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Impact Economy

Impact Economy

The point where the terms microeconomics and macroeconomics are now present in today’s realities and needs is very different from the starting points at the beginning.

Time is changing. Expectations and needs of individuals are different than the past. Our world is getting older every day. Unfortunately, in order to be able to achieve success in the world trade figures, it is very inefficient to be able to speak to the stakeholders with only the slogan “consume more, use more”. The fact that the rights of future generations now begin to be protected, that social and environmental responsibilities are fulfilled by institutions, and that there are efforts to protect sustainable values, has become the priority of all stakeholders surrounding the institutions.

As a result of all these economic efforts and the rise and development of micro and macroeconomics in a sense, our world is now in a very different and awaited point. At this point, the concept of ‘Impact Economy’ is not only evaluating the economy in terms of production-consumption but also evaluating the financial values of all the corporate social responsibility endeavors of the corporations, protecting the interests of investors, business institutions and all the stakeholders surrounding them. The registrant has presented an economic model that can respond to the economic needs of the new world order in a holistic way.

In fact, this point is inevitable in a sense…

“The Principles of the Economy” was written by Alfred Marshall in 1890. This book presents that the basis of today’s microeconomics. After that, John Maynard Keynes who was a student at Cambridge University published a book entitled ‘General Theory of Employment, Interest and Money’ in 1936. This book included the basis of modern macroeconomics. We can see that the post-World War II economy began to be handled and evaluated separately with respect to micro and macro dimensions. World War II opened new ways in terms of global economic development in different countries.

I will come back to 2017…

The transition from Micro and Macro Economy to ‘Impact Economy’

In 2030, when we say that the greatest wars will be on ‘Finding Water’, much more different terms and concepts have begun to become important, and even micro and macro economies have begun to follow.

Freeman created the concept namely “Stakeholder Theory” for the first time in 1984. This theory assumes organizations need management understanding that includes all stakeholders’ expectations in management and decision-making processes. In fact, we can say that this is an approach that includes worries of future periods and years of resourcefulness at a time when global economic developments are beginning to develop rapidly.

This theory is developed by different academics in different ways, but in the essence of Freeman, “Organizations have a stakeholder community of people and groups they serve, and organizations understand that they can not sustain their existence without the support of this stakeholder community” (Freeman, 1984).

“Stakeholder Community Management” was written by Freeman and McVea in 2001. This book presents that the forefront of the issues that should be considered in organizations, all parties involved in the stakeholder community; that is, shareholders, employees, customers, suppliers, non-governmental organizations and all other groups, underpinning the work and management of their interaction, cooperation and integration with each other in a way that will ensure the long-term success of the company.

The Concept of Governance and Stakeholders’ Management

Micro-economy is focusing on consumers, companies, and industries to evaluate the economy. However, the macro-economy focuses on the decision-making units in the economy and how firms are making decisions and how they affect each other in the market.

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Generally speaking, it is possible to see that these microeconomic and macroeconomic indicators are now starting to change, given that the wheel of this wheel is not capable of turning one another, depending on the developing world conditions.

What then would be the new name of this new level of economic world?

New era in the economy: Impact Economy

This new period in the economy is also closely related to investment markets. Many private companies and institutions, particularly in America and Europe, are consulting to support sustainable, profitable and socially responsible operations and are actively involved in the research of businessmen and investors in this area. These institutions develop a positive impact on society and the environment, and at the same time, they also advise clients on financially valuable projects.

It is evident that being able to foresee projects that create plus value to environmental and social issues and place them on the other side of the financial success benchmark has become the primary target of the world’s leading consulting companies such as McKinsey.

Marc Newberg from Womble Carlyle Company has expressed the concept of ‘Impact Economy’ with the concept of ‘Impact Economy Investing’. Recently, he estimated that the impact investment market is between 50 billion dollars and 70 billion dollars in the world. Apart from this, he emphasized that the value of corporate social responsibility investments is only US $ 3 trillion, and the impact of economic investments on the value of the investment for corporate social responsibility activities, how big a measure has been expressed. Globally, corporate social responsibility investments amounted to around  20 trillion dollars and thus, the global impact investments were much more than the 20 trillion dollars.

