What You (Really) Need to Know About Key Impact Terms

An authentic look at how these words are currently used so we can improve the dialogue and move our organizations forward.

I’m not a fan of jargon.

I think it muddles communication rather than making it clearer because a wall is put up between those who know the jargon and those who don’t.

I’ve spent a large part of my career in the marketing industry, which has a particular fascination with generating new non-words as a way to make themselves feel special. It results in empty word soup paired with nodding faces. Who wants to say they don’t know what a term means?

Marketing isn’t the only industry at fault here. The social impact space has generated its own vocabulary over time, and now that we’ve set a new standard for business, more and more people are diving in.

That has resulted in a conversation where the same words have different definitions depending on who you’re speaking to or what you’re reading.

It’s Vocab Time

I’ve put together this article to help you navigate some of the key terms used (and often conflated) in the impact space.

My definitions are based on my perspective, as well as the trends I’ve uncovered in my reading and research. I’m not attempting to be academic; rather, I’m attempting to provide practical clarity and a way to cut through the current dialogue productively.

I will also tie things back to being purpose-driven because I believe the purpose-driven model, as defined below, offers the best framework for making positive impact.

Impact

A smart, short word that’s used to mean so much it means almost nothing. Almost.

When someone says ‘make an impact’ or talks about an organization’s impact, generally they’re talking about a positive result in an area that advances an equally positive or beneficial cause.

In fact, any action produces an impact, and that impact can be both positive and negative. That’s science.

If your intention is to look at every ripple of impact, you’re looking at the light and the dark. But in most cases, what you’re reading or discussing will be focused on the bright side — celebrating making an impact, maximizing impact, or expanding impact.

Sustainability

This is a word that’s been around for a while now. In most cases, it’s used to talk about environmental sustainability — our ability as a species to continue to live on this planet without destroying it, or perhaps said better: our ability to coexist with a healthy planet.

However, sustainability actually encompasses three pillars: economic, social, and environmental. Or, as they are referred to by the cool kids, people, planet, and profit.

You can quickly determine the way the term is being used in articles through context.

I’ve found that more often than not, it is relegated to the environment (think green). Sustainability is certainly a factor for purpose-driven organizations, but the environment does not have to be the central focus.

ESG

ESG stands for Environmental, Social, and Governance. Closely related to the three pillars of sustainability, ESG is a measurement system. Companies use the system to track their performance in sustainability and societal impact.

Perhaps more importantly, ESG is a system used by investors and shareholders to assess the company’s impact on the world. This affects which companies they choose to invest in and how they track their investments over time. More and more, it is also affecting stock performance as more companies publish their ESG ratings.

The ESG system tends to be adopted by larger, publicly traded companies, but any company can use ESG standards.

Purpose-driven organizations may use the ESG system, but they may also use something else, including something they build themselves. The same is true of impact investors.

SDG

The Sustainable Development Goals (SDG) are a collection of 17 global goals designed to be a “blueprint to achieve a better and more sustainable future for all.” They were set in 2015 with the intent to have them achieved by the year 2030.

Some companies and nonprofits choose to support or advance the SDGs rather than working with the ESG system. I’ve found that they tend to develop a campaign to address a specific goal using the same end date (2030).

That being said, organizations can also use the areas in which the goals are set as indicative of the areas they should care about when it comes to their impact.

CSR

The acronym stands for Corporate Social Responsibility. CSR is now a more dated term because it connotes a time when impact was kept separate from the rest of the business. In fact, a company’s CSR initiatives were often totally ancillary, but new generations are looking for an integrated approach.

That does not mean this term isn’t still used. It is just most commonly used to talk about stand-alone objectives such as recycling efforts, charitable contributions, or volunteering programs.

Purpose-driven organizations will have their impact embedded throughout everything they do and thus are unlikely to have separate CSR initiatives.

Social Entrepreneurship

Strictly speaking, social entrepreneurs build businesses that provide solutions to social, cultural, or environmental issues.

More broadly, this term can be applied to any company that’s trying to make a positive impact as part of its model. One well-known example would be Tom’s Shoes, which donates a pair of shoes to someone in need each time a pair of shoes get purchased.

