FROM ESG TO NET IMPACT
Why ESG Is Not Enough and What Comes Next
The limitations of an ESG management only approach
Sustainability has become a central theme for companies and investors alike. Regulatory pressure, investor expectations, and societal urgency have driven a rapid expansion of ESG reporting and sustainability frameworks. Transparency has improved. Yet despite unprecedented reporting activity, the world remains far from achieving planetary stability and social development goals.
​
The problem is not a lack of data. It is a misalignment of intent.
​
Too often, sustainability is treated as a reporting obligation rather than as a strategic system for creating net positive value.
​
​
ESG focuses on risk not value
​
ESG frameworks have played an important role in improving transparency and strengthening risk management. By design, however, they focus primarily on identifying and mitigating negative externalities. Organizations are assessed based on how well they manage risks, rather than on the value they create for society and the environment.
​
In practice, this leads to three structural limitations.
​
First, managerial attention shifts toward compliance rather than value creation. Sustainability teams become reporting functions, disconnected from strategy and operations.
​
Second, ESG introduces significant reporting burdens. Time, talent, and capital are absorbed by disclosure activities that do not necessarily improve outcomes. For many organizations, this may create frustration and disengagement.
​
Third, ESG struggles to explain how sustainability contributes to long term performance. Doing less harm does not automatically translate into resilience, growth, or innovation.
​
As a result, sustainability is often perceived as a cost rather than a driver of value.
​
Net Impact reframes sustainability
​
We believe that moving from ESG management to a Net Impact approach is necessary if sustainability initiatives are to deliver meaningful change.
​
A Net Impact perspective reframes sustainability from a defensive exercise into a strategic opportunity. It asks not only how risks are managed, but how products, services, and capital allocation contribute to environmental and social outcomes at scale.
​
Crucially, impact is not limited to avoiding harm. A Net Impact approach considers both positive and negative effects across the value chain and weighs them against each other. The central question becomes whether an organization contributes to a net improvement for people and the planet.
​
For companies, a Net Impact approach means embedding impact into strategy, governance, and operations rather than outsourcing it to reporting functions.
​
For investors, this means moving beyond ESG scores toward understanding how capital enables growth or improvement in environmental and social outcomes.
​
Impact, as defined in the impact investing literature, refers to outcomes that would not have occurred in the absence of a specific intervention. In other words, impact is the change achieved beyond business as usual. This definition emphasizes outcomes, additionality, and evidence.
​
Impact performance varies widely, just like financial performance. Investing in companies with a compelling mission or product is not enough. Impact must be treated as a hypothesis that is explicitly formulated, measured, tested, and refined over time. This shifts impact from a communications exercise to a strategic discipline.​
ESG frameworks strengthen transparency and risk management, while a Net Impact approach builds on this foundation to inform strategy, capital allocation, and performance by focusing on outcomes, attribution, and evidence.
From ambition to execution
​
To move from ambition to execution, organizations need practical tools. One of the most effective is the Logical Impact Framework (often referred to as logframe).
​
The framework forces clarity around four questions:
What change are we trying to create?
How does our intervention contribute to that change?
How will we measure progress and success?
What are the underlying assumptions and risks?
It also makes a critical distinction between activities, outputs, outcomes, and long-term goals.
​
To make this tangible, the table below illustrates a simplified logframe for an environmental remediation organization. It shows how operational activities lead to concrete outputs, how those outputs translate into environmental and socio-economic outcomes, and how indicators, means of verification, and assumptions are aligned across the results chain.
​
Consider an environmental remediation organization that removes a pollutant from the environment. Removing the pollutant is the output. But the more important question is what happens because the pollutant is removed.
​
A Net Impact perspective requires the organization to articulate outcomes such as ecosystem recovery, biodiversity improvements, human health benefits, and socio-economic gains. It also requires clarity on how these outcomes will be measured, verified, and attributed, and which assumptions must hold true.
​
This connects the WHAT with the WHY.
Example of a Logical Impact Framework for environmental remediation. The framework illustrates how activities lead to outputs and how outputs translate into environmental and socio-economic outcomes, with aligned indicators, verification methods, and assumptions across the results chain.
Assessing Net Impact in practice
​​
An ESG approach would primarily focus on identifying and mitigating the negative impacts of the remediation activity itself, such as greenhouse gas emissions, energy and water usage, ecosystem disturbance, or potential effects on local communities. A Net Impact approach goes further. It explicitly weighs negative effects against positive outcomes and asks whether the intervention results in an overall environmental and social gain.
​
In environmental remediation, one practical way to do this is through a Net Environmental Benefit Analysis (NEBA). The analysis compares different management options, such as leaving pollution in place versus removing it, by assessing the net environmental benefits of each option. These benefits are defined as improvements in ecosystem services or ecological value achieved through remediation, minus any adverse impacts caused by the intervention itself.
​
For decision makers, this helps prioritize interventions that deliver the greatest net benefit. For investors, it strengthens confidence that capital is contributing to measurable outcomes rather than activity alone. For regulators, it provides a transparent and evidence-based basis for approving and overseeing interventions.
​
Recent advances in NEBA methodologies have strengthened their relevance for complex remediation contexts, including applications that integrate ecological, social, and system level considerations. One such framework is described in a recent publication, which illustrates how net environmental benefits can be assessed in a transparent and decision relevant way.
​
Importantly, this shifts sustainability from intent to evidence.
​
Expanding the investable proposition
​
A further benefit of a Net Impact approach is that it expands the investable proposition.
​
An organization that reports only the amounts of pollutant removed is often confined to a narrow funding narrative focused on remediation or pollution control. By linking remediation outputs to ecosystem recovery, biodiversity, public health, and socio-economic gains, the organization becomes relevant to a much broader set of innovative capital sources, including climate finance, biodiversity finance, development banks, and outcome linked instruments.
​
The logframe acts as a translation layer between technical delivery and financial decision making. It reduces diligence friction, strengthens credibility, and allows capital to be aligned with verified outcomes rather than activities alone.
​
Putting Net Impact into practice
​
Moving from ESG to Net Impact is not about abandoning risk management. It is about putting sustainability back where it belongs: at the core of strategy, execution, and value creation.
​
Doing so requires more than better reporting. It requires clear impact logic, decision relevant indicators, credible evidence, and alignment between strategy, operations, and capital allocation.
​
At Empaqtify, this is the work we focus on. We support organizations and investors in designing impact strategies, translating them into practical frameworks, and building measurement and verification systems that inform real decisions. Our work typically begins where ESG disclosure ends, helping teams move from reporting risks to demonstrating contribution.
In short, we turn sustainability from disclosure into direction.
​
​
​
13 January 2026