ABCD’s of Impact Creation

“Businesses today are entering a whole new paradigm for management: one which considers a business less as a ‘company’ and more as an ‘institution,’ integrated into the social fabric of society.” Deloitte Human Capital Trends

Business has the responsibility to both their consumers and everyone they impact. That’s a powerful statement; but how to hold business accountable for its actions?

Responsibility goes beyond the Milton Friedman model serving the self-interest for those who invested resources. It must extend to those that invest their trust, loyalty, creativity and time (hard work) in designing, innovating and delivering these products and services. These people have a real stake in the business.

Now, the intention and rules of business demand authentic corporate responsibility… transitioning from shareholder value (financial creation) to customer (value creation) and now to stakeholder value (impact creation). This progression is not just reinventing academic concepts or adding on “purpose” as a brand, but rather reflects a transformation in society’s expectations. The necessity is for business to shift its intention from solely generating profit or innovating a unique customer experience to creating value impacting all stakeholders. For example, Al Salam Bank (Bahrain) has focused its corporate culture and vison on these guiding principles “We Enhance our Clients, We Inspire our People, We are Digital Native, We Do the Right Thing and finally, We Act with Empathy.”

Transforming this intent requires a genuine commitment of the leadership team to drive a culture that rewards and thrives on benefiting all stakeholders. 21st century business leaders are challenged to view opportunities and business practices through an alternate lens — Impact Creation. Redirecting priorities from a shareholder-centric model to a Quadruple Bottom Line (people, planet, profit, prosperity of community) is necessary for tackling today’s challenges.

The ABCD’s of Impact Creation is a 4-step roadmap challenging business models to tackle today’s environmental and social crises, while achieving competitive advantage and being accountable for the impact they generate.

• Align
• Build
• Catalyze
• Drive

Align: To be “relevant” is a priority for businesses to revisit their core values and purpose statement insuring its alignment with today’s transitioning culture. Business must be authentic and transparent. Too often, businesses are driven by self-interest, often selling out on their mission and values. The gold standard for corporate intention, the TEST Values, are essential for achieving a sustainable future. By aligning Trust, Empathy, Sustainability, and Transparency, we create a cohesive purpose-driven culture to achieve company aspirations and drive impact.

Defining value reflects the goals and intentions of the leadership. The pandemic and global crises have fast forwarded a reevaluation to include overall social and environmental wellbeing. “Impact creation” is being accountable for the outcomes impacting all stakeholders.

Impact Creation: A high level of consumer trust generates brand loyalty and consumer influence. According to Edelman Trust Barometer 2020, 81% of customers say trusting a brand to deliver what’s right is a prerequisite for purchasing. Trust by the employee translates into productivity, innovation, and customer service. “Employees in high-trust organizations are more productive, have more energy at work, collaborate better with their colleagues, and stay with their employers longer than people working at low-trust companies. …fueling stronger performance.” In its 2016 Global CEO survey, PwC reported that 55% of CEOs think that a lack of trust is a threat to their organization’s growth. The aggregate of these interactions is the stakeholder experience; TEST Values have a direct impact on a company’s bottom line. A win-win outcome.

Build: The foundation for building effective strategies for impact creation lies in transformative business models. The VBID (Values-Based, Impact-Driven) model requires human-centered practices (e.g., integration of purposeful design, digital technologies, and sustainable innovation) to propel sustainability and accelerate change. Though innovation is essential for increasing efficiency and generating new opportunities, sustainability acts as its complement for resource allocation, preservation, and a positive future.

This infographic defines the TEST Values as each relate to the different players in the stakeholder-centric business model. In the pursuit of impact creation, a company must “reflect” on their relationships with consumers, employees, investors/community, and suppliers. Each relationship must be TESTED for alignment with each of these values. Here is an exemplary scenario. The company that actively lives the values of Trust and Sustainability in their customer service and product development will augment the consumers’ brand loyalty and positively influence their social network. Similarly, the company that develops a culture of Trust and Empathy will align with their employees increasing productivity and innovation. On the supply chain, the company that communicates openly and Transparently with suppliers with increase its efficiency and effectiveness. Finally, the company that is Transparent in their reporting and Sustainability practices will encourage local investment to support the UN’s Sustainable Development Goals. As each of the TEST Values are harmonized with the needs of each of the stakeholders, the company’s performance will grow, and the community will be positively impacted. A win-win outcome.

Impact Creation: Lombard Odier, a Swiss investment bank established in 1796, provides clients with the opportunity to promote a sustainable future without compromising on returns. They believe sustainability and sustainable investing is more than just an environmental issue — it is a revolution. By transitioning from a Wasteful, Idle, Lopsided, and Dirty (WILD) economic model to one that is Circular, Lean, Inclusive and Clean (CLIC™), they define sustainability as “the biggest investment opportunity of our lifetime.” Lombard Odier has a clear alignment of their values, further pivoting themselves towards more sustainable business practices. Based on their CLIC economic model, in 2020, the bank experienced a 15% rise in operating income, while in 2021, they had a 20% rise in net profits for first 6 months. A win-win outcome.

