The impact report, far beyond the sustainability report

Impact reporting is a strong point for benefit corporations against washing. Today, for an organisation, in addition to the annual report that shows the health of the company from a financial point of view, the role of non-financial reporting of intangible capital is also crucial.

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© Gabrielle Henderson on Unsplash

The report, in general, is a representation of what the company achieves. It is a tool for representing the virtuous actions/activities implemented by the company and should be seen as a new opportunity and way of doing business.
Reputation, sustainability, socio-environmental impacts and intangible capital represent the new ‘productive elements’ that must be included in corporate reporting.

Impact and its evaluation for organisations

Impact is a concept that indicates the measure of change, of the effects that an organisation, and in particular a company, can generate on people, communities and the environment. There are several definitions of impact but the one I agree with is defined by Prof. Zamagni as “the long-term sustainable change (positive or negative; primary or secondary) that the intervention has contributed even partially to bring about”.

Fundamental then is to assess the impact, that is, to detect, analyse and ‘give value’ to the action implemented by the enterprise through its activities, the services provided or the projects implemented in favour of the various assetholders (resource bearers) and stakeholders (workers, collaborators, associates, financiers, public citizens and the community at large. As defined by the code of the third sector, “impact assessment means the qualitative and quantitative evaluation, in the short, medium and long term, of the effects of the activities carried out on the communities of reference with respect to the identified objective”.

Impact reporting highlights the contribution to the creation of shared value. It is a process that enhances the elements and pathways of social innovation that organisations bring about (Zamagni and Venturi, 2015). It is therefore not merely a measurement process.

In Italy, this process of valorisation is a profound cultural change, as it does not just stop at finding the appropriate and measurable qualitative and quantitative indicators (kpi), but requires an extra step, namely looking at one’s own business and what it achieves with different eyes and asking oneself: “What is the long-term change one wants to generate or has generated through entrepreneurial activity? And to whom?”

In this way, it becomes a priority for companies to give themselves a purpose, literally a ‘purpose’, to identify the raison d’être, the real motivation that drives them to do business and do it well. In this way, the purpose calls on companies to take on social responsibility, to act to activate good practices that make their social and environmental impact concrete.

The company has the opportunity to look inward to identify value dimensions, i.e. specific traits of its identity, which, linked to the ultimate purpose of its actions and its chosen business model, necessarily affect its ability to generate impact and shared value.

In Italy, since 2016 there has been the possibility for purpose-driven companies to take on the legal status of benefit corporations. The Benefit Company chooses to have a positive impact while carrying out its core business imbued with value dimensions with attention to ESG criteria and the sustainable development goals of the 2030 Agenda. In addition, it “mandatorily” commits to identifying actions that create positive impacts or eliminate negative externalities, measuring their effects. And this is its strategic added value with all the economic, merit and reputational returns that can result.

The innovative character of being a benefit corporation is that of implementing strategies capable of combining business and attention to social and environmental issues with the commitment, made at legal level, to also assess its impact on the community and the territory.

© Isaac Smith on Unsplash

But what does it mean to assess the impacts of a business activity?

Impact assessment should be seen as an opportunity for growth and not as an additional burden since it gives companies the chance to rethink themselves in terms of organisation, efficiency and effectiveness in responding to social needs that are often latent and unresolved and therefore require to be addressed in a systemic manner with the involvement of all the actors present in the territory in which they operate. But it is also a guarantee to stakeholders against the risk of green/social washing.

As impact assessment is not merely a data collection but a process of critical analysis, which supports the governing body in its decisions, it also contributes to improving the transparency of the company reporting its actions.

By taking on the legal status of a benefit corporation, companies have the opportunity to transparently and responsibly highlight their sustainable business actions by virtue of the obligation under the benefit legislation to undertake to report, measure and evaluate not only economic performance but also social and environmental performance.

A benefit corporation chooses to have a positive impact while carrying out its core business, and in addition it is ‘obliged’ to identify actions that create positive impacts or eliminate negative externalities, measuring their effects. And this is its strategic added value with all the economic returns that can result.

The innovative character of being a benefit company is that of implementing strategies capable of combining business and attention to social and environmental issues with the commitment, made at legal level, to also assess its impact on the community and the territory.

Its statute characterised by a dual purpose (i.e. to maximise or rather optimise profits with that of generating positive impacts or reducing/eliminating negative ones on people, communities and the environment) also crystallises the duty to identify and appoint an impact manager and draw up a report reporting on the annual progress of the statutorily defined objectives, specific objectives, modes of action and new objectives, a measurement of the overall impact generated towards its stakeholders and assetholders.

It goes far beyond the mere qualitative description of Corporate Social Responsibility activities typical of traditional reporting in the Sustainability Report; this tool is not sufficient to adequately describe the companies’ commitment to the community and the environment: without an assessment of impacts based on reliable and measurable data, reporting is more of a marketing tool than an effective guarantee of transparency towards stakeholders and investors.

It is necessary to measure and give value to what one does in order to be accountable not only to one’s shareholders but also to all assetholders and stakeholders involved, directly and/or indirectly, in the business activity.

In this way, the impact report, annexed to the annual report, becomes a crucial trust tool for conveying one’s consciously assumed responsibility and for communicating what good is being done by business for people and the environment.

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