Explore The Five Dimensions Of Impact

What

What outcomes do enterprises and investors contribute to? How do they know if the outcomes achieved are ‘good enough’? We explore the impact data categories under the ‘What’ dimension to answer these questions.

The ‘What’ impact dimension covers the outcomes the enterprise contributes to — and how important these are to stakeholders. This page provides guidance on the ‘What’ data categories that enterprises and investors can use to collect, assess and report outcome data. If you are unfamiliar with the impact dimensions (and their respective data categories), we recommend first visiting the short section What is Impact.

Introduction: The ‘What’ dimension of impact

The data categories under the ‘What’ impact dimension help enterprises and investors identify the outcomes they are contributing to – and how important these are to stakeholders.

What outcomes do enterprises and investors contribute to?

To answer this question, enterprises and investors need to go beyond assessing whether C02 emissions decreased or job satisfaction improved by a certain percentage. To drive results, enterprises and investors also need to know if the outcome:

  • is positive or negative, intended or unintended
  • meets the needs of the stakeholders
  • surpasses a nationally or internationally-recognised threshold
  • maps to the Sustainable Development Goals and associated targets

The four data categories under the ‘What’ impact dimension provide a practical formula that enterprises and investors can use when collecting, assessing and reporting outcome data. The ‘What’ impact dimension, along with the ‘Who’, ‘How much’, ‘Contribution’ and ‘Risk’, represent building blocks — if you are starting from scratch, you may want to build your impact management framework on top of them; if you already have an impact structure, then you may want to use the dimensions’ categories as a checklist to ensure that you are not missing any of the essential pieces for managing impact.

If you are unfamiliar with the impact dimensions (and their respective data categories), we recommend first visiting the short section What is Impact.

 

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What is an outcome?

Outcomes are what stakeholders experience as a result of an enterprise’s activities. They can be positive or negative, intended or unintended.

Outcomes represent the changes, benefits, or learnings (both short- and long-term) that result from an enterprise’s activities. They can be intended or unintended, positive or negative.

Enterprises and investors are usually concerned with assessing intended positive or negative outcomes, as they reflect enterprises’ core impact proposition.  

However, an enterprise’s activities often generate unintended positive or negative outcomes, a similar concept to what economists define as “externalities”. For example, a healthy living programme that intends to improve the health of the elderly (an intended positive outcome) may inadvertently reduce hospital admissions, leading to lower operating costs in public hospitals (an unintended positive outcome). Or, a large retailer selling environmentally-friendly products (an intended positive outcome) may (un)intentionally facilitate child labour in its supply chain (an (un)intended negative outcome).    

In applying this data category, enterprises should capture all types of outcomes, rather than just the intended outcomes. Overlooking an unintended negative outcome could raise fundamental questions about an enterprise’s model; whereas failing to consider an unintended positive outcome could mean a lost opportunity to strengthen the enterprise’s value proposition.

By considering all outcomes, enterprises can:

 

1. Prioritise those outcomes that matter the most to the stakeholder affected

 

2. Put policies and safeguards in place to mitigate negative outcomes

 

3. Better communicate their total impact to investors – recognising that investors may invest in the same enterprise for different reasons (i.e. a focus on different outcomes)

The matrix below illustrates the range of outcomes that enterprises can generate.

Selecting outcome indicators

Outcome indicators assess progress against specific outcomes, allowing enterprises and investors to understand whether change has taken place. Outcome indicators can be expressed as four data types: absolute number, percentage, ratio, and categorical.

Not one type of indicator is better than another. An indicator’s validity depends on how well it reflects the outcome. Consulting the affected stakeholders or those delivering the enterprise’s activities (e.g. beneficiaries and field officers, respectively), can provide useful insights about the suitability of indicators.

In addition to thinking about whether an indicator meaningfully captures change, enterprises should consider the indicator’s practicality in terms of data collection and management costs.

Collecting data for direct outcome indicators may not always be possible or affordable. In these cases, enterprises may rely on an indirect indicator (i.e. proxy) that approximates the intended and unintended outcomes.

An output indicator can sometimes be used as a proxy for demonstrating the degree of progress (if any) towards an outcome. Using bed nets distributed as a proxy for malaria reduction, or measles vaccines administered as a proxy for not developing measles, are examples how outputs can be used to understand change. Here, the clear link between output and outcome eliminates the need to collect data on the outcome indicator.

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How important is the outcome to the affected stakeholders?

Understanding which outcomes matter to stakeholders can help enterprises and investors prioritise and tailor their efforts.

Gathering input directly from the people who experience impact can help enterprises uncover which outcomes – positive or negative, intended or unintended – matter the most to those they affect. Based on these insights, enterprises can redirect resources towards improving high-priority outcomes.

When is stakeholder feedback useful?

 

• Before the enterprise rolls out an initiative: Stakeholder feedback can be used for designing an intervention that meets the preferences and needs of the stakeholder in question.

 

• During the initiative: The enterprise can collect data on how stakeholders are responding to the intervention, allowing for quick adaptation.

 

• After the initiative: The enterprise can leverage stakeholder feedback to understand whether the intervention progressed according to expectations, and if so, why.

In collecting stakeholder feedback, enterprises should remember that situations are dynamic: stakeholders’ view of what is important to them may change over time. Stakeholder feedback shouldn’t therefore be a one-time exercise, but a continuous and adaptable process. There are a range of methods available for enterprises to collect feedback, from close-ended surveys (quantitative indicators) to focus groups and interviews (qualitative indicators). The resource box on the right presents a number of sources for gathering actionable stakeholder feedback.  

