Assessing company sustainability impact: Status quo and way ahead

Abstract

The transition to a sustainable economy requires investments in companies capable of driving real-world transformations. Impact assessments are central to this, yet existing company impact assessment tools for impact investing lack the necessary methods and data to determine the significance of environmental and social impacts. This paper addresses this gap by first exploring the life cycle assessment (LCA) literature on LCA logics and their application in company impact assessment tools. Second, we examine the conceptual and practical availability of absolute sustainability indicators for investment purposes. Our findings show that while LCA logics provide a valuable foundation for assessing the significance of company impacts, important gaps remain in allocating macro-level thresholds to the company level. Moreover, while environmental absolute sustainability indicators are conceptually advanced, their practical application is hindered by data limitations, restricting their usability for investors. Social absolute sustainability indicators lack clear impact pathways for translating macro-level issues into actionable company-level indicators, which is further constrained by data gaps. In light of these findings, we emphasize the distinct requirements of the environmental and social dimensions in advancing the assessment of the significance of company impacts. To effectively address these needs and enhance impact investment practices, we highlight the importance of interdisciplinary research, the regulatory and practical adoption of absolute sustainability approaches, and improved data integration.