Seeking Impact
Using theories of change to assess and guide corporate climate action
April 2024
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Whether they say it explicitly, or pursue it through the lenses of risk and opportunity, most companies taking climate action are seeking to have an impact on the world. But the causal links between what companies do and the impact they seek can be obscure, weak, and even broken. Simply following the norms of target-setting, carbon accounting, ESG reporting and disclosures can give a false sense of what is being achieved.
That’s why Zero Ideas is pleased to have teamed up with the Centre for Climate Engagement at Hughes Hall, University of Cambridge to explore theories of change, as a discipline that boards can use to discover whether what their organizations are doing will drive the impact they are seeking.
Used well, a theory of change makes the critical assumptions explicit so they can be tested. Research summarized here shows why this validation is vital. The financialization of climate action, through ESG and sustainable finance, dominates the corporate agenda. But as a way to seek impact, it is severely constrained. Mobilizing capital is one thing; creating the conditions where it can be deployed is another.
Our research report describes how:
- Companies, banks, investors, even regulators are using ‘risk’ is a proxy for the climate impact they want to create, because they have a more explicit mandate to manage risk. But it is an inadequate proxy – a convenient untruth.
- The proven approach to seeking impact (from sectors that have been doing this for a long time) is to use a theory of change to make the assumptions and the logic chain explicit. And when we do this for the finance-driven approach that is dominating climate action today – whether for banks’ debt finance or investors’ equity finance – we can’t validate the assumptions the theory depends on.
- Boards and other stakeholders need to clarify and validate their theories of change to make sure that what they are doing will actually have the impact they are looking for.
Climate action combines long-term commitment with game-changing short-term uncertainty. It’s not enough for boards to respond to what stakeholders are asking from them, because today’s approach to sustainability is unsustainable. Boards need to understand the fundamentals of how their organizations can seek impact, so they can anticipate and influence conditions as they evolve. Used as described here, this is the power and potential of a theory of change.
Please download the report below, and let us know your reactions.
