In this transition, companies must Middle East Mobile Number List balance profits and impact, considering the risks and opportunities to generate a positive impact on society and the environment. Mandatory ESG disclosures and impact economics are increasingly important in this regard, and professionals dedicated to making a positive impact on society and the environment must be prepared to monitor these aspects of their work.
CSR to Impact Economy
To begin with, we will clarify that the Impact Economy refers to a very different type of system from the traditional capitalist economy, which focuses solely on financial returns. In an impact economy, consumers and shareholders will challenge entrepreneurs and executives to demonstrate that they generate their profits in a way that contributes to the public good, according to consulting firm Mckinsey .
Understanding this concept, professionals responsible for sustainability areas in charge of developing and executing sustainability strategies must be prepared to move from CSR to the Impact Economy.
First they should focus on mitigating risks related to environmental, social and governance (ESG) factors. This involves identifying and addressing the potential risks that a company or organization may face in terms of its impact on the environment, labor practices, business ethics, among others.
On the other hand, they must be involved in the creation of new value oriented to positive impact. This involves seeking opportunities to generate social and environmental benefits through business activity. For example, they may explore ways to reduce a company's carbon footprint, promote social inclusion in the supply chain, or develop sustainable products and services.
A new corporate performance
Creating business value is the main objective of a company. However, the emerging Impact Economy is transforming both the concept of business value and who has the ability to define it. In the Impact Economy, economic growth and business growth are not independent of the resolution of social and environmental problems, and can increasingly be aligned with these objectives.
As this field evolves, it can also begin to accurately and consistently use data disclosure to compare companies and sectors, in the same way as it does with traditional financial performance. This marks the beginning of a new era of transparency and integrity in measuring the impacts generated by companies.
In recent years, we have seen an unprecedented level of awareness about climate action and the need to make an impact on the climate. This is due to a number of factors, such as financial market expectations, new regulations, and new generations of employees and consumers demanding greater action from the brands they work for and buy from.
Mandatory ESG rules on the horizon
With mandatory ESG (environmental, social and governance) rules on the horizon, corporate disclosures are evolving from voluntary to mandatory, with the implementation of new government regulations underway. The first group of companies that are required to collect information and data on their sustainability performance, under the European Union's new Corporate Sustainability Reporting Directive (CSRD) regulations, must begin collecting data in January 2024.
Virtually all versions of mandatory ESG disclosure include climate-related disclosures as a primary component, and in particular disclosure of the company's carbon footprint. This disclosure recognizes the role each sector must play to achieve the goal of reducing carbon emissions to zero by mid-century and limiting global warming to 1.5°C.
That is why one of the first actions companies are taking is to establish carbon reduction goals. Companies are assessing their current carbon footprint and setting realistic goals to reduce their emissions, identifying areas where they can do so and defining the time frame to achieve this.
A company's performance in relation to the climate has become relevant to investors. This is evidenced by the more than 2,000 companies that have set science-based carbon targets, including more than 700 of the world's largest public companies and a third of Europe's largest public companies that have committed to achieving carbon neutrality by 2050.
Transformation of the economy and new value
Moving from CSR to Impact Economics may prove to be the greatest economic transformation the world has seen since the Industrial Revolution. One report found that sustainable business models could open up economic opportunities worth $12 trillion and create 380 million jobs by 2030.
Many companies are already seeing business value in areas ranging from cost savings and efficiency, attracting and retaining talent, and improving their supply chains, all of which result in much more durable and resilient businesses. For example, research by Okta and Anthesis Group found that hybrid work can support a net -zero strategy: reducing GHG emissions from reduced workplace square footage and fewer car trips to work.