Incite’s VILROS is a question framework to help practitioners and teams make sense of their organisation’s intersect with society and the environment. It is basic, simple and high-level. It has a strategic orientation, by which I mean it is concerned with how an organisation might seek to allocate its effort or attention. We’ve tested it over a decade and we don’t facilitate many processes without running through VILROS first.
Used in reporting processes, it provides insight into the material issues that are likely to inform your stakeholders’ decision-making. In strategy processes, it provides a foundation for more granular work needed to inform better sustainability thinking and action.
VILROS informs a facilitated process that draws on the insights of every participant in the room. Here’s a simple user’s guide:
Start by making your organisation’s business model explicit. This is the holy grail of insight into profit-enable (i.e. scalable) impact opportunities. Incite’s business model canvas is based on Clayton Christensen’s classic thinking. This basic stuff is generally all you need but use whatever works for you. I suggest you avoid the IIRC’s octopus business model which is designed to tie you in knots.
Impacts and dependencies
Sketch the value chain. Consider how ESG trends and pressures may impact your company (outside-in) and how your company impacts society and the environment (inside-out). This two-way logic has recently been named ‘double materiality’ thanks to increasing harmonisation of disclosure guidance.
- Impacts are what happens to capital stocks/flows as a result of what your company or others (including nature) do. For example, skills development impacts the broader community; an extreme weather event impacts your logistics operation and hence your flow of raw materials. Impacts may be positive or negative and how we experience them depends on our perspective. (For some employees, a pandemic may have positive impact because it means they get to work from home.)
- Dependencies are factors that are needed/relied on for value protection / creation. For example, your company needs access to skills in order to operate. Those skills may be abundant, under threat or in short supply (in which case they may be risks).
Dependencies and impacts may relate to any of the six capitals. (Originally the five capitals developed by Jonathon Porritt in his 2005 book Capitalism: As If the World Matters.) They may present as risks, opportunities or both at the same time. They can change overnight in relation to something your company did, something some other entity did or an entirely unforeseen event (e.g. the pandemic shifted training online and increased access overnight). In disclosure, this is called dynamic materiality. It keeps ESG analysts on their feet. It should also keep you sceptical about neat lists of ‘impacts’.
Impact identification is messy. We make sense of our impacts and dependencies by relentlessly putting them into context, being clear and consistent about the level of granularity, and keeping current as best we can. People who make decisions at the Intersect know the basic impacts and dependencies in their area. Impact identification requires a bit of science (not rocket science) and art.
Leverage refers to impact areas where your organisation has potential to deliver positive social/environmental impact at scale. The business model is the best option for scaling positive impact, but not all positive impacts can be scaled through the business model. The term profit-enabled impact (PEI) refers to positive social/environmental impacts that can be scaled through the core business. At a high level, we can look at how our peers are finding traction in PEI. We can also tap informed intuition by asking decision-makers to name the top five potential impact areas of the business. If the CEO is in the room, they usually start leading the discussion around PEI opportunities: as chief integrators this is their game and applying it to Sustainability challenges tends to delight them in ways they did not expect.
If you want to make potential leverage areas more explicit, try out Incite’s profit-enabled impact canvas. Virtually all initiatives that deliver both social/environmental impact AND financial value can be categorised into one or more of these three Shared Value pathways. Our Ideator tool can be useful in this respect. I will get to blogging about soon. (I use the terms Shared Value and Profit-Enabled Impact interchangeably. The well-known term is Shared Value but it has been terminally abused by integrated report writers and is rarely used in its technical sense. I leave the terminology up to you.)
That’s Incite’s initial approach to making sense of the socio-environmental intersect. Unless you are reimagining the organisation, you will find that your business model, key impacts (inside-out) and leverage areas remain fairly stable. The spectrum of associated risks, opportunities and stakeholder perceptions can shift rapidly at any time.
The second part of VILROS is about sense-checking. The Intersect is not the sole preserve of formal sustainability practitioners. People across the organisation are constantly finding new information and developing their understanding of this space. Check your VIL analysis with iterative consideration of current and emerging Risks, Opportunities and Stakeholder perceptions. Updated intel on these factors should be available from various functions within the organisation. Despite the mainstreaming of Sustainability, there are often gaping holes in ROS analyses, so introduce colleagues in these functional areas to sustainability thinking as a priority. These conversations will improve your next sense-making session, and so on.
VILROS may seem a bit overwhelming at first. But with some preparation, you can cover the basics – enjoyably – in a single conversation with an executive team in about two hours. As with most methods, results and enjoyment improve with practice.