impact measurement archives

Business Impact Measurement as a management tool

20 June 202220 December 2021 by Marina Fernández

Businesses 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 business has driven social development.

The first large-scale programme to diagnose and treat HIV was set up by an Anglo-American company to protect its workers in South Africa, according to a new report. Mark R. Kramer y Marc W. Pfitzer in its article The shared value ecosystem published in the Harvard Business Review. MasterCard is another great example, having successfully implemented mobile banking, providing access to financial services to 200 million people worldwide. And the most recent case is 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 the business value and the value to societyare the ones that will achieve 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. To this end, it is essential to to know the impacts that the company generates on society, to manage and measure them in order to maximise the positive ones and minimise the negative ones.

In order to understand, manage and measure impacts we need information. Information, metrics and data are the basis for all business decisions. It is unthinkable for a company to undertake an investment without first carrying out a financial analysis, or to launch a new product on the market without understanding the needs of consumers.

Most companies are intuitively aware of the impacts they have on the environment and society. However, there are still very few that are committed to quantifying them. However, before we begin to explore impact measurement, we need to understand what business impact is and how we understand it.

What is business impact?

Impact is seen from a value chain perspectiveIn this context, companies have a series of inputs that they transform, through activities, into outputs. These outputs are the "tangible" results of the business activity. For example, for an infrastructure company that builds roads, an example of an input would be the raw material used to build the road and the output would be the road.

These outputs generate "Outcomes" and, in the longer term, "Impacts". Outcomes are the specific changes that a company's products or services generate in the behaviour of its customers or users, and impacts are the attribution of fundamental changes, intended or unintended, that occur in organisations or communities over the long term.

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

Why measure business impact?

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

- The investors increasingly favour companies committed to sustainability (ESG investment, socially responsible investment, etc.).

- The regulatorsincluding the Spanish Administration and the European Union, require companies to publish non-financial information statements.

- The customers and the company prefer to consume from purpose-driven companies that are aligned with their beliefs and values.

- The employees prefer to work in socially responsible and environmentally friendly companies.

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

Measuring business impact

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

There is a wide range of methodologies for measuring and managing impact depending on where the focus is sought. Among others, GIIN, BLab, GRI, GSG, the OECD or the WBA. Several are part of Impact Management Project (IMP), we are a partner organisation, and they are also on the recently created Impact Management Platform.

At Transcendent we have developed a IMP-based impact measurement methodology which allows the quantification of impacts, both positive and negative, and their subsequent follow-up and monitoring.

Our experience measuring the impact of large companies is always very positive as managers acquire relevant information to make decisions with it. A trend that is growing all the time.

It seems, therefore, that impact measurement is the way forward. Because quantifying impacts enables companies to understand, manage and make decisions in line with the purpose of the business, so that they can be agent of positive change in society. Find out more about impact measurement at our blog!

What is it and how to activate Purpose in a company?

11 October 202227 January 2021 by Ana Ruiz

We are undoubtedly in the age of purpose. In the era where purpose and financial results are not at odds with each other, but on the contrary, purpose is the path to better financial results. It is proven that those companies that focus on employees, customers, communities and the environment have a better financial performance. better return for its shareholders. So what is it and how can we activating purpose in a company?

What is the purpose of a company?

It is authentic commitment. When we talk about purpose, we go far beyond an inspirational phrase, an inspiring phrase, a claim marketing campaign or a headline in a press release. When we talk about purpose we are talking about a commitment that has to be genuine.

Create value

The purpose is to the raison d'être of a company. That which helps to solve a social and environmental problem while creating financial value for the company itself.

Differential value

It is intrinsically linked to what the company does in a differential way by focussing on the "what for"The mission (the what), the vision (how far) and the values (how).

The key is its activation, not its definition

In order for the purpose to be a real lever for the improving financial performanceThe key is not in its definition but in its activation. How the company is able to incorporate this purpose in its business strategy, in its products and services, in its culture, in its processes, in its relationship with its suppliers and in the communities where it is present.

To be activated by the leader

And this is where the link between the purpose with leadership. A good leader is essential for the purpose to evolve from a phrase to action and to become embedded in the heart of a company.

Measurement required

Such a leader must first of all understand the opportunity to "professionaliseThe company has to be able to "make this purpose a reality" and to act with conviction and courage for its implementation and activation in the company. And as part of that professionalisation, measurement is key.

Leadership with purpose in the case of Unilever

A clear example of purposeful leadership is that of Paul Polman, CEO of Unilever for 10 years. Polman initiated the company's transformation journey with the plan Sustainable Living Brands.

In this line, and to achieve this, Polman was able to break with the internal dynamics of your company. So much so that on his first day as CEO, and with the aim of avoiding short-termism, he announced that he would no longer issue quarterly share guides or reports. As controversial as this move may have been, by the end of his tenure, Unilever generated a return for its shareholders of 290%.

Purpose is still a way to go for many companies, and there is no doubt that in the post-COVID 19 era the purposeful leadership will be more important than ever.

Capitalism based on profit maximisation is broken.

20 June 202218 December 2020 by Cristina García del Valle

This transformation has to be led by the CEO with the commitment of all senior management because it is a business opportunity and a competitive advantage.

Measuring and managing impact under a standard model that enables transparency, management and comparability between companies are the big challenges ahead.

The meeting between José María Álvarez-PalleteExecutive Chairman of Telefónica, y Gonzalo GortázarChief Executive Officer of CaixaBankwith Sir Ronald CohenThe President of the Global Steering Group for Impact Investment (GSG)The panel, moderated by María Herreropartner of TranscendentThe event was an opportunity to discuss the need to redesign a new capitalism, pivoted around social impact.

The debate, which took place in the framework of the VII Ship2B Impact ForumThe debate highlighted the need to redefine capitalism because the system focused solely on maximising profit for the shareholder, which has lasted until today, is broken. During the debate, the strategic importance of impact was emphasised, which represents an opportunity and a competitive advantage that improves the profit and loss account of companies due to its direct impact on financing and on their economic and reputational costs. This not only maximises the positive impact but also limits the negative impact on people's lives and the planet's resources.

During their interventions, they all agreed that "the moment of impact has arrived" and that this transformation towards a capitalism 2.0, based on the social purpose of the company and on social impact, is not merely recommendable but is now essential. They also pointed to the need for CEOs and senior management to lead this transformation and to ground it in the strategic plan, thus reaching all layers of the company.

In fact, companies such as Telefónica and CaixaBank are already working on this, according to their top executives. With bonuses for their managers linked to the achievement of sustainability and social impact variables, promoting impact investment and financing for social entrepreneurs, mobilising assets, connecting millions of lives through cleaner and less polluting fibre optic networks and, above all, transmitting to the entire organisation the need to generate, measure and manage the impact of their operations, products and services.

A process of organisational transformation and cross-cutting mindset that has also been accelerated by the coronavirus pandemic, which has put people more than ever at the centre of financial and business decisions.

The challenges ahead include measuring and managing impact in concrete KPIs because "what cannot be measured cannot be managed", they said. This is the era of transparency of impact.

Therefore, according to María Herrero, partner at Transcendent, it is necessary to "integrate the chip of impact and social purpose into the business model itself and adopt business models that include positive impact in their products and services, so that the more successful the company is in its sales, the more impact it has".

Sir Ronald Cohen recalled during the talk what he reflects in his new book Impact Driving Real ChangeThis is the impact revolution and each of us has a role to play as consumers, employees, savers, employers, investors... We all are and must be part of a new capitalism 2.0 of shared growth and prosperity where no one is left behind.