ABC of Enterprise Impact | ABC at Outcome Level ABC classification begins at the granular level of individual outcomes experienced by stakeholders, using data to describe those outcomes across the five dimensions of impact.
An enterprise can classify an outcome experienced as Acting to Avoid Harm, Benefiting Stakeholders, or Contributing to Solutions based on data across the data categories that underpin the five dimensions of impact. Outcomes can be classified prospectively based on goals, or retrospectively based on performance.
Note that organizations might be contributing to positive and negative outcomes for the same group of people simultaneously, hence the importance of disaggregating by demographic characteristics to identify these differences and manage them accordingly.
ABC at Outcome Level
For simplicity, the ‘ABC’ of impact is referred to as a form of impact classification. However, “Benefiting stakeholders” is technically an outcome classification, as it is based on a level of performance rather than a change in performance and does not require causation.
“Act to avoid harm” and “Contribute to solutions” are both impact classifications, since they require change over time that is caused by the enterprise. They differ with regard to whether the original below-threshold outcome was originally caused by the enterprise itself (“Act to avoid harm”) or not (“Contribute to Solutions”), and whether the outcome has crossed the threshold into the sustainable range, or is expected to do so during the period for which goals are being set.
Assessing individual impacts as A, B or C
Organizations can assess progress towards these objectives by putting sustainability performance information in context. This information informs the management decisions organizations – and their investors – make.
Act to reduce harm: the partial reduction (or absence) of an unsustainable outcome caused by the organization, to a level that is still nevertheless below the sustainable threshold.
Assessing whether an impact is an ‘A’ at a minimum requires the:
- outcome level;
- baseline outcome level, enabling assessment of the change in outcome over time;3 and
- the societal or ecological threshold.
This data may be disaggregated by stakeholder characteristics/geography if relevant to explore if different impacts are occurring for different groups.
Benefit stakeholders: a sustainable outcome is created or maintained by the organization.
Assessing whether an impact is a B at a minimum requires the:
- outcome level; and
- societal or ecological threshold.
Contribute to Solutions: a sustainable outcome caused by an organization for people or the natural environment who were previously experiencing negative outcomes not caused by the organization (e.g. caused by market failure or policy failure).
Assessing whether an impact is a C will often require the:
- outcome level;
- baseline outcome level, enabling assessment of the change in outcome over time;
- societal or ecological threshold;
- outcome counterfactual, to assess whether the people/natural environment would likely be experiencing an unsustainable outcome in the absence of the organization
- number of people affected; and
- stakeholder characteristics/geography of the group experiencing the outcome, if relevant to the type of need being met.
The EU Taxonomy
The EU taxonomy is a classification methodology that uses this same logic. The EU has a policy objective of achieving net-zero emissions by 2050 and so the taxonomy lays out thresholds for economic activities which are significant contributors to global warming and climate change to help organizations assess whether they are sustainable (B) or unsustainable (A) on this sustainability topic.