Social entrepreneurship is often seen as a hybrid between the charitable intent of a nonprofit but with the financial engine and structure of a for-profit business. Some go so far as to suggest that the nonprofit as an entity structure should be wholly replaced by social entrepreneurship.

B-Corps

Organizations operating as B-corporations have fundamentally altered their bylaws to hardwire their benefit into their structure. Once done, upholding that responsibility is a requirement of their board of directors and investors.

There is a distinction between B-corporations and a B-Labs certification, even though the terms are used interchangeably.

B-Lab organizations have to be certified every three years through an assessment process whereby they must maintain a minimum score. The assessment questions and areas largely match up with the people, planet, profit structure.

Part of the process of achieving B-Labs certification is becoming a B-corporation.

There are currently 3,285 certified B-corporations. It is the intention of B-Labs that these companies will use the scoring system in their certification process as a performance indicator that they work to improve; however, most organizations seem content to achieve the status and wear the certification. AKA it’s just a marketing play.

While the change in the legal structure and regular assessment process can be a tool in the proverbial toolbox, I do not believe that you must be a B-corporation to be purpose-driven.

Stakeholder Capitalism

This term is more focused than the last few. It has come about as an alternative to shareholder capitalism, or a view of capitalism where the company’s only responsibility is to its shareholders.

Stakeholder capitalism means the company is oriented to serve the interests of all its stakeholders. Key stakeholders include customers, suppliers, employees, shareholders, and local communities.

Under this system, the company should not be maximizing profits at all costs. They should be focusing on generating long-term value. A company practicing stakeholder capitalism is likely paying attention to its ESG performance, but that is certainly not a requirement.

Purpose-driven organizations absolutely focus on long-term value. They are also mindful of their stakeholders; however, they know when and how to prioritize those stakeholders in circumstances that put them at odds with each other.

Conscious Capitalism

Similar to Stakeholder Capitalism, Conscious Capitalism states that businesses should serve all principal stakeholders, including the environment. In fact, it actually encompasses Stakeholder Capitalism within its four guiding principles: Higher Purpose, Stakeholder Orientation, Conscious Leadership, and Conscious Culture.

Translated briefly, the company should have a purpose beyond profits, serve all stakeholders, have leaders that emphasize “we” rather than “me,” and create a culture that is the sum of the values and principles that make up the fabric of the business.

Conscious Capitalism discussions tend to bring in discussions around morals. This does put a divide between conscious business, and by definition, businesses without a conscience which can have negative (and unproductive) implications. It can also lead to discussions that assume we all have the same moral standards, but morality varies across cultures and individuals.

Whole Foods is a company that purports this philosophy.

Mission-driven

This label is applied to organizations “on a mission.” Nonprofit organizations by definition are mission-driven, but for-profit companies can have a mission too. Leaders can also be classified this way.

When effective, the mission guides the companies actions, products, services, programs — you name it.

Mission-driven and purpose-driven are often used to mean the same thing. To operate as a purpose-driven organization, you should have a purpose as well as a mission, as your mission is the how not the why.

My experience, as well as the research, indicates that purpose-driven organizations are more successful than mission-driven ones.

Purpose-driven

Purpose-driven organizations are, by my definition, committed to both making money and making a positive impact, whereby the organization’s impact is inextricably linked to how it does business. That means the organization makes decisions based on its purpose and its bottom line.

To be purpose-driven, there are a number of things the organization should do, including focusing on long-term value creation, operating transparently and responsibly, and investing in human capital. But first and foremost, it must embed purpose throughout the entire organization.

If you’d like to learn more, I’ve compiled 10 principles to give you a deeper picture.

In my opinion, this model is the most effective as it ties the financial engine directly to the impact — and both grow together.

These terms represent only a handful of those used in the space, but they are the ones I see used most often with the widest berth in definition and propensity to be interchanged.

As you look to share your ideas or refine what you’re doing in your organization, consider your words carefully. The more clearly we all communicate, the more likely we are to collaborate and advance our good work.

And when in doubt, just eliminate the jargon.

This article was updated on February 16, 2021.