Measuring business impact, a powerful management tool

Companies are key players in today's society. Many of the world's great advances have come from the private sector. Michael Porter, in his study on shared value, shows many examples of how companies have promoted social development; for example, the first large scale program to diagnose and treat HIV was implemented by an Anglo-American company to protect its workers in South Africa. MasterCard has succeeded in implementing mobile banking, making it easier for 200 million people worldwide to access financial services. And the most recent case we have has been the COVID vaccine, which has been developed and distributed thanks, in large part, to the efforts of the pharmaceutical industry.

At Transcendent, we understand that companies are agents of change and that, those that manage to position themselves in the area between value for the business And the value for society, are the ones who will get a competitive advantage. 

Being an agent of change means playing a key role in the transformation of society, promoting sustainable economic, social and environmental growth. For this, it is essential know the impacts generated by the company on society, manage and measure them in order, as an ultimate goal, to maximize the positive ones and minimize the negative ones. 

In order to know, manage and measure impacts, we need information. Information, metrics and data are the basis of every business decision. It is unthinkable for a company to make an investment without first doing a financial analysis, or to launch a new product to the market without understanding the needs of consumers.

Most companies are aware, in an intuitive way, of the impacts they generate on the environment and on society. However, there are still very few who are committed to quantifying them. In any case, before we begin to explore impact measurement, we must understand very well what business impact is and how we understand it.

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What is impact? 

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We can see the impact from a value chain perspective, in which companies have a series of inputs that transform, through activities, into outputs. These outputs are the “tangible” result of business activity. For example, for an infrastructure company that builds roads, an example of input would be the raw material used to build it and the output would be the road.

These outputs generate “Outcomes” and, more in the longer term, “Impacts”. Outcomes are the specific changes that a company's products or services generate in the behavior of its customers or users, and the impacts are the attribution of fundamental changes, intentional or not, that occur in organizations or communities in the long term.

Following the example of the road construction company, the “outcome” would be to facilitate access to the University for young people from a small town, who, thanks to the road (“output”), can reach the University more easily. The “impact” is positive, and could be a percentage increase in the rate of students with higher education in the area where the highway operates.

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Why measure impact? 

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More and more stakeholders are demanding that companies have positive financial returns while generating a positive impact on society:

· They favor investors, increasingly, to companies committed to sustainability (ESG investment, socially responsible investment...).

· The regulators, including the Spanish Government and the European Union, require companies to publish non-financial statements.

· They prefer patrons And the society consume in purposeful companies that are aligned with their beliefs and values.

· They prefer employees work in socially responsible companies with respect for the environment.

In this context, knowing and measuring business impact is an opportunity for companies to position themselves, differentiate and value the positive effect generated on society in the face of investors, regulators, users, shareholders and other stakeholders.

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Impact measurement 

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Impacts are difficult to quantify and measure, so there is no global consensus on how to measure, evaluate and report them.

There are a wide range of methodologies for measuring impact depending on where you want to focus. It stands out among other GIIN, bLab, GRI, GSG, the OECD or the WBA. In any case, it seems that the methodology that is managing to group the rest is that of Impact Management Project (IMP), organization with which we are allies.

At Transcendent we have developed a impact measurement methodology based on the IMP which makes it possible to quantify the impacts, positive and negative, and their subsequent monitoring and monitoring.

Our experience measuring the impact of large companies is always very positive since managers acquire relevant information to make decisions with it. A trend that continues to grow.

It seems, therefore, that impact measurement is the way forward. Because quantifying impacts allows companies to know, manage and make decisions in accordance with the purpose of the companies, so that they can be agent of positive change in society.