Tuesday, March 24, 2015

Is CSR dead?

CSR is dead claimed Peter Bakker, President of World Business Council for Sustainable Development, at a recent sustainability conference in Copenhagen. The organization represents 200 of the largest companies in the world so there is ample reason to take note and ask; if he is right what comes next?

Let us put forth our answer - Impact Investing.

CSR has had some concrete success beyond PR, for example in taking sustainability and environmental topics higher on the corporate agenda and it will surely live on in some format. But it is becoming abundantly clear that CSR is not enough to tackle pressing societal problems such as climate change and resource security. In a time where we are coming dangerously close to going beyond what are considered safe planetary boundaries we must work through frameworks that can catalyze the radical shifts needed. Incremental improvements, the hallmark of CSR, coupled with pure profit maximization will not reverse the accelerating rate of natural capital destruction and rising emissions. Current research show little progress on key metrics. In fact we are eroding the foundations of the financial system and adding enormous fragility to supply chains.

Impact Investing has the potential to bring about transformative mindset change through its very raison d'ĂȘtre - the intent to pursue positive environmental and social impact in conjunction with financial returns. It's not profit maximization with a pinch of "nice to have" positive impact. From the ground up, activities are designed with the explicit intent of achieving both. Seeing profit and positive impact as integrated concepts, permeating all units of a business instead of a stand alone CSR function, will aid in creating long term accountability. This distinction is not trivial but a revolution in its own and absolutely necessary to survive and lead in a business environment with stringent environmental legislation, more consumer pressure and natural capital restraints. Impact Investing will foster change on a grand scale and help companies and governments navigate the rough seas ahead. New business models, new strategies, new competitors, more complex accounting and balance sheets with externalities priced in. Is your organization prepared?