Picturing the future. The age of impact investing
We live in a world which is moving at increasing speed compared to the past, and this often prevents us from understanding and decoding new phenomena. A world that is both connected and interconnected, whose actions can result in unforeseeable reactions. This is nothing new, yet we need to capture what is happening, to take a snapshot - albeit a blurry one since the world is in constant motion - to slow down in order to be able to reflect on the emerging international trends that are reshaping products, services, visions, and relationships. This is what our Longforms are all about. Every month, we bring you in-depth stories on a number of key issues. A way to understand what is happening around us and to meet the future challenges that will affect people, businesses, and communities. If you have not already done so, be sure to read the previous issues. And we hope you enjoy reading this new issue.
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"Photos have a connection to the heart, the mind and the eyes, and they have to communicate something - if they do so, they have value." This is what American photographer Elliot Erwitt, one of the world pioneers of photojournalism, once said. And if we look at the latest shot by Nima Sarikhani, winner of the Wildlife Photographer of the Year People's Choice Award, we can recognize all the communicative power of photography described by Erwitt. Photos are often worth a thousand words. This is also true in this case - a polar bear sleeps on a block of ice in the middle of the North Sea. The photo is a poignant visual reminder of the rate at which the polar ice caps are melting due to rising temperatures. "Although climate change is the biggest challenge we face, I wish for the photo to inspire hope," stated Sarikhani, who wants the moment captured in this photograph to have a positive impact able to turn things around and thus enable human beings to understand the risks posed by climate change. Because sometimes it takes very little to stir consciences, even if the action must start from the top, from governments and businesses that are in a position to act directly.
Impact investing
If there is one positive thing that the pandemic emergency has left in the consciences of citizens, institutions and businesses, this is the great need to work to find a solution to severe climate and social problems. Harvard Business Review calls the post-pandemic period we are experiencing the era of impact investing - companies are stepping up to address the biggest environmental and social problems of our time.
General Motors has pledged to become carbon neutral by 2040, Apple is investing $100 million in its Racial Equity and Justice Initiative and plans for 100% of the brand's products to be designed for circularity by 2040. Those companies that fail to act risk losing investment opportunities and market share. A goal-oriented corporate responsibility strategy can help companies think big and do more while also improving accountability to their stakeholders. Nevertheless, setting corporate responsibility goals cannot be a one-size-fits-all proposition. The objectives of a large retail chain can be very different from those of a small software company.
The key is to develop "a set of targets that are rooted in the brand, the business strategy and the culture of the company," says Harvard Business Review. One of the most iconic examples in the world is offered by Patagonia, an American sportswear brand that launched the "Worn Wear” program dedicated to promoting sustainability and environmental responsibility in the clothing industry. Based on the Repair, Reuse, Recycle philosophy, the initiative encourages customers to take care of their outdoor clothes rather than replacing them frequently. The program offers several services, including free repair of the clothes, thus encouraging consumers to reduce waste and extend the life of their clothing. In addition, Patagonia is promoting the sharing of stories about people's much-loved and long-used garments, highlighting the emotional and practical value of owning durable items.
CSR open to the world
The impact that companies are seeking to make on society and the environment is the natural evolution of all those good practices and behaviors that have always inspired their actions up to today, such as Corporate Social Responsibility (CSR) activities. It is like an implicit agreement between companies and the community, in which companies take responsibility not only for their own profit, but also for the welfare of society and for environmental sustainability. In other words, it is not just about doing business, but doing so in an ethical, respectful, and sustainable way. This may manifest itself in various forms: the adoption of environmentally sustainable production practices, respect for human rights across the supply chain, support for local communities through volunteering initiatives and donations, implementation of diversity and inclusion policies in the workplace, and so on.
