Show notes
Welcome back to part two of our ESG episode on making sustainability a strategic advantage, how can we measure impact?
The speakers on this Podcast are:
- Hanna McRobbie, Weightmans
- Amy King, Paragon Impact
- Aimee Girdwood, Stories Evolved
- Abhay Srivastava, Weightmans
- Christina Bartholomew, Stories Evolved
Listen to the podcast
Transcript
Hanna [Weightmans]: Welcome back to part two of our ESG episode on making sustainability a strategic advantage, how can we measure impact? At the end of part one, Abhay introduced some frameworks, including the Sustainability Accounting Standards Board or SASB as it's also known, and the International Reporting Standards Foundation, as well as the UN SDGs or Sustainability Development Goals. Apologies for all the sustainability acronyms that seems to come with the territory. But diving a bit deeper then into these frameworks, can we perhaps first explore the difference between mandatory and voluntary monitoring and reporting? What would you say are some of the challenges when navigating the different tools?
Amy King [Paragon Impact]: This is such a good question. The challenge is that we have huge amounts of variation between jurisdictions on what is actually voluntary and what is mandatory to disclose. When it comes to actually impact measurement, there is very little mandatory disclosure out there. This is because most regulation is expecting firms to disclose the ESG data, which we spoke about in part one. And we know that this data alone doesn't fully explain the impact that a firm is having.
Amy King [Paragon Impact]: But we know that the international policy challenge is that we're trying to find these interoperable frameworks that mean the sustainability performance of one business, or one asset, is equivalent and can be compared on equal grounds to another. I think this was the rationale for formation of the International Sustainability Standards Board, the ISSB, under the IFRS. But again, this is mostly focused on ESG data, which is helping investors understand the ESG risk that an asset may present them as part of their own investment decision making process. Again, this doesn't really take into consideration that outward impact that a firm is likely to be having on environmental or social systems. We know that there are some fantastic organisations like B Corp that do have an impact measurement component to them. If you're going to become a B Corp business, they expect you to be able to articulate your social and environmental impact, and they have a very rigorous application process where this impact measurement occurs. However, B Corp is not likely to be suitable for all businesses, so it doesn't tick that interoperable requirement that we'd look for in a standard that can measure impact globally.
Aimee Girdwood [Stories Evolved]: Thanks, Amy. If I could jump in here, Hanna. I think that point about interoperable is such a good one, and especially relevant at the moment if we consider the uncertainty, that we spoke about a few podcasts back, specifically in terms of some of the reporting legislation. We've recently seen some legislative proposals from Senate Republicans in the US, for example, against the EU's Corporate Sustainability Due Diligence Directive, citing competitive disadvantages. And we're also waiting for the final amendments that are going to come out of the EU. So, it's going be interesting to see what happens in that regard. But I suppose building on that and what you've already said, Amy, many businesses feel overwhelmed by reporting fatigue. The business of a business that, you know, many businesses feel understandably is doing the business and what many of these regulations and frameworks introduce is a large administrative burden, and of course as well the costs of reporting. And there's also a fear about losing competitive advantage because of the information that's disclosed and put into the public domain, especially if businesses are reporting on a voluntary basis and their competitors aren't yet investing in similar reporting. Again, there's also a worry about kind of accusations of greenwashing in in what the businesses disclose, especially if impact isn't being measured authentically or perhaps you're still seeking to understand what you need to measure, what's really material for your business, and how to measure that in a credible way.
Aimee Girdwood [Stories Evolved]: So, kind of stepping back from that, I'm going summarise three clear reasons why we think impact measurement is valuable despite all of these legitimate concerns. And the first is opportunity and performance. As I mentioned earlier, measuring impact isn't about disclosure, or it's not just about disclosure. Importantly, it's about having the right decisions at your fingertips to make smarter, more strategic business decisions. And that's really building on the point that Abhay made in the first part of our discussion about governance. So, for example, by tracking your energy and water use, you can cut waste, reduce operating costs, and become more efficient. Or if you're in construction, impact data could highlight opportunities, perhaps new ways to improve your materials for resilience against fire or extreme weather, giving you a unique competitive advantage.
