This leadership insight with Simon Glynn provides an in-depth analysis of why, and how, companies and boards should use a theory of change approach to drive meaningful climate and sustainability impact for their stakeholders. He argues that a focus on risk management alone is insufficient, and that boards must grasp the essence of impact to navigate the uncertainties of climate action to ensure a sustainable and resilient business model.
Insight Highlights:
- Companies, banks, investors, even regulators are using ‘risk’ as 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.
Report Summary:
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.
Theory of change is a discipline that boards can use to discover whether what their organizations are doing will drive the impact they are seeking. It is a long-established approach in the sectors that have been seeking societal impact for longest—in public services, philanthropy and among NGOs. 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.
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.
About the author: Simon Glynn is the founder of Zero Ideas, a charitable organisation dedicated to challenging and expanding the perspectives of corporate leaders on climate action, established as a response to the conservative approach companies often take towards climate change. With a rich consulting background that began in 1990 and focused on climate issues since 2004, Mr Glynn has collaborated with a broad spectrum of non-profit and commercial entities, including notable names such as CDP, the Carbon Trust, HM King Charles III, IKEA, and Nucor, among others. His efforts to advocate for substantial, impactful actions have been recognized and featured in leading publications such as the Financial Times and the Economist, as well as on the BBC World Service, underscoring his significant contributions to the global dialogue on sustainable development and climate action.
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