What is at stake is a long-term vision and the creation of shared value. Doing good - and then measuring it the best you can - is worth the effort. Because companies that invest in their ability to generate a positive impact on the world often reap tangible benefits, such as improved brand reputation, greater trust from customers and investors, a marked ability to attract and retain talents, and even at times competitive advantages in the marketplace. According to a global survey conducted by Harvard Business School, 77% of consumers are keen to buy from companies committed to making the world a better place, while 73% of investors say efforts towards improving the environment and society play a part in their investment decisions. This trend is more widely supported by younger generations who are feeling the effects of climate change and new social interactions. Already today, nearly 1 in 2 consumers – more exactly 41% of millennial investors – are making significant efforts to understand the CSR practices of companies compared to only 27% of Generation X and 16% of baby boomers. Harvard Business School analysts estimate that this figure is likely to increase as future generations - such as the Z or Alpha generations - become active consumers and will seek to understand how their investments can positively impact society, and the world in general, for better or for worse. It follows that positive investing helps organizations to position themselves successfully in relation to medium- to long-term systemic challenges. And what's more, it almost becomes a forecast of potential growth. That is why it can no longer be ignored, as also reported by Marco Fasciglione, a CNR researcher and Board Member of the Fundamental Rights Agency of the European Union, in his guest post. "We need to give global markets a human face. Companies' commitment to positive impact can no longer wait. Organizations must commit to generating a positive impact on people, the environment and society."
Monitoring impacts – creating value
In its broadest sense, social impact includes everything that affects the company-stakeholder relationship - how fast and how reliably suppliers are paid ( for example, think of supermarkets), how a product affects daily life (think of social media), how small shareholders are likely to be treated, what impact is generated on both health and communities. It is increasingly complex for companies to monitor this impact because by reducing the human experience to numbers, it is often impossible to fully appreciate the bigger picture. This is not to say that any measurement would be useless, but that relying solely on metrics is ultimately ineffective. That is why, in order to collect feedback and insights on the social impact of business activities, there is a need to focus on metrics involving all stakeholders, including beneficiaries, communities, employees, investors and other parties.
This is key to creating the kind of value chain that sees the company not as a profit-maximizing collector but rather as a multiplier of the values in play - a fairly simple factor for a small company where supply chains are easily tracked, but quite difficult for multinational companies. However, there are numerous examples of large companies that are able to track their impacts. Among them is Unilever, a multinational consumer goods group that owns 400 of the most popular brands in the food, beverage, hygiene and household goods sectors. This giant has launched "Sustainable Living Plan", an initiative that aims to improve the health and well-being of more than one billion people and to reduce the environmental impact of the companies' manufacturing processes.
To monitor the impacts of its actions, Unilever engages stakeholders through consultations, public meetings, surveys and online platforms to gather feedback, ideas and suggestions on how to improve its business practices. But the key has been the introduction of an apex role who works on a plant-by-plant basis to collect this feedback and act on the social impact. At the end of the year, all numerical and empirical monitoring activities are summarized in the Sustainability Report, one of the other key aspects of a company's positive impact.
Communicating impacts - acting and letting people know
One of the major principles of Corporate Social Responsibility is to take impactful actions and ensure that these actions are communicated in the right way. Three principles should guide corporate communication in the immediate future: honesty, transparency and repetition. Honesty to state when the company has failed in the impact targets it has set, whether it is workforce diversity or greenhouse gas emission levels. Transparency in communicating what plans are in place to address these issues and work toward meeting defined targets. Finally, even more important is the ability to repeat the message, especially by people in the company who are both ambassadors and advocates. Dell Technologies has been working to achieve its social responsibility goal for the past decade. The company has spoken out regularly and publicly about the challenges of measuring that goal by creating a blog. It has collaborated with other companies to promote the emerging field of Net Positive measurement and now it has a bold yet measurable new target - to achieve net zero emissions by 2050. It also communicates its progress annually through the Sustainability Reports that are increasingly popular with large companies as they allow organizations to assess their impact on a wide range of sustainability issues. These documents enable them to increase transparency about the risks and opportunities they face. Putting social partners and stakeholders involved in the supply chain back on center stage is the new mantra for companies. Nowadays, what we can call stakeholder capitalism has become strategic as corporate profit comes from combining value chains enabling everyone to play their part, so that no one is excluded from this irreversible process moving in the direction of a social and plural company.