Take the example of Ziqitza Health Care Limited, an Indian social enterprise that has deployed ‘lean’ phone surveys to gain a better understanding of its customers. Through this process, Ziqitza realised that pregnant women represented a core customer of its ambulance services. This finding reinforced the importance of Ziqitza’s partnership with government schemes that support maternal and child health. It also provided the socially-driven organisation with a point of reference for expanding into new markets.

 

Source: Stanford Social Innovation Review, The Power of Lean Data (2016)

When the outcome relates to the environment, the data will likely come from secondary research such as the Intergovernmental Panel on Climate Change or the Stockholm Resilience Centre

Working backwards from widely-shared consensus that global temperature increases should be kept to less than 2°C, Ford’s in-house climate scientists conducted an assessment of the share of global emissions coming from its products, and established the fuel-efficiency levels required to meet the scientific mandate. 

 

Source: Ford, Climate Change Strategy

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How do we know if an outcome is ‘good enough’?

The outcome threshold helps enterprises understand how their impact performance fares against industry standards and peer benchmarks.

How do enterprises know if the outcomes they generate are ‘good enough’?

This data category helps enterprises understand how their outcomes fare against industry standards (which provide widely-agreed thresholds, grounded on research) and benchmarks (which provide minimum and maximum bounds of performance based on enterprise data). If an enterprise’s outcomes fall below either of these two thresholds, they would be considered insufficient to meet the needs of the stakeholder.

Broadly speaking, enterprises can compare their outcomes against two types of thresholds:

  • Standard-based thresholds define the ‘tipping point’ at which an outcome turns from negative to positive. Set by governmental and regulatory bodies, these thresholds help enterprises assess whether they meet (or exceed) a generally-accepted minimum level of outcome. Examples include the UK Living Wage Foundation’s Real Living Wage or the Rowntree Foundation’s Minimum Income Standard, which define the necessary income for achieving an acceptable standard of living in the UK. 
  • Results-based thresholds aggregate enterprise data to provide benchmarks on the minimum (i.e. threshold), average and maximum levels of impact performance. By comparing an outcome to the industry’s average (or minimum) performance, an enterprise can gain valuable insights into what they could be doing better. Examples include the B Impact Assessment, which compares companies’ impact across key stakeholders, and the Access to Medicine Index, which gives an in-depth comparison of how pharmaceutical companies are improving access to medicine in low- and middle-income countries. 

Sourcing outcome thresholds 

While a central repository of standard-based outcome thresholds does not yet exist, governmental and intergovernmental organisations have produced thresholds for several social and environmental issues. For example, the World Bank has set three international poverty lines ($1,90/day, $3,20/day, and $5,50/day) that are widely used to measure progress globally. These thresholds are particularly helpful for enterprises with anti-poverty policies and interventions. Another relevant resource is the SDG Index, which has released more than 80 universal thresholds across all 17 Sustainable Development Goals. For results-based thresholds, we recommend starting with the B Impact Assessment

Regardless of whether it is standard- or results-based, the threshold should closely mirror the outcome indicator to be reliable and useful. For example, if the outcome indicator denotes the yearly income provided to UK employees from disadvantaged backgrounds, the Real Living Wage threshold would be a reliable measure of whether the income is ‘good enough’.

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How do the outcomes relate to the SDGs?

Classifying outcomes into one or more of the 17 SDGs – and accompanying targets – provides enterprises and investors with macro-level insights into how their actions are contributing to, or detracting from, the globally-agreed goals.

As a universal call to action, the Sustainable Development Goals (SDGs) are challenging enterprises to understand both their positive and negative impacts on people and the planet. Classifying outcomes into one or more of the 17 goals – and accompanying targets – can provide enterprises and investors with macro-level insights into how their activities contribute to or detract from this widely-accepted global effort. 

Enterprises may find this SDG alignment useful when engaging with investors, who are increasingly interested in knowing how their portfolios can contribute to wider impact goals.

 

Understanding business activities through the SDG lens

 

Japanese general trading company Mitsui & Co has developed a three-step approach to understanding its contribution to the SDGs and targets. The process starts with identifying material issues through (1) consulting relevant stakeholders — from investors to local communities —, (2) and applying well-established frameworks such as the UN’s Global Compact and GRI’s Sustainability Reporting Guidelines. Mitsui then identifies themes of business activities that address the material issues narrowed down in the first step. Once the material issues and activity themes are identified, the third step involves mapping each theme to the relevant SDG and SDG target. 

 

As an example, for the activity theme of Environmental Management, under the material issue of Protection of the Global Environment, Mitsui identified 3 SDGs and 4 targets as relevant, in addition to listing all of the different activities and initiatives in reporting period that contributed to those SDGs. In total, Mitsui found 61 out of 169 (or 36%) SDG targets to be relevant to its business activities. 

 

As a result of the mapping, Mitsui has gained a broader view of how it affects society — positively and negatively — as well as actionable insights for how it can improve its performance against specific SDG targets. Mitsui also used the exercise to communicate its social and environmental efforts to a variety of stakeholders including business partners, governments, local communities and investors.

 

Source: Mitsui & Co, 2018 Sustainability Report (2018)

 

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