Managing Impact and Competitiveness: Two Sides of the Same Coin

Companies impact the well-being of individuals, society, and the environment, not only by providing products and services, but also by creating jobs, promoting innovation, and contributing to GDP. Yet, their activities and supply chains trigger both positive and negative environmental and social impacts. As fears of recession grow in many regions, the management of such impacts is still too often viewed as a cost factor, rather than recognized as a driver of long-term performance and resilience.

In this article, we argue that impact management and competitiveness are not in conflict but interdependent. We show how companies can align long-term value creation with economic performance using Impact Accounting and sector-specific benchmarks to make impacts visible, comparable, and actionable.

Why is impact management a competitive advantage?

The conditions for doing business are increasingly shaped by environmental and social realities. Take the case of AI data centers: they offer immense benefits for business and society, from worker-centric, Industry 5.0 applications to productivity growth. However, compared to conventional data centers, AI infrastructure needs substantially more cooling, and tapping into water reservoirs is a low-energy way to meet this need. According to the European Commision, global water demand is projected to exceed supply by 40% as of 2030. As a result, water scarcity is no longer just an environmental issue, it has become a business issue too.

This example shows how social and environmental externalities are increasingly influencing costs, supply chain stability, and reputation. In short, they shape competitiveness. Businesses that act early to manage these dependencies reduce risks, build stakeholder trust, and position themselves for future success.

Solutions to redirect business performance supported by Impact Accounting

Impact Accounting helps companies integrate social and environmental impacts into decision-making by measuring them in monetary terms, alongside traditional financial data. It shows how business activities affect and depend on people, nature, and the economy. Thereby, social, environmental, and economic effects become visible and comparable.

This approach is based on two complementary perspectives: the value to society, which looks at how companies impact the world around them, and the value to business, which reflects how these impacts and dependencies affect financial performance. Making both visible helps companies manage risks, set priorities, and create long-term value.

Figure 1 illustrates this using the example of water consumption. It traces the pathway from water withdrawal to outcomes such as reduced water availability, health impacts, and economic consequences, depending on the regional context. Since water is a locally bound resource, its cost to society and nature varies by location.

This logic applies across all types of externalities. By valuing impacts and dependencies in monetary terms and factoring in regional differences, Impact Accounting enables meaningful comparisons – whether between different companies, or between scenarios of a company’s present and future activities.

While Impact Accounting is not a silver bullet for solving all sustainability challenges, it provides a consistent, decision-relevant framework for understanding sustainability impacts and managing resource dependencies strategically.

Building a Shared Basis for Decision-Making

Impact management and competitiveness reinforce one another when decisions are based on consistent, evidence-based insights. To support this integration, we at WifOR Institute work with leading organizations in Impact Accounting and standard-setting – including the Value Balancing Alliance (VBA), GIST Impact, the International Foundation for Valuing Impact (IFVI), Valuing Impact, the Capitals Coalition, and emerging public initiatives like those led by the OECD.

Our goal is to help establish a common language for integrating sustainability into economic decision-making across companies, governments, and financial actors. Below, we show how to put impact data into practice to support more informed and forward-looking decisions across sectors.

Sector-specific impact benchmarks: From “Do less harm!” to “Outperform your industry!”

Many ESG approaches rightly emphasize the importance of minimizing environmental and social harm. In some interpretations, this has led to the ideal of “zero externalities” – a vision where the most sustainable business is one that creates no negative impact at all. While useful as a guiding principle, this falls short in practice. Real-world decisions involve trade-offs: even wind turbines generate emissions and consume scarce resources.

Navigating this complexity requires tools that make trade-offs visible to enable targeted action. That’s where Impact Accounting comes in: by measuring both positive and negative effects in context, it enables informed, balanced decisions.

However, data without context is insufficient. This is why, together with the Value Balancing Alliance, WifOR Institute developed sectoral impact benchmarks across 11 global industries and 20 countries. They quantify the expected environmental and social externalities per euro of revenue for the average, based on WifOR’s global macroeconomic impact model.

Instead of holding all companies to a universal sustainability ideal, these benchmarks establish sector-specific baselines that reflect the unique context and impact profile of each industry. They help companies understand how they perform relative to peers, identify material risks and opportunities across their value chain, and set targets that align with both operational realities and strategic ambition.

Use Cases: How Benchmarks Guide Action

The practical value of sectoral impact benchmarks can be illustrated using the example of the health care industry. As shown in Figure 2, each euro of revenue in the global health care sector generates an average of 21 cents in environmental and 12 cents in social externalities. The majority of environmental impacts – such as water use and greenhouse gas emissions – occur in the supply chain, accounting for around 86 percent of the total environmental footprint. Social externalities, particularly related to occupational health and safety, are more pronounced in companies’ own operations. These insights help organizations understand where their most material impacts arise – internally, externally, or both – and how to prioritize action accordingly.

Figure 3 adds a second layer, comparing an individual company’s impact (blue line) to the sector benchmark (green line) across specific categories. This side-by-side analysis reveals where a company exceeds the sector average – such as in GHG emissions or land use – and where it outperforms. Through benchmarking, companies can identify material sustainability issues, strengthen regulatory compliance, and position themselves as leaders through evidence-based impact performance.

Conclusion: Turning Impact into Strategy

Competitiveness today is shaped by more than just financial results. Managing social and environmental impacts is now a key driver of long-term business success. Companies are increasingly held accountable not only for financial outcomes but also for the impacts they create across their value chains.

Impact Accounting offers a concrete way forward. It enables companies to quantify and compare their environmental and social performance – and to act where it matters most.   Businesses that systematically measure their impacts are better equipped to manage them – and to shape outcomes that create value for both business and society. That’s the core strength of Impact Accounting: if you can measure it, you can shape it.