How to Assess Your Business’ Environmental and Social Impacts

Are you ready to embark on a sustainable journey that achieves more than an ordinary business venture? Sustainable entrepreneurship involves exploring the key issues that drive a responsible business and the measures you will take to assess your business’s social and environmental impacts.

The decisions you make today to align your company with environmental outcomes will echo far beyond your boardroom. But there are limitations built into traditional business models, especially a short-term focus on quarterly profits, that prevent groundbreaking sustainable businesses from starting down the path to creating a healthy prosperous community.

In the midst of the hottest year in history, with billion-dollar climate disasters happening more frequently than ever, any human willing to consider the evidence recognizes the urgent need to address climate change, social inequity, and natural resource depletion. Responsible businesses must do more than take proactive steps to minimize their carbon footprint and increase their contribution to society.

Editor’s Note: This article is based on a new tool for starting your entrepreneurial journey, the “Sustainable Entrepreneurship Training.” Shift Group founder Stefan Doering will contribute a series of articles about how to take your sustainable business idea from the lab to success in the marketplace. This article contains affiliate links. If you purchase an item through one of these links, Earth911 receives a small commission that helps fund our Recycling Directory.

The Broken Traditional Business Model

The traditional business model that focuses solely on profit as the ultimate indicator of success is now under scrutiny for its shortsightedness and detrimental impacts on the environment and society. For decades, business has pursued the singular goal of maximizing profits, often at the expense of people and the planet. Today’s social, environmental, and economic challenges are the result.

Business is responsible for significant contributions to environmental degradation. The energy used to extract, process, and ship raw materials for use in products, along with all the impacts along the supply chain account for the majority of greenhouse gas emissions globally. That also means that business can make the biggest difference simply by deciding to reduce extraction by switching to circular approaches to materials and to decarbonize industrial processes.

According to the United Nations’ 2022 Emissions Gap Report, global emissions must be reduced by 45% by 2030 to limit global warming to below 1.5°C, a threshold humanity is dangerously close to today.

The relentless pursuit of profit has also led to the overexploitation and depletion of natural resources. The Global Footprint Network estimates that humanity currently uses the equivalent of 1.75 Earths annually. We are borrowing resources consumed today from future generations, and leaving immense amount of waste for them to clean up.

If business fails to decarbonize and introduce circular products and services, the results will be with catastrophic for ecosystems, weather patterns, and every human on Earth – the customers business relies on for survival.

Another significant issue with the traditional profit-first approach is the exacerbation of social inequalities. Oxfam International research found that the world’s richest 1% own more than twice as much wealth as the rest of humanity combined. This concentration of wealth often occurs as businesses prioritize profits and executive compensation over fair wages for workers. Such income inequality can lead to social unrest and decreased overall economic stability.

Enter the Triple Bottom Line

A new more holistic approach to understanding business performance addresses the shortcomings of the traditional business model. The Triple Bottom Line (TBL) and the concept of measuring the risk associated with environmental, social, and governance (ESG) performance of companies offers a new perspective. TBL aligns business success with social and environmental responsibility, and it comprises three bottom lines:

1. People: The social aspect of the TBL/ESG looks at a business’s contribution to the well-being of its stakeholders: employees, customers, and communities.
2. Planet: The environmental aspect of TBL evaluates a company’s ecological footprint and its efforts to minimize environmental harm; ESG reporting is meant to explain the future impact of a company’s behavior on business conditions – it is a financial accounting, not an environmental and social report card.
3. Profit: Economics remains essential, as businesses need financial stability to remain viable and make positive contributions. However, TBL emphasizes that profit should not be pursued at the expense of people and the planet.

And businesses that go TBL find themselves becoming more profitable because of:

1. Increased sales: Embracing sustainability attracts a growing base of environmentally conscious consumers who actively seek out environmentally responsible products and services.
2. Decreased expenses: Sustainable practices often lead to resource efficiency that reduce operational costs.
3. Unique marketing opportunities: Communicating your sustainability efforts effectively opens doors to new customers. Responsible environmental stewardship creates a powerful narrative that can resonates with consumers to set your business apart from the competition.
4. Team building: Embracing sustainability fosters a positive, inclusive work culture, attracting and keeping top talent who seek to work in purpose-driven organizations.

