5 Ways To Engage In The Impact Economy
The impact economy blends social and commercial value through business models that maximise positive impacts for stakeholders and create financial returns. Palladium, a pioneer of the impact economy, describes it as ‘profit with purpose’. Like any other business decision, profit motivates business model improvements in the impact economy and it’s profit that makes them scalable and sustainable. But the product should also create real value for stakeholders, such as in the way it is produced or through the problem it is trying to solve (that is, the reason it is being produced at all).
All elements of a business model represent potential opportunities to innovate and create positive stakeholder value. Inspired by the Innovation Radar, a practical tool developed by the Kellogg School of Management to help companies systematically choose where they should focus their innovation energy, it’s useful to look at the dimensions of your business model to identify where you could engineer win-win solutions.
WHAT are you making?
WHY are you making it?
WHO are you making it for?
HOW do you make it?
WHERE do you market, sell and distribute it?
The difference between engaging in the impact economy and merely performing ‘acts of goodness’ (A.K.A corporate social responsibility or CSR) is that CSR is secondary to core business. It’s tacked on the side. Yes, it may have a positive impact and may even be closely aligned with your core business, but it’s not fundamental to the way your business model is organised. The point at which the impact economy becomes real is when your business model is fundamentally all about creating value for the community, the environment, suppliers and employees, while still generating financial returns. In this way, the impact economy is really Shared Value in practice.
To engage fully in the impact economy, you do need to critically examine your company’s DNA and really interrogate the purpose of your business. But you don’t have to change everything overnight. It’s perfectly okay to dip your toes in the water with some quick and easy wins – even starting with just one dimension of one product. After all, you have to start somewhere!
Here are five easy ways your business can start engaging in the impact economy right away:
Value chain – take a look at your supply chain and choose a simple supply of goods or services that you can source from a social enterprise, a supplier with strong sustainability credentials or an Indigenous-owned enterprise. Perhaps one of your supply contracts is coming to a close so now is a good time to look for alternatives. Check out Social Traders, Supply Nation or B-Corps to identify potential suppliers. Or check how those goods or services are normally certified as sustainable or ethical (e.g. Forest Stewardship Council for wood products) and source your supply that way.
Net zero carbon – calculate the carbon footprint of your product or even your whole business. Use an online calculator, such as CarbonFund.org‘s business calculator, to get a back-of-the-envelope calculation, but be aware that to claim a product or business is ‘carbon neutral’ in your marketing or labelling requires certification (not as complicated or expensive as it sounds). Talk to providers like Carbon Neutral or Pangolin Associates to get an idea. They’ll help you reduce your emissions profile, advise on switching to renewable energy sources and can also help you offset any emissions you can’t avoid. There are some fabulous sustainably and ethically produced carbon credits available on the market – check out Aboriginal Carbon Foundation, South Pole and Gold Standard.
Divest dirty stocks and bonds – while technically not a dimension of your business model, this action very much helps you create stakeholder value. Ask your broker or investment manager to review your company’s investment portfolio. Get rid of any investments in coal, tobacco, fire arms, palm oil producers and any other industries that damage stakeholder value. Develop a policy to invest a minimum percentage of your company’s funds in socially responsible investments. Even better, investigate whether there are any impact investment funds that are supporting local enterprises in your area so you can invest in your stakeholders at the same time.
Single use plastics – examine the packaging in your value chain (whether associated with your end product or external inputs) and try to eliminate all single use plastic waste. Consumer waste is not the only source of single use plastics – there is plenty in the B2B environment as well. Instead, take a page from the circular economy and switch to a bio-based renewable resource material or packaging made from reclaimed waste materials, if possible. Even if you’re in the service industry or you’re a consultant, you’re guaranteed to be susceptible to consuming single use plastics in the course of doing business. Don’t!
Use your waste wisely – investigate your production process and identify what waste materials may be reusable, reclaimable or recyclable. If you’re not already squeezing value out of this material, this may be a lost opportunity. Even materials you may think are unrecyclable – think again! TerraCycle, for example, has created a transformative business model where it profitably collects and transforms materials previously considered non-recyclable waste into new products. They may be able to help find a solution for your waste. Otherwise, try contacting the materials science department of a university in your local area and if they’d like to partner with you to devise a solution.
When you’ve done any or all of the above, communicate! Communicate to your staff, your board, your suppliers, your customers and the community more broadly. Be proud to tell people you’ve taken the first step. Making public comments like [“We accept our business has an impact and we want to do better”] or [“We want to find a way to make a more positive impact – it will take time, but we’ve taken the first step”] or [“We’d welcome your support, your feedback, your insights, your ideas as we become more purposeful”] go a long way to engendering trust and sparking interest, just so long as you’re genuine in what you say.