Aimee Girdwood [Stories Evolved]: The second point is governance and risk management. Again, the governance point. Impact measurement equips your board and leadership teams with the insights necessary to identify and manage significant medium and long-term risks, and I would say even increasingly short-term risks. So, take the EU's Corporate Sustainability Due Diligence Directive, for example. Despite some pushback, which I referred to earlier, the directive clearly shows the direction in which global regulations are moving. Companies proactively measuring impact are better prepared to manage these evolving legal and operational risks, protecting their reputation, safeguarding their market position, and ensuring future profitability.
Aimee Girdwood [Stories Evolved]: And the final point I want to make is about the way the wind is blowing. Businesses are navigating a complex transition towards a new operating reality. And while the frameworks and regulations around impact and disclosure are still evolving, there is growing consensus that environmental and social factors pose tangible financial risks from direct regulatory fines to indirect costs like supply chain disruptions and broader economic volatility. The new IFRS sustainability disclosure standards such as IFRS S1 reflect the shifting landscape and excuse the acronyms again, we're going to have an index in the show notes. But they are requiring companies to disclose sustainability related risks and opportunities. So, while they currently focus more on ESG than on impact, the line between the two, I think, is going to become increasingly blurred as we see sustainability becoming integral to mainstream business strategy. So, in short, investing in voluntary impact measurement is not about compliance - or not just about compliance. It's about gaining crucial insights to help you position your business confidently for the changing business environment.
Hanna McRobbie [Weightmans]: Thank you, both. And I think that is a good summary of again, the why of impact management and ESG measurement, as we've sort of expanded on in the first podcast. So, I wonder if you could share then any best practices or case studies to help demonstrate, the importance of operationalising sustainability impacts that we've talked about. Abhay, perhaps I can come to you first.
Abhay Srivastava [Weightmans]: Thanks, Hanna. I would like to share an example of solar cold storage companies that operate in Africa and Southeast Asia, something I was, deeply involved with before joining Weightmans. Now these companies provide off grid systems that have inbuilt energy storage to provide fast cooling rates and shorter precooling times, and they also address cooling redundancies, especially during power failures, all without or in some cases with limited grid supplies. It is interesting to note that their customers are usually smallholder farmers and many of whom earn about two dollars day. And these smallholder farmers are often impacted by significant food wastage in absence of reliable cold storage for their perishable agriculture produce. And there's a lot of data that highlight early cold chain significantly reduces post-harvest losses by twenty-five to fifty percent depending on, the agri-produce and geography. The business model of these companies addresses market and access to financing gaps in most of these markets. While many of them have partnered with fintechs, microfinance institutions to solve financing challenge for their agri-customers, some provided market access to smallholder farmers as well. And this not only reduced wastage of agri-produce, but also resulted in income improvements and, hence, higher standards of living for these smallholder farmers.
Abhay Srivastava [Weightmans]: This model is a classic example of operationalising sustainability related impact for the industry. I mean, it's operating constraint of resources they have and why this is important. Because UK's food, feed and drink imports now stand at about sixty-one billion pounds for financial year 2023 as per the UK government's website. And according to the Food and Agriculture Organisation of the UN, which is, FAO, meeting growing demands will require an increase of seventy percent in full availability by twenty fifty. And we all know that because of climate change, yields have been significantly reduced because of reduction in agriculture output. Regions like Sub Saharan Africa and South Asia are expected to require an increase of about hundred plus percentage. So, such innovations of operationalising multi stakeholder impact are important for our food security. Thanks, Hanna. Back to you.
Hanna McRobbie [Weightmans]: Thank you. Perhaps Amy at Paragon, you could share some case studies.
Amy King [Paragon Impact]: Yeah. I was going to jump in because I'm I've got another good example from, South African game reserve that we worked with at Paragon. And this one really stood out for us, because when we worked with them, we learned that from the very inception of this business, the reserve recognised the importance of deeply engaging with the surrounding community and demonstrating to that community tangible value that the lodge had for them. By proactively managing its impact and measuring the benefits that it delivered into the community, as well as tracking its own financial performance, because we always have to remember that these are for profit businesses, the reserve was able to navigate and avoid some serious challenges. One such example of this challenge came during a period of social unrest when some protests led to road blockades and prevented access to the reserve. What was noticed was that, while other lodges in the area faced complete shutdowns due to this protest, the reserve that, we worked with actually saw a different outcome. The protesters allowed customers for that lodge through because they recognised that this wasn't just another business, but it was a committed partner that was actively supporting the local community. And why we like this case study is because we think it underscores the crucial lesson that businesses have to prioritise genuine measurable community impact because it builds goodwill, and this goodwill results in business resilience.