Catalyze: To catalyze impact creation, businesses need to change their mindset: asking the right questions, disrupting existing practices, and committing to delivering increased value. Their products must generate more than incremental value to the user; they must easily access this value and impact their users’ daily lives. For example, Subaru’s leadership rethought its business intention and goal, “to be a trusted partner for our customers… delivering happiness to people, society, and even Earth.” With data to support their goal, they invested in product design to deliver a “safe family car.”

Impact Creation: Subaru has been named by Kelley Blue Book as the most “Trusted Brand” for the seventh consecutive year and best Performance Brand for second year. For third consecutive year, Subaru has been awarded the J.D. Power 2021 Best Brand Loyalty Award for a combination of longevity, value, trust, and performance. Subaru targeted strategies that realized safety and performance; thus, potentizing its value message. They aligned themselves with building consumer trust. They branded their car as the “Love Car,” focusing on what that “love” means to different segments of consumers. The strategy has proven to be very effective; in 2018, Subaru reached its 10th consecutive year of record sales. A win-win outcome.

Drive: After aligning, building, and catalyzing their value, the company leadership’s next step is to drive impact by holding its team accountable to set of social impact indicators and rewarding sustainable outcomes.

The VBID business model requires that the business intention and standards of performance (beyond profit maximization) are in concert. Social impact indicators that evaluate business outcomes in the context of the TEST Values must replace the traditional Key Performance Indicators focused on shareholder interest (KPIs- Revenue, Net Profit, Customer Retention, Market Value).

ESG (environmental, social, and governance) has become a popular metric for evaluation. Capital as a Force for Good 2021 study revealed “100% of leading financial institutions have adopted ESG considerations and 95% have integrated ESG into core business processes.” In contrast, Tariq Fancy, former chief investment officer for sustainable investing at BlackRock Asset Group, challenged its relevance, “ESG is not something we can rely on for society’s most important challenges- inequality and climate change. “ Although ESG is not a science (as the tools are evolving to quantify long term and unintended consequences), investing in sustainable goals has demonstrated a strong correlation between company reputation and financial performance and ESG.

Fancy suggests that It’s about regulating the real economy… rewarding those that actually reduce carbon emissions, “You’d be better off putting a carbon tax on all the actual emitters of carbon. If you make an underlying business activity less profitable, less capital will flow there.” You Drive the impact by incentivizing product design and supply chains and rewarding sustainable business decisions.

Impact Creation: Intel is a prime example of corporate social responsibility authenticity. With 80% of energy consumption coming from renewable energy, Intel has made significant strides in prioritizing environmental change. ‘Force for Good’ financial institutions achieved 5.7x greater returns to shareholders than less ranked institutions. Finally, the new Nasdaq100 ESG Index outperformed the traditional Nasdaq 100 by 7.7 % points during a 5 year. More win-win outcomes!

Evaluation of ESG routinely allows companies to find gaps to improve on their impact creation process, further pushing a company to align their core values with decision making. With the focus on corporate social responsibility, there is growing movement to agree on values-based metrics for impact creation which will hold all businesses accountable to the same high standard for impact.

The ABCD’s of Impact Creation augment the priority of CEO’s naming social impact as the top success factor for annual performance in Deloitte’s Global Human Capital Trends survey. They demand CEO’s not only create impact but are responsible for the impacts they create.

‘Business leaders must move beyond being simply practitioners of shareholder-driven capitalism and become its stewards, working to enhance the sustainability of the market system and the impacts it generates.’ Steve Denning, former Director of the World Bank.

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Ira Kaufman PhD, Transformation Strategist, CEO, Social Entrepreneur, and Educator. Ira’s 45 years of management experience spans three worlds: business, nonprofit, and education. He co-authored Digital Marketing: Integrating Strategy, Tactics with Human-centered Values (now in 2nd edition) and EMPOWER US! From Crisis) to Strategic Harmony (2020). He challenges leaders, entrepreneurs, and students to reflect on their assumptions and resistances to discover new sustainable solutions. and fuel purposeful action. His company, Entwine Digital, works with midsize organizations and multinationals to design values-based Transformation strategies and train World Class Leaders. In collaboration with Legacy International, his Catalyzer Lab is developing VBID (Values-Based, Impact-Driven) Training, as a transformative learning platform integrating values with emerging digital technologies and human-centered business practices that combine to create positive social impact. As a co-founder of Global Transformation Corps, he redirects entrepreneurship to a stakeholder-centric model with sustainable impacts. At University of Lynchburg College of Business, he designed and implemented the Transformative Leadership Lab and Transformative Leadership in the Digital Age curricula.

Basem Marmal, Operations and Supply Chain @ Georgia Institute of Technology