How can your business 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:

  1. 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.
  2. 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.
  3. 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.
  4. 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!
  5. 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.

Ethical Republic provides Next Generation CSR services to help you engage in the impact economy.

Comments? Questions? How do you approach the impact economy in your business? We’d love to hear what you think!

10 tips to improve partnering for impact

A few years ago, I was negotiating a complex partnership with a major international company to deliver greenhouse gas reductions through savanna burning. One of the largest voluntary environmental offset agreements in Australia at the time, the project was designed to deliver significant improvements in conservation and avoided emissions over 20 years. It would also enable Indigenous people to engage commercially in trading carbon credits in the international and domestic markets.

It was a big deal for the Commonwealth Government entity I was negotiating on behalf of, it was high risk for the private sector partner (think: deliberately lighting fires in vast remote landscapes) and it was a potentially life-changing opportunity for thousands of Indigenous people across Northern Australia.

While it was always going to be a tricky partnership to navigate due to the high stakes involved, the biggest battle took me by surprise.

The toughest task turned out to be managing the internal suspicion, politics and sense of entitlement that developed amongst the leadership of my own organisation. Yes, the executive management team and Board knew all about the partnership, and yes, they were kept well-informed and up-to-date. But what I failed to appreciate was that there was too much distance between the decision-makers and front-line partnership managers. Even though I had ‘permission’ to partner, the leaders of each organisation were not personally invested in the project, which led to uncertainty and doubt. The focus became all about securing the dollars and the headline, and the purpose of the partnership became lost.

Fortunately, the program is now in implementation and delivering incredible impact on the ground. But based on this experience, my top tip for effective partnering is to ensure the leaders of the partner organisations have the opportunity to create personal relationships early on and that they are not too far removed from the action as the partnership progresses.

Ten tips for effective partnering:

  1. Start with purpose: Effective partnerships start with a shared vision of purpose and impact. At this stage, parties focus on creating the vision and articulating the value proposition for the project, ensuring a strong fit with business or organisational objectives, developing common ground and shared ownership.
  2. Ensure the right partners are around the table: Each sector (NGO, business, government, community) has a particular role to play in society. The parties involved in the partnership should be equally valued and the role each is assigned to play should be consistent with their mandate. There is, however, usually a tipping point for the optimal number of parties in a partnership, above which it can become unwieldy to manage and the costs start to outweigh the benefits. The more partners involved, the more structure, process and formality is usually required to keep things on track.
  3. Securing internal permission to partner: It’s important to secure high-level support from internal decision-makers early on. This includes agreeing on the boundaries and any limits to autonomy that partnership leads must operate within. It also means developing internal protocols to ensure leaders are briefed regularly and comfortable with how risk is being managed. Ultimately, each partnership lead should be granted a level of freedom to partner and innovate so that face-to-face time with partners can be used to maximum effect and individuals can negotiate with confidence.
  4. Ensure leaders are personally invested: This is fundamental, especially for major partnerships. It’s important to provide opportunities for the representative leaders to build and maintain personal relationships that are more than symbolic. Decision-makers need a level of understanding and buy-in. They need to appreciate the purpose of the partnership, they need to be on board with the scope and risk/reward profile, and they need to trust and respect the others at the table. Too much distance can lead to misunderstanding and suspicion, which can jeopardise the partnership.
  5. Be clear on the type of partnership: There are three main types on the ‘partnership continuum’.
    • The first type is transactional, where there is a one-way flow of resources from the dominant partner (the ‘sponsor’) to the recipient (the ‘beneficiary’). This is passive, whereby the sponsor simply contributes resources towards an activity or outcome.
    • The second type is engagement, which is characterised by a two-way exchange of resources. Here, the partnership usually involves one entity engaging the other to deliver a defined set of services (under contract) in exchange for funding, although the process of defining the services or solution may well be participatory.
    • The third type is integration. Partners join together to tackle a common problem and and collectively co-create a solution. This type of partnership offers the best opportunity to maximise strategic value and is most likely to lead to transformational change and true impact. All forms of partnership on the continuum are equally valid – it depends on your readiness to partner and what you’re trying to achieve.
  6. Governance – boring but necessary!: I’m pretty sure most people don’t start their day thinking “Hurrah! Today I will tackle governance!”. However, a clear, workable governance framework is critical for a multi-sector partnership to succeed. This includes attention to roles and responsibilities, accountability structures (both within the partnership and external-facing), approach to decision-making and other protocols. An appropriate mechanism to formalise the partnership, set milestones and define commitments should be signed.
  7. Set ground rules around process: Once you’ve decided on the big-picture stuff, it’s important to set ground rules around process. This includes: communication preferences, meetings, expectations, monitoring, reporting, media relations and more. It’s useful to agree on these ways of working early on and document them in a ‘partnership blueprint’ that all partners have access to.
  8. Build trust and respect: As with anything, it’s the relationships between people that bring a project to life and make things tick day-to-day. It’s important to invest time in building trust, mutual respect and an understanding of the roles and drivers of your fellow partners. Being clear about shared values for approaching the partnership is useful too, with favourites being flexibility, patience and integrity. There’s no substitute for face-to-face meetings, so partners should commit to physically getting together on a regular basis to ensure the team is cohesive.
  9. Keep an eye on impact: There’s so much to do to keep a major partnership functioning well that it’s easy to lose sight of why you came together in the first place. Keep up with delivery, monitor your outcomes, and commit to continual improvement. Be tenacious about impact – that’s why you’re all there – and if what you’re doing is not working, don’t be afraid to go back to the drawing board and rethink. Sustaining the partnership includes letting it evolve over time and recognising where you may need to tweak the strategy to achieve your purpose.
  10. Consider engaging a partnership broker/manager: Partnership brokers are experienced in bringing parties together, know what steps are required to build and formalise a collaborative partnership, and will have an impressive set of tools and tricks to keep things interesting. It can also be useful to have an independent party driving the process, ensuring delivery stays on track, and keeping everyone accountable.

Comments? Questions? What’s worked well (or not) in your experience with partnering? We’d love to hear what you think!