Followers of this blog and my sustainability report reviews will know that I often refer to direct impacts and indirect impacts. Maybe I should clarify what I mean.
These are all the actions of a company which have an impact on stakeholders. This can be anything from reducing carbon footprint to creating a new environmentally friendly product to paying employees a living wage to volunteering in the community - anything that the company actually does and its direct effect on stakeholders.
These, in my CSR lexicon, are really the effects, results or outcomes of direct impacts. By developing a cause marketing campaign (action which creates a direct impact on those involved in the campaign or benefit directly from the cause), a company may be influencing awareness and consumer behaviour in an indirect way. By developing a new environmental technology, a company may be influencing consumer habits far beyond the specific action the company invested in order to develop a product. A bank may lend money in a responsible way (direct impact) but the whether the money is used in a responsible way is the indirect impact. An ingredients supplier such as Danisco has an indirect impact on (1) the way manufacturers make products with more sustainable characteristics and thereby change consumer habits and (2) the sustainability impacts of manufacturing supply chain processes at customers who buy their ingredients.
Indirect impacts, in many ways, are outcomes of direct actions. A company cannot control indirect impacts, only direct impacts. But if we think of the direct impact as the driver and the indirect impact as the outcome, then indirect impacts should be of vital relevance to any company's sustainability thinking.
The interesting thing about this is that in almost any business, industry or sector, the indirect impacts are always far, far greater than the direct impacts. This represents the real difference a company can make as it adopts a sustainability approach, impacting much more widely than its immediate actions. HP say this in their 2009 Global Citizenship Report: "The IT industry is responsible for about 2 percent of global GHG emissions. But our products and services offer great potential to help reduce energy use and emissions throughout the global economy—the other 98 percent." In determining their sustainability strategy, HP is conscious not only of their activities for designing, manufacturing, marketing, selling and distributing products but also on the way they are used by consumers, in order to impact far beyond the scope of HP's actual operations. An HP printer may be manufactured in a sustainable way but the way it utilizes ink, enables dual-side printing, is recyclable etc determines the level of potential environmental impact through its lifecycle. By now, everyone knows that the carbon footprint of a T-shirt is mainly in the wear and laundry of the T-shirt thoughout its lifecycle which overtake the carbon emissions generated by its actual manufacture.
Where am I going with this ? One more thing and we will get to the paradox.
See, I read hundreds of Sustainability Reports. Most of these reports relate to what the Company is doing to behave as a responsible business and advance local or global sustainability. No matter what the report structure, they always come back to impacts in the marketplace, workplace, community and environment and the narrative is almost exclusively about what the Company has done, how much it has invested, how many people were involved and how good everybody felt. For companies that report metrics, these metrics measure all of this: how many volunteering hours, how many training hours, how many emissions, how many hybrid trucks are used in distribution, how many eco-products have been developed, how much money has been spent. But frankly, what use is it to me to know that employees volunteered for 50,000 hours if I don't know what kind of a difference they made during those hours? I dont mean where they went and which project they advanced. I mean what DIFFERENCE did they make? Same with our HP printer example. Who cares if HP or any other company has developed a program to recycle printers? What we should care about is how many consumers actually recycle printers. The program is the input or the enabler, the actual level of recycling is the outcome. The outcomes are what we want.
All of these input -type metrics are important as management reports to guide decision making around resource allocation and get a sense of progress in working to plan. Usually, good basic sustainability practice should create strong indirect impacts. However, it takes time and energy to maintain adequate systems to manage sustainability practices and report on them. It's much easier to measure what you do than the result of what you do. So ...
and here is the paradox ....
companies spend their time and energy reporting on direct impacts when indirect impacts are much more crucial evidence of the way they are changing the world. What really matters most is the outcomes, but very few companies report on these. Most indirect impacts can be measured to a lesser or greater degree with the right kind of analytical thinking, but very few companies go the extra mile to attempt this.
If one thing needs to change about sustainability reporting, it has to be the practice of publishing a shopping list of actions and instead reporting on the value a company adds to our collective sustainability. My strongest recommendation to all companies entering the reporting cycle for 2011 reports is just that: Focus on where you are having an impact beyond your immediate actions. Let this be what drives your strategy, decisions, actions and reporting. Think top-down, not bottom up. Make the effort to assess the difference you are making.
Get past the paradox.
elaine cohen, CSR consultant, Sustainabilty Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices Contact me via www.twitter.com/elainecohen on Twitter or via my business website www.b-yond.biz/en (BeyondBusiness, CSR consulting and Sustainability Reporting firm)