First published on BusinessGreen and republished, with permission, here.

A just and regenerative future depends on businesses understanding their impact, writes Forum's Global Director of Impact, Martin Koehring.

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Impact seems to be a buzzword within corporate sustainability these days. Business conferences are increasingly centred around impact and focusing on how impact leadership is transforming the workplace. What does impact really mean, and how can business leaders make sense of it?

According to the Impact Management Project initiative, impact is a "change in an outcome caused by an organisation". For outcomes to manifest themselves in positive change, they need to have long-term effects. Five key ingredients for lasting impact include: creating an impact mindset, embedding it in strategy, building an enabling culture around it, forming conducive partnerships, and lastly, measuring impact.

Let's take each in turn.

1. What does it mean for a business to adopt a truly impact-driven mindset? 

Many companies still approach sustainability with a "harm reduction" mentality. In other words, business leaders think of impact as merely reducing risk. According to Forum for the Future's A Compass for Just and Regenerative Business, such a mindset often overlooks opportunities to build long-term value.

The "do no harm" mentality goes one step further by highlighting the need for companies to eliminate harmful activities across its value chain, for example by aiming for 100 per cent certified sustainable sourcing. In recent years, leading companies have started to embrace a do-good mindset to reverse damage done in the past, for example, by engaging with communities and restoring degraded forests.

But the only effective way to tackle complex challenges is a just and regenerative mindset that focuses on gaining a deep, holistic understanding of the systems a business is part of and seeking to change the goals of these systems to support regeneration and justice. This could include co-designing solutions with suppliers, employees and customers and working actively to improve the health and vitality of the operating context.

Once a company has embraced an impact mindset, it is critical to enshrine impact goals and metrics in strategy to help clarify the direction they want to embark on and the plan for how to get there.

At Forum, we employ the power of theories of change to draw the path from foundations to activities to outcomes to impact. Impact strategies are increasingly important to help companies navigate complexity. For companies to influence their value chains and their broader operating context, which is largely beyond a company's direct control, companies can employ practical systems change tools and applied futures to make their organisations' strategies future-fit.

3. Building an enabling impact culture. If mindset is the starting point, and strategy is the "how to", then culture is the essential enabling environment. An impact culture ensures internal alignment on the direction of travel.

And it's not only business leaders that will need to live and breathe impact but employees too—and ultimately this will spill over to its whole ecosystem, including suppliers, investors and consumers.

If a company makes decisions based on impact as well as financial viability, suppliers will start to position themselves differently. They will not necessarily only focus on cost, efficiency and resilience but will also prioritise wider social and environmental change. The assumption that there is a trade-off between impact and financial viability is a false dichotomy: transforming the purpose of business is possible, based on an impact culture that embraces visionary leadership, rethinking value chains and reimagining consumption and that creates a supportive enabling context.

Creating an impact culture is not an easy feat. It requires turning words into actions, including through: intentionality (making purpose and values a priority), transformation (replacing extractive practices with regenerative ones), and ambition (pursuing new and inspiring goals related to purpose and values).

4. Forming conducive impact partnerships. Building strong partnerships is a critical component of business resilience. For example, 'nearshoring' and 'friend-shoring' against the backdrop of global disruptions are examples of companies focusing on securing resilient supply chains.

However, true impact partnerships go beyond risk mitigation and resilience. They aim to transform the system itself. A good example is the Cotton 2040 initiative, a multi-year partnership involving the cotton industry, brands and retailers, farmers, research institutions, philanthropy, NGOs, and communities. The achievements of this partnership approach included designing tools to support climate resilience, testing new business models that incentivise just and regenerative practices, and increasing the uptake of sustainably produced cotton by aligning sustainability impact metrics.

5. Measuring impact. A major challenge for companies is the alphabet soup of sustainability reporting and measurement standards. Against the backdrop of rising concerns about greenwashing and the limits of ESG reporting, there is a need to change how companies report on impact. The concept of double-materiality encourages a business to judge materiality from two perspectives: affecting the value of the company, and the environmental and social impact of the company's activities.

A reliance on ESG reporting is inadequate because of its focus on disclosing risks, often with investors in mind. This inward-looking perspective, with a focus on investment, needs to be complemented by outward-facing impact measurement and management (IMM), taking into account the dual objectives of driving both financial and impact returns. IMM aims to help companies and investors measure the positive social and environmental change they can achieve, raise their ambition and intentionally work towards a just and regenerative future.

Going for impact beyond intention

For companies to truly embrace impact, intention alone is not enough. An impact mindset is the starting point, but it needs to be translated into strategy, embedded within culture, accelerated through partnerships, and measured effectively. None of this is easy, but it will shape the just and regenerative future we all want and need.