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.