Dirk Schoenmaker is a professor of Banking and Finance at the Rotterdam School of Management, board member of PFZW and the Sustainable Finance Lab, and a member of the supervisory board of Staatsbosbeheer (Dutch government organization for forestry and the management of nature reserves).Willem Schramade is professor of Finance at Nyenrode Business University and Head of Sustainability Client Advisory at Schroders. Together they wrote the book 'Corporate Finance for Long-Term Value', which integrates social and ecological factors into traditional finance models. This combination of financial, social, and ecological factors is also known as 'broad value'. We spoke with Dirk and Willem about their views on impact and their challenges and dreams related to this theme.

what does impact mean to you?

Willem:"Impact, to me, is about helping to make a difference to achieve a society within planetary boundaries. If all goes well, my children will live until the end of this century, and possibly even into the next one. I want to contribute to making that possible. This interest started around 2011, when my mother passed away and my daughter was born. I was reading various books about exceeding planetary boundaries, and it became clear at work that we had to become more sustainable. It all came together at that time."

Dirk:"My interest really originated from nature. In Africa, I saw how nature itself is circular. We are disrupting that balance. The drive for economic growth is unnatural. We need to reconnect with nature, then the rest will follow automatically."

Willem:"As a society, we are on a very bad course and confining ourselves in an artificial straitjacket because of how we view and discuss growth and risk. Bringing about positive change is, much more than I first realized, truly a mental challenge."

why is it important to include social and ecological value in the long-term financial picture?

Dirk:"I would like to split it into two parts. First, the moral aspect; it is incredibly important that we are aware of the moral choices we make, especially in the world of finance and economics. No choice is also a choice. Second, it's about long-term value. We believe that this can be achieved by giving sufficient attention to the social (S) and ecological (E) dimensions.

Willem:"A third important point is removing blind spots. By making the S and E dimensions explicit and not offsetting them immediately, you can clearly see clearly what your impact is. How do we ensure that companies do not offset these things against each other or compensate for them elsewhere?"

how do you make impact quantifiable? And what risks does that entail?

Willem:"Quantifying impact helps determine what is truly important. Many companies have a laundry list of different factors with social and ecological impact, making it difficult to fully understand the impact of these various factors. By quantifying impact, as we describe in our book, it becomes clear that some issues are bigger than initially thought. Knowing what is important allows you to better set priorities and be accountable. The risk, of course, is that people might start seeing things that are not precise as precise. However, even financial figures are not nearly as objective as people may think."

Dirk:"The risk lies in substitution, where negative effects can be offset elsewhere."

Willem:"Yes, similar to indulgences in the Catholic Church."

Dirk:"And the purpose of quantifying impact is to make it comparable for better decision-making, not to make it tradable."

what difficulties and challenges do CFOs and companies face when integrating impact into their business operations? And what strategies can be used to overcome these obstacles?

Dirk:"A major challenge is outdated software. But more importantly, clinging to old mindsets is a serious obstacle. It's not so much the data, but the traditional economic mindset, that of the homo economicus, that really stands in our way."

Willem:"Indeed, and data is often used as an excuse for not integrating impact into business operations, just like risk management. The challenge is how to make difficult-to-compare things comparable. Finance is then not an end, but a means. With numbers, you can tell a story and, for example, show how much CO2 reduction you can achieve for a certain amount of money. This way, you can start making decisions differently."

Dirk:"Furthermore, it is crucial that sustainability is not limited to separate departments, but truly embedded in the business strategy. Then comes thelearning round, where you atftrprfexcel; how do we tackle this once we realize it's necessary? I would say: demonstrate, and in true Rotterdam fashion, get to work. And don't be afraid to make mistakes."

Willem:"Exactly, overcoming obstacles is about just getting started, asking questions, and experimenting."

how do you deal with the reluctance of leaders to deviate from the beaten track?

Willem:"By confronting them with the implications of what they are saying. I read about a town in Belgium where they had been trying for years to get a chemical company to stop driving its trucks through the town. The company had never paid any attention until the message was put differently: the people in this town live in constant fear that their children will be run over. That message did resonate. In short, we have to try to find that hook where leaders do feel responsible. Behind their reluctance is often something they do care about. It's crucial to tap into that."

Dirk:"You have to show the consequences, in the recipient’s language, and that is very difficult. Sometimes you have to show it in a different way if the first approach doesn't work."

what are your expectations for the future regarding the integration of social and ecological value in business valuation? What trends, challenges, and opportunities do you see?

Dirk:"I hope we can turn our logic around. Start with planetary boundaries and social equality, and only then look at the economics. That's a very positive and futuristic outlook, but that's what I hope for. First, you tidy up your house, then you bring in the residents, and only then can you see how to manage it efficiently. Not the other way around."

Willem:"I am very annoyed by the political debate and the abandonment of politics, signs of transition and chaos. Yet,I still hope and think that there is an underlying trend where people strive for something better. Yet, I hope that along the way, we will see sometipping points, such as better data influencing corporate behavior."

Dirk:"We need to acknowledge that there are advantages to being ahead of the curve, even though it is now mainly seen as a risk. There are many sayings about never being the first, but if no one takes the first step, nothing ever happens."

Willem:"It is promising that pension funds are now taking action by investing in impact. There is enormous potential there. And it sends a powerful signal. Atipping pointmay be a stretch, but it could ultimately turn out to be one. And then there are all sorts of internalization processes, such as a serious CO2 price, acarbon-borrow-mechanism, or even the nature restoration law, which can lead to real game changers with aBrussels effect.

Dirk:"This makes usfutureproof. It is the path to long-term survival, both for society and for businesses. The bottom line is recognizing the absurdity of allowing companies to exploit both humanity and the planet. That's the beauty of that absurdity; when you call it overexploitation, it becomes so clear that it is strange that we allow it. And that is turning the logic around. I believe that if we manage to ask those E and S questions first and only then that F question (finance), then we will befutureproof."