Navigating the Impact: Unveiling the True Cost of Business on the Environment and Society

Written By Selar Henderson

Image Attribution: Chartered Accountants Worldwide - A Sustainability Roadmap click here

Download the Concept Note: Authentic Sustainability Measurement

In an era where the interplay between business and the environment has never been more critical, understanding the deep impact of our business activities on the environment and society is imperative. Impact can be both positive and negative, and in a series of blogs, beginning with this one, we suggest how businesses can explore, and then commit to, the journey towards true business viability and authentic sustainability.


Comprehending Deep Impact

To truly grasp the consequences of business activities, we must move beyond superficial evaluations. Impact assessment involves analyzing direct and indirect, upstream and downstream effects of business activities on the environment and society. From carbon emissions and biodiversity, to social inequality and stability, a comprehensive understanding is crucial.


Tracking Impact: The Role of Data

 Effective impact tracking necessitates a robust data collection and analysis system. This includes real-time monitoring of resource usage, emissions, and social indicators. The data needed spans across various domains — from environmental footprints to social impact indices — providing a comprehensive view of the business's overall influence. Putting such a system into place requires understanding, commitment, investment and a willingness to do better business - and demonstrate it.


Doing nothing vs acting now

The evolving landscape of business recognizes that understanding and mitigating impact is becoming an integral part of the cost structure. Beyond financial bottom lines, society is evaluating businesses on their environmental and social responsibility, making this a new, non-negotiable cost of doing business. This could directly play out against a business’s social license to operate. The implication is that it will create additional costs, potentially threatening business viability. However, doing nothing is going to be more costly than preparing for, and acting on, this transition now.


Costing the Impact

Determining the cost of impact goes beyond monetary figures. It involves quantifying environmental degradation, the depletion of natural resources, and the impact on communities, both direct and indirect from current (and planned) activities. This comprehensive costing requires businesses to adopt a holistic approach that includes both immediate financial implications and long-term consequences. It is worthwhile noting that these concepts are in early development, and being overwhelmed by the issue is an unsurprising response - all businesses are being asked to lean in.


Viability in the Wake of Understanding

Business goals must align with sustainable practices, and this in turn must be embedded right through the value chain of business operations. It means not only mitigating negative impacts but actively contributing to positive change (hence the term regeneration). Sustainable and socially responsible practices become the cornerstone of business operations, ensuring long-term success and viability in a world that now demands environmental and social responsibility.


Defining Thresholds and Leadership

Establishing impact thresholds involves setting limits on acceptable environmental and social impacts, and understanding what social and environmental resources are available for businesses to utilize sustainably. Leaders within the organization must spearhead this initiative, ensuring that the business adheres to these thresholds. Collaboration between various stakeholders is vital in determining realistic and effective limits.


Accountability: A Shared Responsibility

While leaders take charge, accountability is a shared responsibility. Every employee, from the bottom up, must recognize their role in minimizing impact. Transparent communication about impact metrics, goals, improvement innovation, and progress fosters a culture of accountability.


Transparency in Impact Reporting

Transparency is the bedrock of impact accounting. It means openly communicating about the business's impact, both positive and negative. Transparent reporting builds trust with stakeholders and allows for constructive feedback, fostering a culture of continuous improvement.


A Question of Risk

Whether business can gain or retain relevance in a world that is demanding better action is a question all organisations must ask themselves. By continuing to operate in a ‘business as usual’ fashion and ignoring any of the above points will be a risky strategy. In a world where customers are likely to move towards businesses who care about their impact, revenue (and therefore profit) becomes a question of risk. This suggests that the risk of not acting, considering impact, and reporting transparently and responsibly, will lead to the eventual demise of the organisation.


Moving Beyond Sustainability: Impact Accounting Frameworks

Sustainability is a starting point, and true impact accounting goes further. There are many players in the exploration of how business can value and account for impact. Perhaps a good starting point would be to review the work and vision of The Impact Management Platform https://impactmanagementplatform.org/ - which is a collaboration between the leading providers of sustainability standards and guidance coordinating efforts to mainstream the practice of impact management, concentrating on 4 key areas:

  1. Providing guidance on the actions and landscape of impact management

  2. Advancing interoperability across impact management resources

  3. Tackling systemic issues through joint research and development

  4. Informing policy and regulatory processes

Another pathway to navigating impact and unveiling the true cost of business could be approached using the following resource from Chartered Accountants Worldwide. This has a great summary of where to make a start, which the image below ties together holistically:

Attribution:

Chartered Accountants Worldwide - A Sustainability Roadmap click here

Conclusion

Understanding the deep impact of business activities on the environment and society is a journey towards responsible and viable operations. Through comprehensive costing, effective tracking, and embracing impactful accounting frameworks, businesses can not only navigate the challenges of our times but emerge as positive contributors to a sustainable future.

This is not just a new cost of doing business; it is a paradigm shift towards a more conscientious and impactful approach.

What You Can Do Next

Selar Henderson
Next

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