Introduction

The report, produced by the Impact Management Platform, outlines the growing need for organisations—enterprises, investors, and financial institutions—to adopt a systematic approach to managing environmental and social impacts. While sustainability-related practices have gained traction, current approaches remain fragmented and overly focused on entity-specific (idiosyncratic) risks. The report defines impact as the effects of an organisation’s actions on people and the natural environment, and impact management as the process of understanding, acting on, and communicating these impacts to reduce negative and increase positive outcomes, with the goal of achieving sustainability and improving well-being.

The need for greater consideration of system-wide risk

Traditional risk management focuses on idiosyncratic risks such as reputational or regulatory threats. However, this narrow scope overlooks how individual impacts contribute to broader, non-diversifiable risks—termed system-wide risks—which originate from collective dependencies on environmental and social systems.

The report illustrates that impacts, even when not financially material to an individual entity, can accumulate and affect market-wide stability. For example, while Enterprises A and B might experience reputational risk from environmental impacts, Enterprise C’s similar impacts—though not affecting its own financial performance—still contribute to systemic risks that may affect Enterprises D and E.

Quantitative evidence underscores the link between environmental degradation and economic loss. Between 1992 and 2013, extreme heat linked to human activity is estimated to have reduced global GDP by USD 5–29.3 trillion. Income inequality among OECD countries reduced GDP growth by 4.7 percentage points between 1990 and 2010. Gender inequality is estimated to cost USD 28 trillion in global GDP potential by 2025.

These examples highlight that environmental and social conditions are already influencing economic outcomes and demonstrate the need to manage system-wide risks through improved impact management.

Mainstreaming impact management

Impact management is positioned as a foundational approach to achieving sustainability, managing all forms of risk, and promoting well-being. It involves a set of actions—identifying impacts, setting targets, implementing plans, monitoring outcomes, and communicating results—embedded within strategy and governance.

Key characteristics include taking action to operate sustainably, considering all potential impacts holistically, engaging affected stakeholders, factoring in local contexts, and ensuring transparency and accountability. The process must be evidence-based and iterative.

The report stresses that impact management differs from but complements ESG and sustainability risk practices. It calls for coordinated uptake across the economy to address the “tragedy of the commons” and “tragedy of the horizon”, where short-term individual interests undermine long-term shared resources.

Enterprises must manage their impacts not only to reduce risk but to help prevent systemic issues like environmental collapse and rising inequality. Investors, particularly universal asset owners with broad exposure, have a strategic interest in supporting impact management to protect long-term returns.

The road ahead

The report issues a call to action for stakeholders:

• Enterprises, investors and financial institutions should adopt holistic impact management to mitigate both idiosyncratic and system-wide risks.
• Governments must align legal, fiscal, and procurement policies to support sustainable behaviour and discourage harmful practices, such as fossil fuel subsidies.
• Standard-setters and international organisations should collaborate to build a coherent system of norms and guidance.

Given that impact information may be financially material, disclosure of such data should be encouraged.

The report concludes by noting that standard-setters must provide clarity and ensure interoperability across sustainability frameworks. Building consensus on definitions, topics, and methodologies is essential to support the global adoption of impact management.