December 13, 2021

Responsible businesses and impact for profit – an expose in the evolution of business value

Responsible businesses and impact for profit – an expose in the evolution of business value

“In the mind of an impact investor” was the theme of a seminar held at Minc by Jenny Carenco, Member of the Swedish National Board of Impact Investing and the founder of Prosper. If you missed it or would like to revisit the talk about impact and what impact is, this is a glimpse of the recording found in the link below.

Sustainability and impact are the new imperative in business, and sooner than later, this will be the new normal in businesses. Or as Jenny Carenco expresses it:

As a small startup, you might not have the resources to do everything sustainable from the beginning. You may have to start with what you can have. What’s important is that you are transparent about why you have made your choices, and can explain how you aim to become more sustainable as you grow. This is what brings you and your potential customers, investors, and employees value. This is how you future proof your business.
What does an impact startup mean?

An impact startup means that there are positive, intended outcomes of actions created by a startup. The effects, i.e. the impact, improves our world today and potentially also for future generations. In order to show this, these effects need to be measurable, tangible, and connected to a monetary value. The success of an impact startup is thus the positive impact and the monetary value it creates.

In the evolution of business, this is very new. Profit has been the metric for success for over a century. Then, some decades ago businesses’ responsibility gained importance, for its workers, users of their products, and similar. Over the past decades, Corporate Social Responsibility (CSR) and more lately Environmental Social Governance (ESG) have emerged in the evolution of business responsibility.

These terms relate to how organisations act responsibly taking society and the environment into account. In this chart from Prosper presented by Jenny Carenco, you see the increased orientation towards responsibility, with sustainability and ultimately impact having the greatest influence upon the development.

Development of business logic over time

Sustainability derives from sustainable development and the most common definition of it today is the one defined by the Brundland commission in 1987: Sustainable development means “meeting the needs of the present without compromising the ability of future generations to meet their own needs”.

Sustainable development differs from CSR or ESG in the way that it addresses the entire organization, both internally and externally. Externally, the boundaries of limitation of what we can do today, because of the consequences it creates in the future are often expressed with phrases as business that: “Do no harm”, “Thrive within planetary boundaries” or “Act within the 1,5 degree C limits”.

Sustainable development includes doing less of those things that put future generations’ needs at risk, and more of those things improving the possibilities for future generations to thrive.

Rather than focusing on the organization alone, sustainability encompasses external consequences created by a company’s activities. You might have heard the phrasing “the three P:s” as in Planet People and Profit. What it basically means is that it creates value not only for the company but for people and the planet and does no harm. Since the world is constantly changing, so needs sustainability to keep developing, in order to protect future generations. In this change lays business opportunities, and to an increasing extent businesses and investors are starting to realize that sustainability increases profitability. And when the sustainable effect is measurable, that is the impact.

Special thanks to Jenny Carenco for sharing knowledge in the area of impact.

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