Christina Bartholomew [Stories Evolved]: That is such an interesting example. I loved that. And yours as well, Abay. And I'd like to build on another one. This one in the FMCG space. So, a food retailer we supported, committed to significantly reducing its climate impact through practical steps like installing energy efficient LED lighting and generating, renewable energy on-site for use at its stores and its distribution centres. But beyond those important energy initiatives, this business recognised a key area of impact closely tied to its core operations, and that was food waste. Managing food waste doesn't just help meet greenhouse gas reduction targets. It's also critical in a world grappling with inequality, poverty, and hunger. So, the company set out first to clearly understand the nature and scale of its food waste, and with our help, to identify potential innovative solutions that could tackle it effectively. And they're now actively implementing pilot initiatives to prevent food waste before it happens. They're leveraging technology and data analytics to better predict customer demand, to optimise stock management, and they formalised reliable donation processes for unsold but perfectly edible food to support local communities directly. And there's that trust that you were identifying, Amy K. In any case, any remaining food that can't be consumed safely is being repurposed within their supply chain for things like animal feed. And this proactive approach demonstrates a core lesson, I think, for any business that operationalising sustainable impact doesn't just fulfil commitments. It can reduce costs. It can strengthen reputations. It can build community trust and position the business to thrive long term. And in some cases, can lead to new revenue streams through great products.
Hanna McRobbie [Weightmans]: Agreed. These are some excellent examples of how sustainable impact management can really build resilience for organisations and act, almost as a future-proofing strategy as well as impacting positively the communities around them. Finally, then, I'd like to finish with some top tips from all of you. So, for organisations that are perhaps just starting out on their sustainability journey, or looking at what's next for how to measure impact, what would you say are some of the key issues that they should be aware of or any key takeaways that you'd like to finish on?
Amy King [Paragon Impact]: So, I'm going to jump in first. I think my message that I'd like to land is that ESG and impact are not the same. If you want to be an impact leader, then this will mean an extension of your business beyond ESG. But there are significant benefits to doing this. I think we've highlighted many and especially with the case studies that we just spoke through. Once you as a business have clarity on your impact, you will likely identify additional risks that you don't have on your business's risk register today. Additionally, once you start measuring your impact, you can start raising capital from investors who want to see an impact return as well as their financial return. And we're finding that stakeholder maturity on sustainability is rapidly progressing. Stakeholders are much more frequently asking about what a business's impact performance is. And unfortunately, many businesses today don't have the ability to express that with the confidence that they need to.
Aimee Girdwood [Stories Evolved]: Amy, I'm going jump in here. I mean, I think the three case studies that, have been spoken about Amy K, Abhay, and Christina have just been the highlights of this discussion for me because it really shows the interlinkage between looking at and understanding impact and really what it means for the resilience of a business. So, for me, I think that's almost a key takeaway from this discussion is understanding impact and managing it responsibly equals business resilience. And so, to everyone listening, I would say firstly remember to focus on the impact that is material. And then secondly, in understanding what is material, remember to keep those lenses of what you are legally required to do, importantly, what you are required to do to maintain your integrity and trust with your key stakeholders, and that's an issue that was highlighted in those various case studies that's absolutely vital. And, of course, how does how do those issues help you in your drive for business resilience and competitiveness? I'll hand over to you, Abhay.
Abhay Srivastava [Weightmans]: Thanks. I would say, that if you are starting the sustainability journey or impact measurement based on any of the drivers mentioned by Amy K, Aimee G, and Christina, I would say start small and focus on the basics, which is all about putting right people, imparting them with right knowledge, and providing them with right amount of support to execute their plans. And from my experience, I can say that this need not be a linear process, and it can be continuously improving iterations of the same process to measure impact, understanding your overall impact, and do good for the business, for the communities, and the planet. Thank you.
Hanna McRobbie [Weightmans]: Thank you. That again, that's a great note to end on. And thank you again everyone for, your contributions and your time today. I think this has been another very insightful discussion. And thank you again to everyone listening. We hope you've enjoyed learning more about impact measurement, the complexities of it, but how it can be a strategic advantage for your organisation. So, get in touch to let us know your thoughts. Let us know if we can help and join us again for our next episode as we continue to talk about all things ESG.