Founder EASTWEST PR and Host of the SPEAK|pr Podcast
They looked around at some of the other approaches to impact quantification and verification and found that they applied to later-stage companies or corporations, and they evaluated supply chain and operational footprint as opposed to measuring the products and services of a company. They were strictly retrospective. In the meantime, the entrepreneurs they worked with were trying to engage investors around their potential. They had new innovations, they could solve massive challenges, and they needed to engage investors around that possibility. And so, they needed an approach to impact quantification that captured that future potential. It was out of this personal experience with entrepreneurs and seeing their struggle with this issue for years that Catherine and her team developed an approach to quantifying social impact and projecting it over a given term.
Catherine says many entrepreneurs struggled with the data piece, especially on the social side, which often is viewed as subjective or anecdotal. And so, they operate with founders on a unit level. They take a unit of sale, think of one thing sold or one buyer sold to, and identify the impact on a unit level. Where a company is lacking primary data, which is often the case with startup companies, they are able to draw from comparables or other companies that are doing similar things, and the efficacy that has been proven there or through third party research that says that this kind of an innovation can do or generate this kind of impact. Generating that impact on a unit level really makes it much more manageable.
At ImpactableX, they have a three-step process, which is very simple and straightforward. The first step is they define the metrics. Take, for example, a ton of carbon as the first impact metric. Then in the second step, they identify the unit level impact, so for each thing sold, how many tons of carbon are abated or saved or, in one case from a current client, actually pulled from the atmosphere to generate a new product? They relate a unit of sale to a unit of impact and by operating on an individual basis, they then allow entrepreneurs to have a dynamic future-looking projection. Because if they know the impact of one thing sold, then they know the impact of 50, 100, or 10,000 things sold over the next five or 10 years.
Case study: Reducing recidivism
A case study she gave was that of a company that participated in a project with Bloomberg Philanthropies in the city of Philadelphia and Wharton Social Impact Initiative, and it was addressing recidivism. When that company worked with ImpactableX, they were very new. Their idea was that by selling certain types of tablet technologies to prisons with educational content built-in, they could reduce the likelihood of recidivism, of an inmate returning to prison within a certain period of release. Step one was identifying the core metrics. For that company, it was reduced three year re-incarceration rate and sustained employment one year post-release. In the second step, they talked about that unit level impact. They looked at how many prisons the company expected to sell to over the next five years, how many prisoners in average are in each prison, how many active users then per prison will use their product, and then of those, how many will be released over a given period and won’t return to prison based off of what the research says. Sure enough, the RAND Corporation had published a report that said that this type of educational content can reduce the likelihood of returning to prison by quite a substantial percent. They typically discount that percentage to engage stakeholders and operate as conservatively as possible. Now, they have a rough number of prisoners who, based off of the research, won’t return to that one prison over a given term. They can then apply that across all of the prisons that the company expects to sell to over the next five years, so that’s an impact output or KPI.
In the third step, they look at economic valuation of impact, at new value created and costs avoided as a function of the impact. In that example, they looked at what it costs a state every time an inmate is released and returns to prison within a period of time, and it’s expensive. The costs to the state are astronomical. They often discount it and look at averages over the entire country. They’re then able to multiply this economic value of one prisoner returning to prison within three years of release by the number of prisoners that the research says will be impacted by this technology over the same period of time. From that, they get the social impact projection for that one metric, which represents the total impact value that this company can generate over a given period of time, pursuant to their sales and revenue projections.
Clearly, what they’re doing over at ImpactableX is not just an environmental index. They focus on lots of different metrics in which you are making an impact, so they are able to cover many of the UN Sustainable Development Goals. This follows the theory behind their approach, which is that social entrepreneurs are solving massive problems. And by doing so, they create massive value, but they can only monetize a portion of that value that they create.
If you look at a company’s revenue model, you’re missing all of that additional value that they’re creating. But with their approach, they really try to capture all of that external value, whether that value is experienced by the buyer or by the commons, and whether it is social or environmental. That’s why getting clear on what the metrics are in that first step is very important, as well as aligning with global standards like the Impact Management Project of IRIS+, and notably, the Sustainable Development Goals. Their indicators and targets are so important, because it’s not standardized. The kinds of impact that different innovations and business models and technologies can have should really be acknowledged, Catherine thinks, on a case-by-case basis, even though they can roll up into more general categories or impact verticals.
What it’s like working with ImpactableX
For business owners who are curious about ImpactableX, Catherine says that when you work with them, they start by having that conversation about your company’s impact metrics, they understand your business model, and then you get access to software that walks you through the data collection process. This includes all of the different input you need in order to generate these analytics. You get access to the methodology, and you get guidance through it, customized for your specific innovation and business model.
Once they have all of the baseline data collected, they generate a company report, which shows all of the high level data points that they’ve uncovered. This is your impact metrics, impact outputs, impact evaluations, and impact multiples. They generate revenue to impact multiples and capital to impact multiples, which Catherine finds particularly fascinating and interesting for investors. They generate a company report that has all of that clearly laid out. That is also supported by a data validation page, which shows all of their work, their assumptions, if they make any calculations, citations, etc., and then they generate a certification mark. A founder can say on their website, pitch deck, or marketing material that this data has been verified, it’s third party certified, and you get a core logic model, which is essentially a stable formula with variable inputs. You can play around with your revenue and sales projections, or you can play around with your impact percentages, capital requirements, or various data points that feed into their analytics within a stable formula. That allows you to be a startup founder, to play around with their assumptions and expectations of how your business will grow over time.
From there, they check in with you every three months, just to make sure that your data is tight. If you’ve pivoted, they update their analytics. They support you with office hours, with investors, and with marketing advisors and experts who can help you integrate some of these data points into your marketing and branding. Their mission at ImpactableX is really to help founders deliver their impact at scale. They want to see social impact scaled far and wide. They want to provide all of the value, practical and theoretical that can help you do that, and they think that impact data is the right place to start.
The reception from VCs or the finance community to ImpactableX‘s offering and formula was resounding, Catherine says. Increasingly, impact investors are beginning to really require impact data. Investors have been trying to figure out what kinds of impact or reporting to expect from the founders they invest in for quite some time, and they’re very wary about placing undue burden. But with ImpactableX, this is intended to only take a couple of weeks to a month. This is not a lifecycle assessment or one that takes years and requires piles of primary data.
Catherine says they don’t want the cost to be a barrier to entry for founders to build social impact projections, so they’ve priced base certification at $995, and that provides access to the methodology, guidance, and all the deliverables previously mentioned. There’s additional services that they can offer to support founders with research, with data collection, etc., but that base certification is really priced accessibly for founders.
To find out more about what they do, you can find Catherine on Linkedin or visit ImpactableX Analytics’ website or their LinkedIn as well. With that, I’m very grateful to Catherine for spending some time talking with me today. For us business owners and entrepreneurs, it sounds as though measuring your social and environmental impact is one way to help you unlock the value of your business, and ImpactableX can help you with that.
This article is based on a transcript from my Podcast SPEAK|pr, you can listen here.