In today’s rapidly evolving business landscape, two concepts of responsible business have risen to prominence: Environmental, Social, and Governance (ESG) and Impact. Despite their growing importance, these terms often breed confusion in boardrooms and investment circles alike. As a business leader or investor, understanding these concepts and how they may apply to your business is crucial for future-proofing your organization, adequately responding to stakeholder requests, and uncovering new opportunities for growth.  

Why should I care about ESG or Impact?

While ESG and Impact similarly aim to quantify environmental and social outcomes, each creates a new lens to evaluate businesses or investments by requiring a company to sift through large amounts of ad-hoc data to draw insights that drive better, but often new ways, of business decision-making. As companies are exposed to new regulations, more sophisticated customer bases, and shifting investor demands, the number of parties interested in evaluating your business and new criteria being introduced are vastly increasing and the stakes are getting higher. Hidden behind these requests are opportunities to grow your business and reduce risk.

ESG: The Corporate Report Card

ESG, as defined by Gartner, is a set of criteria for evaluating a company’s environmental and social impacts, along with its governance practices. It provides quantifiable metrics based on non-financial performance that are focused on the internal practices of a company. Think of ESG as a comprehensive report card for corporate responsibility.

Companies may define and report on ESG criteria due to:

-             Regulatory requirements

-             Ongoing Investor and customer demands

-             Pressure from internal and external stakeholders (i.e. employees, the public, etc.)

ESG doesn’t have to be just about compliance or reporting, it’s a tool for improvement. For instance, evaluating a company’s carbon footprint can reveal opportunities to enhance operational efficiency, innovate new streamlined processes, and identify areas of risk, boosting both top and bottom lines.

Impact: Aligning Profit with Purpose

Impact or more specifically,Impact Investing, is defined by the Global Impact Investing Network (GIIN) as investments made with the dual intention of generating financial returns and positive, measurable social and environmental impacts. Impact investors will identify metrics that help them qualify and quantify Impact across their investments. ImpactInvestors will often target investments in specific industries where products and services can create significant societal benefits. For example, an impact investor might look at a minority-focused health service company to improve healthcare to underserved communities while also improving financial returns and maintaining responsible business practices with ESG criteria. Again, these metrics not only provide information to investors and business leaders, but also provide you an opportunity to better understand opportunities to improve your business.

Leveraging ESG and Impact to Discover Impact Insights

ESG and ImpactInvesting push companies to understand and quantify their operations in ways that promote sustainable and responsible decision-making. In my experience, this provides an opportunity for a discovery process, where you can leverage these metrics to generate Impact Insights that can answer meaningful questions about your business. Do you have unnecessary waste? Are there increased sales opportunities if you offer a more sustainable service or product? Can you increase the productivity of your employees? The goal is to build a repeatable process to harvest valuable insights from both ESG and Impact metrics and accustom your company to leverage this information to improve business outcomes and stand at the ready to respond to a growing number of high stakes requests; all while avoiding what I call “the spreadsheet swamp”.

Escaping the Spreadsheet Swamp

Unfortunately, for far too many companies, the key elements that allow you to surface Impact Insights– actionable intelligence based on ESG and Impact metrics– are locked within vast spreadsheet swamps – buried deep within mountains of cells, formulas, external vendor systems, and third-party companies, and shockingly, most of this data is being manually collected, analyzed, and reported. Yes, believe it or not, most companies still heavily rely on manual processes built on complicated spreadsheets to collect and quantify both ESG and Impact, particularly in mid-market companies. Not optimal is putting it mildly. To really dig deep into the info and uncover meaningful insights that add value to your business, data science expertise is a must – something most companies simply do not have or cannot afford without blowing the budget on adding significant software infrastructure, internal headcount or expensive consultants.

Embracing a Modern Approach

The process of surfacing Impact Insights isn’t magic – in fact, the only thing standing in your way is the spreadsheet swamp. With spreadsheets out of the way, replaced by modern, cloud-based technology and processes, it becomes straight-forward and economical. A win-win. Technology solutions (i.e. cloud-based software platforms) can improve overall business outcomes by providing a depth of understanding of a business based on a multitude of new factors and ensuring the company is prepared to answer any stakeholder requests on-demand. The right software solution will automate much of the process, dramatically reducing the need to increase both internal and external resources.

Below are key things to consider when evaluating solutions to help you finally escape the antiquated, cumbersome world of spreadsheets and quickly unlock tangible, meaningful ImpactInsights:

1.        A Just Right Approach: Just like Goldilocks, find a solution that has enough functionality to meet your current and future requirements, but not so much as to waste your valuable time navigating a complex system or chasing unnecessary information.

2.        User-Friendly Platform: Look for a platform that is intuitive with a low learning curve. The best solutions offer built-in support and can offer additional services if, and when you need them.

3.        Automation: The right solution should streamline data collection and analysis, reducing time and effort without requiring specialized in-house data science expertise.

4.        Versatility: Avoid one-off solutions that only address specific regulations or focus only on a limited set of metrics such as carbon accounting. Identify solutions that are extendable to future use cases and accomplish reporting to stakeholders while revealing Impact Insights about your business.

Embracing the Journey

In my experience, understanding and leveraging ESG and Impact data is crucial in today’s business environment. Whether you’re just starting your journey or looking to enhance existing efforts, remember that it’s an ongoing process. Continuous learning, adaptation, and improvement are key to success in this ever-evolving landscape. Most importantly, understand your company’s specific obligations:

-             What are your current reporting requirements?

-             How can you make your processes more efficient and repeatable?

-             Do you need to consider data from third parties such as vendors or portfolio companies?

-             Can you avoid unnecessary costs or resource additions?

Finding the right software solution and partners for your journey is critical. It can give you the confidence to future proof your business and turn potential challenges into opportunities for growth and positive impact.

Ready to take the nextstep? Explore how Liminal Data can help you navigate the complex landscape ofESG and Impact. Visit www.liminalimpact.com to learn how our solutions can help you with your insights discovery process to uncover hidden opportunities, address blind spots, and drive tangible outcomes for your business and its stakeholders.