Beyond Compliance 2024

Beyond Compliance: Embedding Impact through Innovative Finance26Creating bespoke solutions for corporate issues Some companies may, however, choose to apply OBF on a discrete issue that is specific to their requirements – for example a material social issue that is hard to address due to the depth of the supply chain. Step 1: Determine general feasibility Before engaging in OBF, companies should consider that OBF is only relevant if the outcomes linked to the social issue are measurable (the social issue must have clearly defined, measurable outcomes that can be tracked over time, allowing for transparent and objective assessment), and verifiable (the impact achieved should be verifiable by third parties), as well as being achievable within a reasonable timeframe. Other elements, such as alignment with core business goals and potential for scale, are just as important when considering criteria for OBF implementations. For many companies, however, it will be difficult to make an educated determination of whether a social issue is truly measurable or verifiable. In such cases, it is recommended that companies engage experienced OBF actors to advise on the feasibility, structure and financing of such instruments. Step 2: Establish buy-in For OBF to succeed, even in its pilot stage, key stakeholders need to be aligned internally. Typically, this includes: –Finance: Many OBF solutions are multi-year engagements and therefore likely to require signoff from the finance function. –Sustainability: A key aspect of the OBF solutions is their direct link to sustainability metrics. –Functional department: Depending on the focus of the OBF solution, a functional department needs to be involved (e.g. HR for skilling initiatives, procurement for supply chain initiatives, etc.).Ideally, senior executive support for the pilot project should be secured as well, given its potential long- term implications and transformative potential. Step 3: Design a pilot The implementation of pilots can be helpful to identify suitable OBF models and collect evidence about the mechanics, but also with regards to the impact generated, how impact is measured and how these models contribute to the company’s goals. Companies may want to start with a small- scale pilot project within departments that can support its incubation. When doing so, companies should design the pilot based on best practices. This includes principles such as the ones developed by Roots of Impact,58 which focus on key elements such as providing incentives to the creators of social or environmental value, ensuring impact additionality, setting context specific prices, stakeholder engagement etc. If possible, responsibilities should be assigned to a small, cross-functional core team, to manage and oversee the various aspects of OBF. Step 4: Evaluate and measure Impact measurement should be embedded in the pilot as one of the core components. Success should be measured continuously; this includes outcomes achievement rates as well as acceptance among key stakeholders. Step 5: Scale OBF engagements Once a pilot has achieved success, the core team can assess the readiness of corporate structures, systems, culture and personnel to implement and sustain OBF adoption at scale, and address gaps with capacity building. When designing solutions, reference illustrative use cases The following potential use cases address some of the key corporate challenges mentioned throughout this report and are suitable for OBF applications.