ABC of Enterprise Impact | Setting Impact Performance Goals
Setting impact performance goals
Most enterprises do not set impact goals when designing their business models, but rather once they are up and running.
These enterprises can collect, analyze and assess data across the five dimensions to understand the impact that people and the planet experience as a result of their products, services, and policies. Based on this assessment, enterprises can set goals to reduce (improve) their negative (positive) impacts.
If an enterprise is starting from scratch and building a new business model, its impact intentions can guide the goal-setting process. For example, if the intention were to tackle a specific social or environmental challenge, the enterprise would start by analyzing available data about the cause of the challenge. Which groups of people (Who) face barriers to achieving which outcomes (What)? How many people are not achieving these outcomes, and how deep a change would they need to experience to attain their desired outcome level (How Much)? What is the market (e.g., affected people and communities, other enterprises, NGOs, government interventions) currently doing to support or impede progress on these outcomes? To what degree would the enterprise’s efforts contribute to the status quo (Contribution)? Are there approaches with a strong track record of success or would the enterprise need to take risks and try new models (Risk)?
If the enterprise wants to manage impact to avoid material negative effects – whether for the purpose of mitigating financial risk or behaving more responsibly – the goal-setting process is different. The enterprise will likely set a goal to try to have a less (or no) significant effect (How Much) on important negative outcomes (What).
This assessment across the five dimensions enables an enterprise to not only set impact goals but also to design a business model with the greatest potential to achieve those goals (while bearing in mind financial considerations). Once the enterprise is up and running, it can set more precise goals based on continuous learning about its impact and financial performance.
example
If an enterprise set out to improve access to clean water in the U.S., they might start by trying to understand which communities face barriers to accessing the water they need and why. This analysis may show that families on the Navajo Nation in the Southwest drive for hours to purchase barrels of potable water and communities in rural West Virginia drink from contaminated streams due to industrial pollution and inequitable federal investment in water infrastructure (Who). The enterprise may seek to identify which strategies have proven most effective at improving access to safe and reliable water (What) that these communities need, in terms of depth, scale, and duration (How Much and Risk). It would also assess whether the water infrastructure market is saturated and what the current offering is in Indigenous and rural communities (Contribution). Building on this analysis, the enterprise may choose to create an intervention with a proven track record of delivering a specific outcome, or it may trial new strategies that have a limited evidence base. The selection of a goal will be determined by the impact risk the enterprise is willing to take and the contribution it is seeking to make.
Impact-financial integration
As a relatively new field, the impact ecosystem does not yet have sufficient data to draw conclusions about which types of impacts deliver which types of financial results — and vice versa. This means that enterprises should exercise caution in inferring causal relationships between specific impact goals and financial goals. Despite the lack of data, enterprises can forecast their impact (financial) performance relative to the financial (impact) goals they want to achieve. For more, see Impact-Financial Integration.
example
One enterprise may assume that its impact goals do not preclude competitive risk-adjusted financial returns. Another one may assume that its impact goals allow for competitive risk-adjusted financial returns but over a longer time horizon than the market would typically tolerate. Finally, other enterprises may assume that their impact goals require a disproportionately low risk-adjusted financial return, because they are testing whether market creation is possible for a historically and / or currently marginalized community.
