. Erb Institute | Innovation Forum | 1
Customers want to make an impact. How can companies be more transparent and give consumers the power to make influential choices? Companies are expected to make their supply chains both transparent and traceable—because consumers want to know where their products come from. Storytelling can also help promote sustainable practices and ethical sourcing—as well as create connections between consumers and suppliers or growers. “It’s a business opportunity to build trust with your brand,” one participant said.
Accountability and transparency help reduce a company’s risk. The stakes are especially high for human rights risks. Companies have been making progress on issues such as forced labor and mitigating the progress of disease in Central American banana workers. At the company level, one panelist said, addressing human rights is an issue of will, not ability: “If you want to make sure your supply chain is safe, invest in it.” In some areas, field workers are empowered to document and report risks or violations. However, revealing risk can be problematic. As one participant put it, companies “want to know the extent of the problem, but knowing the extent of the problem puts them at risk” of punitive regulatory action.
What we need is to transform the entire business model into truly more forwardthinking models that drive market-level change. The opportunity for collaboration and sharing in the pre-competitive field is huge. One pre-competitive recycling coalition spans the value chain from retail to brand to supplier to container manufacturer—all the way back to the recycling infrastructure that “harvests” the container from the consumer after use. Industry-driven interventions can align market pull and push to strengthen the value chain toward the most sustainable value opportunities.
In cross-industry collaboration, how do we create and support partnerships for sustainability? Academic organizations and nonprofits can provide valuable support. One nonprofit uses scorecards, similar to investment scorecards, when working with apparel companies on deforestation in the Amazon. One NGO’s challenge to companies asks: Are you part of the problem, and, if so, do you have the power to fix the problem? Academic partners can add value to these partnerships by helping to assess risks and benefits through risk management models, for example. Erb Institute | Innovation Forum | 2
Materiality—focusing on the impact your company makes—is important. This means focusing on only the targets or goals relevant to your company. For example, some companies initially reported on everything in the GRI but later narrowed their focus to only those metrics that are material to the company. Further, materiality assessments should consider the future, not just the present. Some companies’ material issues have evolved to include emerging issues that, while not central to operations, are salient due to their newly understood importance. “Relevance changes through time,” one participant said.
We need market transformation. Through enterprise integration, companies can operate better, faster, cheaper and with less energy, but that doesn’t get us to a sustainable world. What we need is to transform the entire business model into truly more forwardthinking models that drive market-level change.
We need more internal company support for sustainability action and change. Internal company buy-in is critical for success. Translating improvements into dollars is complicated, but if you can do it, you can get the attention of company leaders. One way to sell more sustainable practices is to leverage long-term data sets: Data from early sustainability success stories helps convince board members and elevates the conversation about sustainability. Further, knowing your audience is critical to successfully winning this buy-in: “The story you tell the CFO might not be the same story you tell the CMO,” one panelist said. This internal buy-in throughout the organization can also be gained by challenging employees at all levels of the organization to innovate. For example, one carbon-neutral company started imposing a “carbon tax” on each of its teams—so that each team is responsible for paying for its own carbon use, including electricity and air travel. It encourages innovation and creativity as teams find ways to reduce their impact, and it holds people accountable for what they actually do.
Young people want to make a difference, not just money. This means that companies that have made more headway on sustainability are more attractive to new talent. Millennials, in particular, want to work for companies with which they share values. Companies need to demonstrate—and communicate—their progress and commitment to sustainability to all stakeholders, including employees.
We should communicate with outsiders in clear ways. All the conference attendees are sustainability people, but do they typically include outsiders in discussions about these issues? We are entering a moment of change, and companies need to evolve their messaging to tackle global issues together—these issues are too big for any one company to solve. A company should paint a picture of what its business should look like in 100 years. And sustainable practices can be presented as a way to future-proof the business.
A diversity of voices and perspectives—including political diversity—is necessary to drive meaningful change. Otherwise, progress will be—at best—incremental. Erb Institute | Innovation Forum | 3