WHAT IS IMPACT BUSINESS?
Impact business is an umbrella term that comprehends all possible ways for corporations to intentionally contribute to solving social and environmental challenges
It represents a step ahead from the traditional belief that the only way to address social problems is either through governmental action or philanthropy and the only purpose of companies is to leverage their profits.
The contribution of the private sector to social good takes many shapes and has been addressed in multiple ways across history. Since the 1960s, companies have gradually embraced the need to adopt corporate social responsibility practices (CSR). This has an internal reach – in-house procedures to improve the well-being and the diversity of the workforce – and an external reach – the voluntary pursuit of positive impacts on society and the environment. Companies are meeting their shareholders’ expectations on a micro and macro level, answering to the demands of their employees, customers, and communities, and thus strengthening their brands.
Other companies produce services and products that represent a direct contribution to economic and social development. Their CSR policies are not parallel to their operations but represent their core business. They are what we call impact-driven companies.*
In more recent years, global financial institutions and asset owners have also started to adopt socially-conscious practices. This has been coined as sustainable investing and described by US SIF as “an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact.” Sustainable investment is a response to the growing awareness in both the public and private sectors that the challenges facing society in the 21st century are too large and too complex to be solved by government and the social sector alone.
Regardless of their size, geography and industry, all companies have the potential to make a contribution to a more developed and sustainable society without sacrificing its returns. The mobilization and deployment of resources should be done in harmony with more traditional financial goals.
Several trends and surveys indicate that corporate leaders and shareholders have never been so aware of their social responsibility as now. Granito & Partners helps enterprises to harness their full contributive potential.
Global sustainable investment assets have expanded dramatically in recent years, rising from $13.3 trillion at the outset of 2012 to reach a total of $21.4 trillion at the start of 2014. This 61 percent growth outpaced the growth in total professionally managed assets (Global Sustainable Investment Review 2014, GSIA)
Impact Investing: 89% of managers reported financial performance in line with or better than their expectations. Six in ten respondents principally target risk-adjusted, market rate returns, while 25% target ‘below market rate returns: closer to market rate’ and 16% target ‘below market rate returns: closer to capital preservation (GIIN and J.P.Morgan Chase, 2016)
87% of millennials (people born no earlier than 1982) believe that “the success of a business should be measured in terms of more than just its financial performance” (Deloitte Millennial Survey 2016)
The main drivers to move towards corporate social responsibility practices are “cost management” (67%), “customer demand” (64%), “because it’s the ‘right thing to do’” (62%) and “brand building” (59%) (International Business Report, Grant Thornton, 2014)
66% percent of global respondents say they are willing to pay more for sustainable goods, up from 55% in 2014 (and 50% in 2013) by companies that are committed to positive social and environmental impact (2015 Nielsen Global Sustainability Report)
Percentage of CFOs who rate corporate social responsibility and sustainability as “moderately important or very important items in their business strategies”: 83% in Africa, 76% in Latin America, 67% in Asia, 63% in Europe (Duke University/CFO Magazine 2013 Global Business Outlook Survey).
* Companies that directly contribute to the achievement of the United Nations Sustainable Development Goals (SDG). Generally, these companies operate in the fields of clean energy, socially-oriented technology, sustainable transportation, finance (including microfinance), sustainable tourism, education, healthcare, infrastructure, culture, innovation, telecommunications, agribusiness, or sustainable urban development and competitiveness.