As a consultant with raiSE and having worked with several social enterprises including my own, I am always inspired by the positive impact created by these businesses large and small everyday.

Whether it is through a pledge of profits/revenue to help the marginalized, or through inclusive hiring practices, the creation of impact are material, financially and otherwise, to these businesses. Yet, very few of them actually account for these impact properly. It may be due to a variety of commonly cited reasons, e.g. lack of motivation or resources to do so. But perhaps, underlying these apparent reasons, there is a fundamental misunderstanding that has blinded many businesses from realizing the value from the impact they are creating.

The misunderstanding is this – social impact is external to the business, that there is a commonly accepted double bottom-line for an enterprise that also wants to deliver certain social objectives in addition to surviving as a business. Trapped by the expectation of twin objectives, many well-intending businesses decide that it is too difficult to achieve both at the same time. Delivering and reporting on impact is an additional burden to the business, which many had to sacrifice along the way.

But what if this is not the case? What if impact creation is inherently a part of the business already? If a business is able to integrate the creation of impact into its business model and strategy, it is possible to realize that they are in fact at one with each other. Reporting on the business will automatically include reporting on impact. Any business decisions will inevitably include considerations from impact. How?

Starting from the overarching disclosures framework now led by IFRS in its new ISSB standards, we understand that the premise for such disclosures is to report on issues material to the financial and sustainability of the business. The creation of impact, climate-related or otherwise, all translates to costs, risks and returns for any business. For businesses with a social impact angle, the creation of such impact would inevitably affect the financials of the business directly and/or indirectly. If only the social entrepreneurs could look at their social enterprises this way and internalize the impact creation into the business from day one, starting with this thought and understanding, then they would never look at impact as an additional onerous target as if from an external source.

The clarification of the double bottom-line (mis)conception is the starting point for social enterprises to be motivated to integrate ESG considerations.

While the impact created by the businesses may have positive externalities on the society at large, it is fundamentally an internal business decision to create the impact.

When the social enterprises take the trouble to do some “soul-searching” and dig deeper into their raison d’être, it is not surprising for them to find the hidden pot of gold, in the form of unexplored profit opportunities, reputational goodwill cost-savings, and/or business risks mitigations.

Then the next concerns are what to measure, what tools to use and how to implement it properly. I will share my thoughts on these questions about the metrics and methodology in the subsequent notes of this series.

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Disclaimer: The content of this article is informational only. Nothing in this note shall constitute legal, investment or professional advice.