Entrepreneurs, consumers, corporations, and investors alike are demanding a transition from an economic model that measures our collective success in purely monetary terms to one that also reflects non-financial components, namely the impact that stakeholders have on humanity and the planet.
We are in the early stages of this transition to an economy where every asset, company, and investment can & will be assessed through the lens of risk-return-impact. But the problem today remains: how are companies reporting on the impact they’re having? How are consumers able to discern which companies positively impact the environment versus those that just claim to be impactful, as part of an insidious and pervasive “impact washing” trend? How can investors compare one company with another when it comes to assessing their value through a holistic lens?
This paradigm shift will only be made possible by scalable, end-to-end technological solutions, for collecting, verifying, and analyzing granular impact data in a transparent fashion — and enabling direct impact data streams that show the positive or negative influence companies have on the world.
A Data First Solution
Impact investing has a current market size of $715BN, but beyond that, demand for investments that offer more than just a financial return has exploded to over $100TR in the last decade alone.
While the market for impact investing is steadily growing, mobilizing capital to execute on this demand still faces a key challenge — to date, there has not been a trusted way to measure the non-financial performance of these assets in a dynamic and efficient fashion. Instead there has been a disjointed and convoluted effort to create impact measurement standards which directionally may indicate positive or negative impact but remain static & onerous to analyze. Amongst the leading frameworks most commonly used today are the United Nations Sustainable Development Goals, the IRIS Catalog of Metrics, IRIS+ Core Metrics Sets and the Impact Management Project’s five dimensions of impact convention.
Proof of Impact believes that attempting to converge upon a universally accepted measurement standard may be a “a journey up a blind alley” and what we actually need to unlock the ability to make more holistic decision making (with impact as a pillar) is better data. With a data first approach, investment capital can be secured, non-financial factors can be analyzed alongside financial ones, and then any type of impact measurement and management tools or frameworks can be applied based on the unique needs of each organization.
Challenges to A Data First Approach
Accessing raw impact data at scale is onerous for a few key reasons. Most investment organizations rely on costly consultants and outside sources to collect and analyze impact data for their portfolio, with many noting that “the investment consultant industry is the single largest barrier to increasing the scale of impact capital available in the market.” Data transparency also remains a critical issue due to the fact that data is typically stored in centralized, opaque systems, and there is not always sufficient confidence that the data was not altered or manipulated prior to reporting. Additionally, data collection is highly fragmented and siloed across organizations and departments — with little to no integration of data channels.
The consequence is a set of related, yet unsynchronized set of workflows for performance tracking and reporting which result in data silos and resource intensive analysis.
Proof of Impact: Breakthrough Technology for Impact Driven Decision Making
So, how do we solve these formidable barriers to accessing reliable impact data and making it a meaningful asset?
Proof of Impact (POI) is working to transform the way that impact data is collected, verified, and analyzed by giving investors, companies and consumers access to trusted, actionable impact insights which empowers them to make data-driven decisions.
Impact as a Service Model: Collect, Verify, and Analyze
Collection: Setting the Bar for High Quality Data
POI establishes granular impact data streams directly from companies via proprietary data processing solutions, enabling event-driven transmissions of operational data. The platform collects data from various sources including: management systems that are core to the company’s operations (ie Customer Relation Management, Enterprise Resource Planning and Human Resource Management systems), IoT, devices, sensors, drones, as well as surveys from individuals. Businesses can transmit relevant operational and transactional data via the POI platform, select from a repository of impact metrics, and manage how this data is automatically and continuously visualized to show their performance towards their impact KPIs. As a result of direct integrations to comprehensive, or “raw” operational data sources, impact measurement and management via POI can be conducted with high fidelity.
Verification: Transparent Authentication & Securitization on the Blockchain
The trustworthiness of this non-financial data is established via direct integrations with a company’s operating infrastructure, and it is verified via decentralized applications and storage solutions on the blockchain. As this data is pushed to POI, each output unit is automatically verified, using algorithmic techniques for ensuring the data is unique and non-anomalous. Once data submissions are verified, they are minted to the blockchain, representing an “impact token” that is secure, immutable, and auditable.
Analysis: Standard Agnostic Insights
POI unlocks the utility of this data by providing streaming analytics and interactive visualizations, insights into ongoing performance that are not available in traditional, static impact reports. Streaming impact analytics enables continual impact management and consequently optimization of impact and enhanced interpretation of an investment’s performance towards impact objectives.