How to Assess the Environmental and Social Impact of Sustainable Practices

The assessment process involves evaluating the entire spectrum of a company’s operations to understand its environmental and social footprint. By conducting thorough initial assessments of sustainable strategies, businesses can gain valuable insights into their current and future impact. With that insight, they can develop strategies to minimize negative environmental impacts while maximizing positive contributions.

Understanding Your Environmental Impact

Some key areas to consider during the environmental impact assessment include:

• Energy Consumption: Take the time to understand your company’s current energy usage and how is the power generated to explore opportunities to transition to renewable energy sources.
• Carbon Footprint: Track greenhouse gas emissions. Measure emissions from electricity consumption, transportation, and other operational activities. Then, implement energy-efficient practices, invest in renewable energy sources, and encourage employees to adopt sustainable commuting options like telecommuting, walking, biking, or carpooling.
• Water Management: Evaluate your company’s water consumption and implement water-saving measures, such as recycling water where feasible, and allocate some of your revenue or profits to support conservation projects in water-stressed regions.
• Waste Management: Cutting waste is the most immediate way to reduce a company’s environmental impact – more resources go to profitable uses, reducing the need for additional extraction of natural resources. The Ellen MacArthur Foundation estimates that the circular economy could save businesses up to $630 billion annually by 2025. Conduct a waste audit to identify waste streams and explore opportunities for waste reduction, recycling, and upcycling.

Assessing Social Impact

A socially responsible business must also consider its impact on all stakeholders, including employees, suppliers, communities where they do business, and society at large. Consider these issues when assessing your company’s social impact:

• Employee Welfare: Do employee experience a sense of well-being, work-life balance, and confidence they will have opportunities for professional growth and development? Conduct surveys and gathering feedback to find out. Companies that invest in employee welfare report 21% more profitability. In fact, companies with engaged employees see an 18% decrease in staff turnover. Your business should strive to offer competitive wages, provide training opportunities, and foster a positive work environment.
• Community Engagement: Evaluate the company’s contribution to local communities and explore how to support community development projects in the regions where you operate. Engaging in social initiatives can also foster a positive brand image and strengthen customer loyalty.
• Product and Service Impact: Consider how the company’s products and services affect customers’ health, safety, and well-being. Products designed based on sustainability principles and ethical values can attract environmentally conscious consumers. And if you think the market is not yet aware of the benefits of socially and environmentally responsible solutions, it may be time to educate them.

Implementing Actionable Strategies

Once the sustainability assessment is complete, put actionable strategies to work to address identified environmental and social impacts. Some effective practices include:

• Goal Setting: Establish clear and achievable sustainability goals and communicate them throughout the organization.
• Employee Education: Conduct training programs to educate employees about sustainability practices and encourage their active involvement in driving positive change. You’ll be surprised at how creative employees can get when empowered with the right knowledge.
• Sustainable Procurement: Concentrate your purchases with suppliers that adhere to ethical and sustainable practices such as fair labor standards and ethical sourcing principles. Engaging with suppliers on sustainability issues can foster collaboration and drive positive change throughout the supply chain.
• Green Innovation: Invest in developing sustainable products and services. For example, Cliff Aron of GreenMax Capital Group is successful in Africa right now with his innovative approaches to e-bike sharing (think Uber on bikes), potable water solutions (so women in Africa don’t have to walk 15 miles for something as basic as water), and decentralized refrigeration systems (saving 50% of food previously thrown away by farmers).
• Social Impact Initiatives: Create local projects, volunteer programs, or philanthropic activities to support local communities and address social challenges.

To ensure continuous improvement, businesses must monitor and report their sustainability progress. Track your performance against established targets and communicate results transparently to stakeholders. Sharing information builds trust and creates accountability within the company and with external partners. Reporting your environmental results to customers communicates your commitment to sustainability.

