November 2, 2021
November 2, 2021
Businesses are diving into environmental, social, and governance (ESG) issues and engaging in social impact initiatives with renewed vigor. Stakeholders, including investors, are asking them to take a public stance on myriad issues, from the environment to racial justice to mental health and personal financial literacy. Organizations are relying on innovation to tackle these massive problems at scale, and they require data-driven solutions.
In this context, boards are assessing their own role in overseeing ESG strategies and programs. Boards are looking to ensure their management teams are setting the right sustainability goals and tracking progress toward real, quantifiable impact.
As the pressure on companies to adopt sustainability initiatives continues to mount, a new category of third-party service providers—with products known as impact as a service (IaaS)—is emerging that makes ESG integration more potent and provides boards more oversight.
What is IaaS, who is building it, and who is leveraging it? Simply put, IaaS enables companies, through technology, to tackle and report on intractable social issues at scale. IaaS employs software suites and data to help companies incorporate ESG into ongoing business processes and decisions.
Think about how software as a service (SaaS) reinvented the world of customer management and transformed Salesforce into the machine that underpins so many organizations. Consider the advances SaaS has made in short-term housing (Airbnb), ride-sharing services (Uber Technologies and Lyft), electronic payments (Venmo and Paypal Holdings), and so much more. With SaaS, software and technology have moved from sector to sector, helping companies reimagine the speed, scale, and depth of how they operate. Now the same potential is emerging for ESG through IaaS offerings.
The first phase of IaaS technology has emerged to support four key ESG-related offerings: employee diversity, inclusion, and unconscious bias training; upskilling courses and critical skills education; programs to track and reduce greenhouse gas emissions; and corporate giving and volunteerism initiatives.
Greenhouse, for example, has a software platform helping more than 400,000 companies promote, track, and improve diversity, equity, and inclusion in hiring. Meanwhile, Benevity is helping over 650 companies scale their impact as they grow by providing an embedded solution to manage online giving, grants, and volunteer work for employees and customers.
Unsurprisingly, technology and financial giants—including Microsoft Corp., Google, Automatic Data Processing, and JPMorgan Chase & Co.—are early adopters of IaaS capabilities. Major companies outside of these data-centric industries, including Coca-Cola Co., Levi Strauss & Co., and Honda Motor Co., are leveraging IaaS, as well.
IaaS products can offer boards and their companies the following benefits:
Without the software and data-driven capability of IaaS solutions, companies may struggle to scale their ESG initiatives and boards will have difficulty overseeing and tracking the impact of this work, which will ultimately limit the potential social impact of their sustainability programs and investments.
With IaaS solutions in mind, boards should ask their management teams how they are integrating ESG programs into core company processes and how they are leveraging data to track ESG offering uptake, utilization, and return on investment. Boards can also ask for an evaluation of the IaaS solutions that are most relevant to enabling their companies’ ESG priorities. For boards and board members who oversee specific ESG areas, such as culture or climate risk assessment, it is important to understand the full scope of IaaS tools and capabilities to clarify best practices and the right methods for improving long-term impact.
As boards formulate their role in ESG strategy, they need tools that enable clear oversight, ensure alignment with strategy, and provide effective measurement. Just as SaaS products reinvented countless industries, IaaS offerings can help boards and companies reimagine the scale, speed, and impact of their sustainability programs and transform ESG initiatives into true competitive advantage.
Maya Chorengel and Steve Ellis are co-managing partners at The Rise Fund.
Editor’s Note: Portions of this article originally appeared in a Fortune piece cowritten by one of this post’s authors, Steve Ellis, and Tom Davidson.
NACD: Tools and resources to help guide you in unpredictable times.