Every company or investor has a different approach to analyzing non-financial KPIs, and POI is standard agnostic when it comes to this analysis. The frameworks or standard KPIs for tracking non-financial performance are entirely up to the stakeholders. Proof of Impact provides a “plug-and-play” solution, creating seamless integrations with the tools and methodologies that a company or firm may already be using.
Company, Investor and Consumer Benefits from Impact Driven Decision Making
For corporations or enterprises competing in today’s economy, having robust data systems that enable effective impact reporting has never been more important. POI understands that establishing continuous, real-time and automated visibility into impact performance data is critical to achieving social and environmental risk management. POI partners with companies like IKEA to ensure that every provider in their supply chain is adhering to their environmental and social policies, empowering both the suppliers and IKEA to collaborate more effectively. POI supports companies big & small in their quest to analyze and showcase their impact. As Tucker Garrison, CEO of Imlak’esh Organics, a sustainable super food distributor, notes,
“It’s no longer good enough to be saying we are doing good work — we must point at data to prove we are doing good for people and the planet.”
The ability to predict the social or environmental outcomes of an investment will become the “holy grail” when assessing the potential of any investment. Automation of workflows and the use of innovative, decentralized storage solutions that facilitate transparency are necessary elements for making predictive impact analysis of investments more accessible. Transparency will enable a sufficient degree of confidence around impact KPIs across investments, while providing access to “training data” that can be supplemented with publicly available datasets for effective predictive modeling. With more impact data for “training”, the patterns of correlation between target output metrics and target outcome indicators can be identified by machine learning algorithms, providing key predictive insights that will allow investors to consider measurable impact projections alongside calculations of expected financial value — moving the needle further towards investing based on an impact-weighted, risk- adjusted returns.
With continual access to streaming impact analytics, investors are able to assess social and environmental risks alongside financial risks, setting the stage for investment products which incentivize impact performance while reducing the risk of the investment. Transparent impact data systems can transform the currently resource-intensive and periodic impact evaluations into dynamic systems for performance management and innovative risk models, which will ultimately drive deeper impact performance and align financial returns.
Digestible impact data will not only help companies better explain to investors and consumers how their products and services impact the environment and society, but will also force companies to be more accountable. Consumers have become increasingly attuned to the environmental and social impacts businesses are having, often reacting severely when companies egregiously undermine accepted standards. For example, the UK’s fastest-growing online fashion retailer, Boohoo, saw a blow of $1.25 billion to its market cap this year, representing 30% of its share price, after it was exposed for having unjust working conditions and lower-than-minimum wages. As conscious consumerism becomes an increasingly essential part of economic activity, companies will benefit from providing data transparency to their customers enabling them to make informed purchase decisions.
The Way Forward
If we want to create a world where impact isn’t simply a secondary consideration in investments, but a true determiner of profitability and long-term viability, we need a disruptive transformation of the way we do business.
Proof of Impact wants to catalyze this transformation by using frontier technologies to help companies unequivocally prove that they can simultaneously maximize profit and generate positive outcomes for humanity and the planet. This proof of impact, provided via transparent, verified data collection and real-time, automated analysis can subsequently shift the investment paradigm to one of risk-return-and impact — a paradigm where non-financial outputs are weighted equally alongside financial ones.
Technology powered solutions can streamline & scale the demonstration of impact, however, POI is just one element in a multi-pronged solution. To really affect the grand scale change that purpose-driven investors, entrepreneurs, and enterprises are looking to achieve, every stakeholder needs to take significant actions.
Sir Ronald Cohen in his recent book, IMPACT: Reshaping Capitalism to Drive Real Change, goes into great depth about the specific, granular actions each economic contributor will need to undertake as part of this transformation:
‘It will take at least a decade to transform our system, and the transformation will unfold in stages: starting with impact investment and impact measurement; through the development of impact economies; to a new global system of impact capitalism.’
Proof of Impact is poised to tackle stage I, helping companies and investors set the new standard of investing with accountability for impact.
As we head into a new year of possibilities, let’s demand that every investment be a positive impact investment, that every company holds themself accountable, and that every consumer be given the choice to make empowered decisions.
- PAIN SPOTS AND OPPORTUNITIES REGARDING ENVIRONMENTAL, SOCIAL,AND GOVERNANCE (ESG) DATA, Karl Richter, page 24
- https://thegiin.org/assets/GIIN%20Annual%20Impact%20Investor%20Survey%202020.pdf, p. 11
- IMPACT: Reshaping Capitalism to Drive Real Change by Sir Ronald Cohen, p. 192