Impact Management

Impact management is the process by which an organisation understands, acts on and communicates its impacts on people and the natural environment, in order to reduce negative impacts, increase positive impacts, and ultimately to achieve sustainability and increase well-being.

The Actions of impact management are the core steps and components of impact management. Explore the Actions.

Why organisations manage their impacts

Impact management is relevant for all enterprises, investors and financial institutions (collectively referred to throughout this section of the website as “organisations”):

• To operate sustainably and to contribute to solutions: by managing impacts, organisations can operate within sustainability thresholds, contribute to progress toward the Sustainable Development Goals (SDGs) and increase people’s well-being.
• To manage idiosyncratic risks and opportunities: by managing impacts, organisations can prevent sustainability-related risks to financial performance from arising and seize sustainability-related financial opportunities
• To manage system-wide risk and opportunities: by managing impacts, organisations manage their contributions to system-level risks and opportunities and, in doing so, help safeguard the sustained financial returns and stability of markets.

More information on the relevance of impact management to sustained financial performance of enterprises, investors and financial institutions, is available in this thought piece.

Who is impact management relevant for?

A growing number of organisations are seeking to operate sustainably, within environmental and social boundaries. Ensuring their operations and activities are aligned with sustainability thresholds is part of their overall vision and strategy.

There is also a growing number of organisations that specifically aim to solve environmental and social problems and increase people’s well-being. Achieving positive impact is part of their purpose.

Many organisationsdo not have sustainability as part of their purpose or vision. Sustainability may still be considered by such organisations, albeit more narrowly, typically from a compliance and/or risk management perspective.

Impact management is relevant to all three of these categories of organisations. However, impact management, as characterised below and as described in the Actions, is practiced by the former two categories only.

What are the fundamental characteristics of impact management?

Impact management is not in contradiction with other sustainability-related practices, such as ESG integration and sustainability risk management, among others. However, it goes beyond these, and thereby sets itself apart.  

The fundamental characteristics of impact management are:

• Taking action to, at a minimum, operate sustainably. Striving to operate within sustainability thresholds, and taking action accordingly, is the minimum level of ambition associated with impact management. Deliberately contributing to solve environmental and social problems and to promote greater well-being is a further strategic objective associated with impact management. In sum, impact management implies that addressing negative impacts and creating positive impacts is part of the organisation’s vision and/or purpose.
• Holistic consideration of impacts. People, society, nature and climate are intimately interconnected and interdependent. This means that impact management requires taking a holistic approach that considers all impacts that are potentially associated with an organisation and addresses all significant impacts. 
• Consideration and engagement of stakeholders and affected parties. Identifying, considering and, where possible and appropriate, directly involving those who are affected (stakeholders) is an integral part of the holistic approach and critical to ensuring accountability. Specifically, this can help determine what impacts may occur or have occurred, how important they are, how best to measure them. It can also help organisations define their goals and strategy, and ensure reported impact is a fair and true representation of reality. 
• Consideration of context. Environmental and social needs and aspirations vary from one place to another. Impact management can only be effective if these contextual elements are properly understood and factored in from the start. 
• Integration across strategy, governance and activities. An organisation can only address its negative impacts and maximise its positive impacts if impact management is embedded directly into an organisation’s company strategy and governance, and across its activities. This includes adopting a level of quality checks and balances for impact management that is similar to what is done for other aspects of business management. 
• An iterative and evidence-based process. Addressing negative impacts and maximising positive impact can take time. Impact management involves understanding what works, through repeated measurement, assessment, monitoring and evaluation, and integrating learnings into organisational practices and policies. 
• Transparency on practice and performance. Communicating information about impact performance and impact management processes with all relevant stakeholders is an essential feedback and accountability mechanism for impact management.