Many startups delay their sustainability commitments but it is more effective to set initial goals and refine them publicly than waiting until later. The clean slate at a startup is the perfect time to establish your social and environmental vision because daily challenges may distract you later. Every founder can learn from sustainable companies, and none more than Patagonia.

The Globally Conscious Business in Action: Patagonia

Patagonia, an outdoor apparel company with a powerful commitment to environmental and social causes, takes a comprehensive approach to monitoring its impact and reporting progress on its sustainability initiatives. The company believes in transparency and accountability, and actively communicates its efforts to stakeholders through many channels.

Here are some key ideas to learn from Patagonia:

• Environmental impact assessments: Patagonia conducts regular environmental impact assessments to evaluate the effects of its operations on the environment. These assessments analyze factors such as energy consumption, water usage, waste generation, and greenhouse gas emissions. Understanding its environmental footprint helps Patagonia identify areas for improvement and set specific sustainability goals.
• Supply chain traceability: Patagonia places a strong emphasis on supply chain transparency, including where and how something is made. It works closely with and monitors suppliers’ practices and conducts audits to verify their commitment to fair labor practices, ethical sourcing, and environmental responsibility.
• Sustainable materials and product design: Patagonia strives to use sustainable materials and apply responsible design practices to every new product. The company seeks alternatives to conventional materials that have a lower environmental impact. It also focuses on creating durable, long-lasting products while reducing waste in its manufacturing facilities.
• Social responsibility initiatives: Patagonia is dedicated to promoting fair labor practices and providing safe working conditions for its employees and suppliers. The company engages in initiatives that support workers’ well-being, gender equality, and community development.
• Annual impact reports: Patagonia publishes annual impact reports that provide detailed information on the company’s environmental and social initiatives. These reports outline progress made in achieving sustainability goals, challenges faced, and plans for the future. The reports also include data on key performance indicators related to energy efficiency, waste reduction, and social responsibility.
• Worn Wear program: Patagonia’s Worn Wear program encourages customers to repair and recycle their clothing, extending the life cycle of products and reducing their environmental impact. The company collects used Patagonia clothing for resale or recycling, to support the awareness about the importance of building a circular economy.
• 1% for the Planet: Patagonia is a founding member of 1% for the Planet, a global movement in which companies commit to donating at least 1% of their sales to environmental organizations. Through this program, Patagonia provides financial support to numerous grassroots environmental initiatives.
• Patagonia Action Works: Patagonia’s online platform, Patagonia Action Works, connects individuals with local environmental organizations and volunteer opportunities. It serves as a tool for customers to engage in environmental activism and support causes about which they are passionate.

Patagonia’s monitoring and reporting practices reflect its dedication to sustainability and social responsibility. By openly sharing its progress and challenges, Patagonia seeks to inspire other businesses and individuals to take meaningful action towards a more sustainable future. Your business can be an example, but it will not become one if it is not built on clear, actionable values and practices. Start your sustainability efforts on Day One, taking steps to communicate internally and externally to foster awareness and collaboration to solve environmental and social challenges.

Sustainable Entrepreneurship Training – A Transformative Investment

You’ve begun the journey in the exciting world of testing sustainable options for your product and company. But the adventure doesn’t end here. We invite you to join the transformative “Sustainable Entrepreneurship Training” course that Shift Group offers.

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And as a part of the global community of sustainable entrepreneurs on a mission to restore the planet, a community that you will join upon graduation from our program, you’ll be making a lasting impact while building a profitable business.

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About the Author
Stefan Doering is the host of the Sustainable Entrepreneurship Training and Shift Group’s managing director. He’s been innovating in business and sustainability since 1987 and coaches green businesses in three major areas: innovating powerful green business models, crafting, and implementing marketing and positioning strategies for bringing green to the mainstream and creating a consistently profitable and sustainable business. Follow Shift Group on Instagram and Facebook.