U.S. companies that conduct significant business in Europe are in for the strategic and compliance challenge of a lifetime. Accustomed to doing their best to provide sustainability information to investors via voluntary reporting frameworks, they must now prepare to adopt a rigorous sustainability reporting regime and wrap their collective minds around a new concept: double materiality.
The aim of the European Green Deal is to accelerate the transition to a low-carbon, sustainable economy. By taking into account the current and future needs of a broader constituency of stakeholders, governments are expanding the concept of corporate accountability. Their goal is to compel companies to think beyond conventional calculations of profitability to factor in the impact they have on the world. Companies will find it harder to ignore previously unpriced externalities and must reckon with how much value they are creating or destroying, not only for themselves but for those affected by their activities.
Understanding and measuring the impact that a company’s economic activity is having on the world is a more expansive and novel task than weighing the effects of events, both real and anticipated, on a company’s financial performance and likely prospects. It requires identifying and understanding effects that the company’s activities, value chain, and products have on the workers, communities, geographies, and ecosystems with which it interacts.
Assessing the impact of a conceptually unlimited set of potential harms or benefits that can arise from corporate activity represents a huge challenge for corporate management, especially when the disclosure of such impacts is regulated.
Denne historien er fra Spring 2024-utgaven av MIT Sloan Management Review.
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Denne historien er fra Spring 2024-utgaven av MIT Sloan Management Review.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
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Avoiding Harm in Technology Innovation
To capitalize on emerging technologies while mitigating unanticipated consequences, innovation managers need to establish a systematic review process.
Make a Stronger Business Case for Sustainability
When greener products and processes add costs, managers can shift other levers to maintain profitability.
How to Turn Professional Services Into Products
Product-based business models can help services firms achieve greater scale and profitability. But the transformation can be challenging.
Do You Really Need a Chief AI Officer?
The right answer depends on the strategic importance and maturity of AI in your company.
Where To Next? Opportunity on the Edge
Doing business in regions considered less stable or developed can pay off for companies. But they must invest in working with local communities.
Make Smarter Investments in Resilient Supply Chains
Many companies invest in resilience only after a disruption. Applying the concept of real options can help decision makers fortify supply chain capabilities no matter the crisis.
The Three Traps That Stymie Reinvention
Organizational identity, architecture, and collaboration can be either assets or liabilities to pursuing growth in new sectors.
What Makes Companies Do the Right Thing?
Vaccine makers varied widely in their engagement with global public health efforts to broaden access to COVID-19 immunizations. Ethically motivated leadership was a dominant factor.
Build the Right C-Suite Team for Your Strategy
CEOs can foster a more effective leadership team by understanding when to tap senior executives' competitive instincts and when to encourage collaboration.
A Better Way to Unlock Innovation and Drive Change
A strengths-based approach to building teams can win employee commitment to change and foster an inclusive, agile culture.
