By Oliver Jones, Head of Marketing at Angel Investment Network & SeedTribe
While the UK was basking in record temperatures, the Mediterranean was burning: literally. With devastating human and economic costs. Many countries including Greece and Portugal all experienced the ferocity of extreme weather with wild fires.
The difference between weather and climate means that we cannot officially say this is caused by human activity. But it is unequivocal (with 97 per cent consensus among the scientific community) that warming from greenhouse gas emissions is contributing to the growing frequency and severity of extreme weather.
And climate change is only one of the great ‘moral issues’ of our time, as Pope Francis described it in 2015. The United Nations has marked out 17 pressing social/environmental/economic issues in its Global Goals for Sustainable Development (SDGs for short).
At this moment, innovation is set to play a decisive role in the outcomes. We are already seeing entrepreneurs emerging with solutions: re-usable tampons, food packaging that tells you when food is off, fishing nets that ward off the wrong types of fish.
These ‘impactful’ businesses show that profit doesn’t have to preclude conscience. Investors who look for profit-with-purpose companies are known as impact investors and their numbers are on the up as they realise that saving the world is a vast and lucrative market.
The growing urgency of many environmental and social issues, and the support offered by the UK government means that the UK impact space is set to grow increasingly crowded in the next five years. As a result, it is important for entrepreneurs to effectively communicate the impact they are making; and for investors to understand how to evaluate impact.
‘Impact’ is not a binary framework – it is impossible to say that a business either is or is not impactful. But this sliding scale means that an objective analysis of impact can prove difficult, especially with startups.
New Philanthropy Capital (NPC) have created their Impact Risk Classification (IRC) which allows businesses to compare their approach to impact with current best practices. This helps companies measure their impact and communicate that to investors in a meaningful way.
At Seedtribe, a crowdfunding platform for impact startups, we also use the UN’s Sustainable Development Goals as a starting point for assessing a company’s potential impact before exploring how deep and/or wide the problem extends. We then look at standard indices of business success such as team experience, market size and traction to understand the business’ potential for making impact.
The perennial problem investors face when evaluating startups is the lack of tangible evidence as a precursor to future success. This is true when it comes to impact. Businesses must become expert at communicating their impact. Frameworks like the NPC’s IRC and the UN’s SDG categories can help businesses define themselves to investors.
The more frameworks like these, the more they will become part of the accepted language of the impact space making it easier for entrepreneurs to communicate the positive change they hope to make.
The challenge then for impact entrepreneurs is effectively communicating the extent of the problem they are trying to solve. Entrepreneurs must be clear in the language they use to convey their impact. If this can be achieved, it will enable the alignment of ‘doing good’ with making profit – which could have the biggest impact of all.