Social Impact has gradually become more popular in recent years, as the distinction between doing well and doing good has faded. Despite its growing popularity, it still lacks economic orientation and its benefits are not valued in the global economy. To gain credibility and mainstream recognition, it is necessary to evolve our response to Social Impact and recognize it as the uncaptured value of the outcomes that a business has on the world through its products and services. Social entrepreneurs have developed solutions to large and complex problems, and are making an impact in areas such as carbon capture, plastic dissolution, and food stamp management.
Social Impact Markets are those which are difficult to monetize. Companies in such markets, need to be more creative when designing their strategies. It is essential to measure both captured value and uncaptured value (revenue and impact respectively) in order to evaluate the economic value of a solution. Evaluating raw concepts and noble intentions is insufficient to reach scale and companies need to be able to show how, when, and by how much they are making an 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.”
Systems currently used to measure social impact are unable to evaluate it in the desired manner. B Analytics, IRIS+, and Acumen's 60 Decibels are significant advancements in this area. Allow me to propose a streamlined model we are using at ImpactableX, for capturing the unmonetized external value and relating it to a company's unit economics, highlighting the relationship between revenue growth and impact growth, as well as the efficacy of the business model as a lever for impact. We call it Social Impact Projection (SIP). Companies should make distinct, measurable claims about the impact outcomes their products and services create that align with global standards. Then we tie these claims to their expectations of economic output. How much CO2 is abated for each car sold? How many people will eat a healthy meal for every widget sold? These claims can be derived from primary data for companies that have traction, or from third-party research for companies that are still pre-revenue. Once the relationship between revenue and individual impact claims is clear, we can model impact creation off of revenue growth estimates.
“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+.”
A dollar value is also assigned to this impact based on the market value of subsidized products or services, referencing research on, for example, the economic cost of a ton of CO2 emitted, the societal costs of inmates returning to prison within one year post release, or the health costs of hunger prevention. This approach also allows for differences in geographic and demographic impact to be accounted for, producing an aggregate dollar figure for the external value a company will create and clear unit outcomes that drive it. At the risk of being reductive, this dollar value allows founders and investors alike to glean valuable insight into things like revenue-to-impact and capital-to-impact leverage. This will enable us to finally compare companies from different impact verticals in ways that are not currently possible.
“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 can create and measure outcomes that offer insight into the value of their services. This data provides a framework to evaluate business models and optimize for both revenue and impact. Peter Drucker's statement "If you can't measure it, you can't improve it" is a key factor in the success of the Social Impact space. With the recent IPO of Beyond Meat and the growth of impact investors, the Social Impact space is ready to be refined and streamlined.