Three ways to reconcile business performance and impact 

Innov­at­ing in busi­ness mod­els to sur­vive dis­rup­tions is at the heart of com­pan­ies’ con­cerns. But this issue has tra­di­tion­ally been linked to object­ives of sus­tain­ab­il­ity, devel­op­ment, and per­form­ance – essen­tially fin­an­cial – of the com­pany. How­ever, driv­en by major cli­mate change, as well as by the “quest for mean­ing” affect­ing young people and a grow­ing part of soci­ety, more and more com­pan­ies are ques­tion­ing not only the eco­nom­ic but also the envir­on­ment­al and social impact of their activities. 

Com­pan­ies have pre­cise means to meas­ure their eco­nom­ic and fin­an­cial per­form­ance, but the very notion of impact, as well as the neces­sary tools that stem from it, remain vague and incom­plete. Even the most advanced com­pan­ies on these issues are still lack­ing the means to recon­cile their neces­sary per­form­ance with the increas­ingly press­ing imper­at­ives of impact.

Caught between two seem­ingly con­tra­dict­ory injunc­tions – busi­ness per­form­ance and impact – com­pan­ies are look­ing for new keys to read­ing and mak­ing decisions. In response to this need, many attempts have been made to define what a sus­tain­able busi­ness mod­el is; in par­tic­u­lar by means of archetyp­al vir­tu­ous busi­ness mod­els that com­pan­ies seek­ing to make an impact (by choice or by oblig­a­tion) should follow.

While these mod­els, or “canvases”, have the advant­age of mak­ing com­pan­ies and their man­agers aware of these issues, they have the dis­ad­vant­age of mix­ing two essen­tially dis­tinct ques­tions: the what (or why), i.e. the impact, and the how, i.e. the busi­ness mod­el. In strategy, con­fus­ing the ends with the means is rarely a good idea! This is why it is essen­tial to use sep­ar­ate tools, one allow­ing a dia­gnos­is and a detailed under­stand­ing of the busi­ness mod­els, the oth­er allow­ing an extens­ive and hol­ist­ic under­stand­ing of the res­ult­ing impact.

How­ever, the study we con­duc­ted¹ shows that impact is only par­tially con­sidered: only envir­on­ment­al and some­times social aspects are taken into account by com­pan­ies in their eval­u­ations, even those that are most advanced in this area. This has a neg­at­ive influ­ence on the defin­i­tion of their strategies and the reflec­tion on the evol­u­tion of their busi­ness model. 

This bias stems from a quant­it­at­ive bias: it is much easi­er to eval­u­ate what you can meas­ure. This pushes com­pan­ies, even the most attent­ive to these issues, to focus on envir­on­ment­al and quan­ti­fi­able dimen­sions (typ­ic­ally CO₂emis­sions), leav­ing aside envir­on­ment­al, but espe­cially social dimen­sions, which although observ­able, are by nature dif­fi­cult to meas­ure (e.g. biod­iversity, resi­li­ence). This bias is rein­forced by exist­ing impact meas­ure­ment tools, which are them­selves par­tial and biased, and by reg­u­la­tions and pub­lic policies, which tend to push com­pan­ies to take into account only cer­tain aspects of impact, and only partially. 

Our study illus­trates the risk of com­bined met­rics (which aim to arrive at an over­all impact score or index) that over­sim­pli­fy an essen­tially com­plex phe­nomen­on and hide the neces­sary trade-offs between the dimen­sions of impact: impact in one dimen­sion (e.g. envir­on­ment­al) is often at the expense of oth­er dimen­sions (social or eco­nom­ic). The impact must be taken into account in its entirety (envir­on­ment­al and social dimen­sions, obvi­ously, but also eco­nom­ic and soci­et­al dimen­sions²) in order to make informed decisions.

Our study reveals a wide­spread fear among com­pan­ies of accus­a­tions of gre­en­wash­ing or impact-wash­ing. How­ever, our ana­lys­is of the CSR policies of major com­pan­ies high­lights the source of these accus­a­tions: very often, their CSR actions are largely dis­con­nec­ted from the core of their busi­ness mod­el and their value cre­ation. In the end, they only serve as a means of com­mu­nic­a­tion, without fun­da­ment­ally chan­ging the nature and scope of the impact of these com­pan­ies: plant­ing trees (a pop­u­lar CSR action these days) is not part of the value cre­ation of com­pan­ies, unless they are hor­ti­cul­tur­al companies! 

