The Erb Institute partnered with Innovation Forum during their recent visit to Detroit, Oct. 2-3rd, for their conference on “How business can measure the impact—and ROI—of corporate sustainability.”

The conference delved into the best ways to assess materiality, build a business case and deliver impact at scale. Participants from corporations, nonprofits and academia shared their approaches to measuring impact and return on investment (ROI). During the conference, Joe Árvai, Max McGraw Professor of Sustainable Enterprise and Director of the University of Michigan’s Erb Institute sat down with Ian Welsh of Innovation Forum to discuss whether there is a disconnect for companies between what they think is material and what actually is material.

Árvai related that despite having a lot of “very bright thinkers in some great companies, there is a lot of insularity and group think surrounding decisions on what is material.” There appears to be a need for deeper questioning. “Having a wide-range of stakeholders at the table, government, business, NGO’s at the table can make a big difference in coming up with a framework that makes sense to a lot of people.”

The notion of science-based targets.

“Who doesn’t want to have targets based on science?  Árvai acknowledged the importance of science-based targets, but even with all the best information in the world, companies can make really poor decisions if the information is not particularly relevant to the context of the decision or the stakeholders.  In the end it’s how this information is used.  In addition to Marketing and R&D large corporations should consider their capacity for Decision-support which feeds the decisions around materiality and how we use those decision in strategic decision making.

There is a real opportunity for building the case for internal decision support, where the pros and cons of decisions can be weighed with respect to different courses of action. The same tools that banks and investment firms are using to make portfolio decisions can be very applicable and ultimately useful to other sectors of the economy as well.