Since its inception, the Social Impact sector has undergone significant evolution. Both academics and practitioners have grappled with positioning themselves within the spectrum of for-profit to non-profit initiatives, as well as navigating the nuances between charitable, concessionary returns, and market-rate returns. As the boundaries blur between doing well and doing good, we have witnessed a remarkable surge in the popularity of doing both at once.
Over the years, impact investing has gained momentum, blurring the line between success and societal contribution. However, despite its increasing popularity, it fails to garner the recognition it deserves within the global economy.
For businesses and socially responsible organizations to gain credibility and widespread recognition, it is paramount to evolve our approach towards Social Impact. We must think of it as value - value derived from positive outcomes and cost savings driven by innovative products and services.
Social entrepreneurs have emerged as problem solvers, paving the way for solutions to significant and intricate challenges. Their efforts are making a tangible impact in crucial areas like carbon capture, plastic dissolution, and food stamp management. The impact analysis of such innovations is crucial to ensure their longevity and real-world impact.
Social Impact Markets are inherently challenging to monetize, requiring companies to adopt a more creative approach in crafting their strategies. To assess the economic value of a solution, it is crucial to measure both captured value (revenue) and uncaptured value (impact).
Mere evaluation of raw concepts and noble intentions falls short in achieving scalability. Companies must demonstrate how, when, and to what degree they are making a meaningful impact.
“It’s tempting to join the boosterism bandwagon and rally behind innovations with the greatest curb appeal rather than those with a measurable approach to real outcomes.”
The existing systems for assessing social impact fall short in evaluating it as desired. However, there have been noteworthy advancements in impact assessment tools, such as B Analytics, IRIS+, and Acumen's 60 Decibels. These platforms offer promising solutions to better measure and understand the societal effects of initiatives but still do not reach the full depth we hope to achieve.
Impactable utilizes a refined framework that captures the untapped external value and correlates it with a company's unit economics. This framework emphasizes the association between revenue growth, impact growth, and the effectiveness of the business model as a catalyst for impact.
To bridge the evidence gap in impact investing, companies must demonstrate their impact. It is crucial to make concrete and measurable claims about the outcomes of their products and services. This includes quantifying the positive effects tied to economic output. Questions such as the amount of CO2 abated per car sold or the number of people benefiting from a healthy meal per widget sold can provide valuable insights.
These impact claims can be derived from primary data for companies with traction, or from third-party research for companies that are still in the pre-revenue stage. By establishing a clear relationship between revenue and individual impact claims, we can develop models to estimate the creation of positive impact based on revenue growth.
By aligning claims with global standards and ensuring transparency, socially responsible organizations can effectively showcase the tangible impact they are making in the world.
“Any company that intends to create social impact first needs to make distinct, measurable claims about the impact outcomes its products and services create; ones that align with global standards like the SDGs and IRIS+.”
Assigning a monetary value to the impact is crucial for a) accounting for both the breadth and depth of impact, b) aggregating apples and oranges metrics and outcomes and c) integrating impact into more traditional financial analysis. This evaluation takes into account various factors, such as the economic cost of CO2 emissions per ton, the societal costs associated with inmates returning to prison within a year of release, and the healthcare expenses linked to hunger prevention.
By considering geographic and demographic variations, this method provides a comprehensive dollar figure that represents the external value a company generates and the specific outcomes driving it. Beyond mere comparisons, founders and investors can gain valuable insights into revenue-to-impact and capital-to-impact leverage, allowing for meaningful assessments across different impact verticals.
This approach unlocks possibilities that were previously unattainable, empowering socially responsible organizations to operate on a whole new level.
“Providing a livable wage or low-interest loan to someone in Africa has a different economic value than doing so in San Francisco or New York. Our approach sheds light on these differences and allows its users to decide.”
Companies have the power to create and measure outcomes that yield valuable insights into their services, utilizing impact assessment tools to reinforce their strategies. This data serves as a framework for evaluating business models, optimizing revenue and impact.
Peter Drucker's famous quote, “If you can't measure it, you can't improve it,” holds paramount importance in the success of the Social Impact sector.
With Beyond Meat’s IPO and the increasing presence of impact investors, the time is ripe to refine and streamline the Social Impact space.
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