It is predicted that impact economic investments will record a huge increase between $ 400 billion and $ 1 trillion in 2020.  Likewise, corporate social responsibility investments will reach the same pace, perhaps even trillions of dollars.

Impact Economy is an approach that incorporates all economic efforts that are economical, profitably or non-profitably into the whole of economic evaluations. From this point of view, it is also possible to measure all the efforts that are non-profitable to be accepted as economic values. This approach will accelerate the process of inclusion in the economy and the accepted value of corporate social responsibility activities that are being discussed on different platforms for many years.

Impact economy investments also incorporate the ‘measurable social benefit’ of this investment in return on investment, along with the financial return from this investment, as a result of the money invested in a project, work, and institution.

The fact that social benefits can be measured and the values after they are accepted as an economic value in the return of investments, such as financial return, has brought the concept of the economy to be a different point from the micro and macroeconomics.

It now interrogates the social benefits of all investments and efforts, collecting and the environment, even if it is done for the purpose of profit making, including financial returns and investments amongst themselves, and these benefits are reflected in the ‘impact investment economy’ as measurable values.

This perspective contributes to the development of social activities, raises awareness and at the same time opens the way to more reliable steps towards sustainable development goals. In a sense, it is no longer 2 + 2 = 4, but the effect of 4 is on its way to an ever-increasing conclusion.

Measuring the corporate social responsibility of the realized investments consists of both the financial values ​​of the contributions they provide to the sustainable values ​​as well as the preferences of the investors within the scope of the consumers and more innovative discoveries. In addition, the benefits (social or environmental) that these social benefits provided to the business or the business of that investment can be regarded as a major financial asset.

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Impact Economy and Governance

Another important concept that can be expressed together with the Impact Economy is ‘Governance’. The King II Report, defining officially the most acceptable definition of the concept of governance, defines the concept of ‘Governance’ as follows: “Is to build a balance between economic and social goals and between individual and social goals. As far as possible, it is possible to rank individual, organizational and social goals.”

This concept actually expresses the concept of governance in its most clear state in the literature. Impact concept of economy highlights governance as a management of companies. Impact as a sum of financial values when assessing the impact of economic investments. It is worth noting that the contribution of corporate social responsibility endeavors to all short and long-term efforts of the institutions is expressed in numerical values and that it is included in the return values of investments. Governance is a necessary and crucial step in enabling corporate social responsibility concepts to be valued in the eyes of companies.

Otherwise, it would be very difficult or even impossible for the corporation to accept social responsibility consciousness at all levels of the company. Institutional Governance Organizations and organizations that have a corporate governance, management structure question, the contributions and effects of the company’s activities and all stakeholders in its management functions and include corporate social responsibility efforts in management decisions.

The Impact economy requires corporate governance, that is, the company’s management decisions, including the social and environmental responsibilities of the corporations, and even go farther, so that all the revenues (including revenues from non-profit-making efforts) incorporates the economy into the whole. When the economy is examined in this way, the economy includes not only the income items that are obtained from investment and business activities but also the numerical income obtained from corporate social responsibility activities.

This approach once again shows how inadequate it is to express economics as micro and macro and presents a much stronger and more acceptable economic model for future generations for all the criteria accepted in the concept of sustainability.

From the very beginning, economic values ​​include investment in social and environmental responsibility activities, the inclusion of expenditures, and return on investment, measurable returns of corporate social responsibility efforts are included in other investment incomes has led to the development of a much more comprehensive economic model in order to establish a sustainable economy.

With the Impact economy model, both the sustainable development objectives can be met and the economy, as expressed in the micro and macro economies, can be defined only as consumption, production, and relations between them. are regarded as constructions that try to fulfill only the economic objectives.

Finally, institutions should be sensitive to social and environmental issues as well as economically within the impact economy model. It is important for future generations to be able to sustain their assets and to be able to attain a structure that protects the world’s more innovative, social and environmental rights. It is inevitable for the institutions to have the management understanding with social responsibility consciousness and for the success of the institutions’ own assets.

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