Com­pan­ies’ impact strategies are often only con­cerned with one par­tic­u­lar aspect of their busi­ness mod­el, namely value com­mu­nic­a­tion, leav­ing aside the oth­er dimen­sions of the busi­ness mod­el (value pro­pos­i­tion, value cre­ation, value dis­sem­in­a­tion, value cap­ture). Some­times these com­pan­ies cre­ate an impact product or ser­vice – typ­ic­ally a green (e.g. eco-refills, sol­id sham­poos) or eth­ic­al product – that is sold at a high­er price (and mar­gin) to more afflu­ent con­sumers, but which does not, des­pite being com­mu­nic­ated as such, res­ult in a sig­ni­fic­ant impact.

This non-align­ment between impact and busi­ness mod­el leads to accus­a­tions of green/im­pact-wash­ing. When impact is embed­ded in all the com­pon­ents of the busi­ness mod­el, com­mu­nic­a­tion about impact becomes intrins­ic­ally cred­ible. It is then less neces­sary for the com­pany to com­mu­nic­ate about impact: the com­mu­nic­a­tion is self-created. 

Anoth­er con­clu­sion: “mak­ing an impact” does not con­sist so much in doing “new things” – launch­ing “impact” products or ser­vices – but in doing “the same things” dif­fer­ently, by trans­form­ing the busi­ness mod­el so that it is, for a giv­en product or ser­vice, truly impact­ful in all its dimensions. 

Our study shows the crit­ic­al role of eco­sys­tems (value net­works) in the abil­ity of any com­pany, how­ever large, to deliv­er impact. Large and last­ing impact does not hap­pen alone, even for the largest com­pan­ies. The role of intern­al and extern­al stake­hold­ers (com­pan­ies, insti­tu­tions, fun­ders, aca­dem­ics, soci­ety) in deliv­er­ing impact is cru­cial. Mobil­ising exist­ing stake­hold­ers and attract­ing new ones is fundamental. 

But this requires a detailed and com­pre­hens­ive under­stand­ing of the com­pany’s eco­sys­tem, because even if the com­pany finds the ‘per­fect’ busi­ness mod­el, its imple­ment­a­tion can back­fire if it does not mobil­ise the stake­hold­ers needed to achieve it and ali­en­ates key partners.

Finally, our study shows the fun­da­ment­al role of gov­ernance in deliv­er­ing impact, both in terms of busi­ness mod­el innov­a­tion and eco­sys­tem mobil­isa­tion. Wheth­er it is with regard to the com­pany’s intern­al or extern­al stake­hold­ers, the man­age­ment of its resources, etc., it is neces­sary to rethink the modes and forms of cor­por­ate gov­ernance: it is a key ingredi­ent in recon­cil­ing the com­pany’s per­form­ance with the impact it wishes to achieve. 

Our study led to the imple­ment­a­tion of a meth­od­o­logy to rethink cor­por­ate strategy to recon­cile per­form­ance and impact. Com­bin­ing three dis­tinct tools – busi­ness mod­el dia­gnos­is, eco­sys­tem map­ping, impact assess­ment – it enables the com­pany to under­stand each aspect of this com­plex prob­lem in detail. Each tool is a key to entry into the reflec­tion. Depend­ing on the con­text, com­pan­ies and their teams may need to think about and dia­gnose one of these three aspects first – the busi­ness mod­el or eco­sys­tems or impact – before con­sid­er­ing how the oth­er two dimen­sions affect this primary objective. 

To con­clude, is it pos­sible to recon­cile busi­ness per­form­ance and impact? We are con­vinced that the answer is yes. But this requires a dif­fer­ent, broad­er view of what per­form­ance and impact are. In par­tic­u­lar, it requires com­pan­ies to adopt decision-mak­ing tools that allow them to under­stand in detail their capa­city to cre­ate value and impact in rela­tion to their ecosystem.