Over the past few months, our team has been focused on assessing our impact: internally, as an organization working within a community and an environment, and externally, through the projects we have been supporting. This blog post details one of the frameworks that has helped us in this endeavor, the Impact Management Project (IMP).

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Is my impact bigger than yours?

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This title illustrates one of the problems in conversations around impact. The other issues in these conversations tend to follow a pattern: definition, measurement, and the path forward. Finding common ground when answering the first two questions poses a challenge that often prevents us from looking at the latter.

Let me first address what impact is. The origin of the word lies in the Latin expression impact us that can roughly translate as strike against. If you take its etymological meaning literally, in the context of today’s conversation, impact means we are pushing against or fighting for something. In our case, at MAZE, we are pushing against social and environmental problems. So, that is settled.

The solution for the second problem is less clear, and it is the core of why I am writing to you today: howto pursue accountability in the context of the impact ecosystem.

Our team cares deeply about understanding if the strategies we deploy to solve social and environmental challenges and the decisions we make, on human capital allocation, are maximising the efficiency in how we answer the problems we strike against. The Impact Management Project (IMP) has developed a framework that aims to consolidate a holistic approach to impact based on five key questions. By answering these questions, each project is classified into ABC categories. From there, a matrix is developed where the project’s impact intercepts with the investor’s positioning towards that project.

It is by combining these two vectors that the assessment is made, on where the investor’s impact lies. For startups, this framework can also be useful, as it can assess the impact that arises, strictly from the project itself.

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When trying to decide how to best manage our impact, the IMP is helping us get closer to an answer. I hope it helps you too.

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1. WHAT?

Think about the type of outcomes you are aiming for. Is your intervention mitigating a negative outcome or contributing to create a positive one? There are industries where creating change means lessening an existing evil and others where you get a chance to revolutionise a system and develop a good solution, from scratch. Let me illustrate,using the case of Student Finance, the first investment made by our MSM fund. It is a platform that analyses real-time job market data and partners with education providers of ‘in-demand’ skills, to finance their students through Income Share Agreements (“ISAs”). Student Finance designed a solution that is revolutionising access to education.

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2. WHO?

Who benefits from your solution? Is it a well-served population, who gets to choose yours from a pool of alternatives, or is it an underserved population, for whom, options are narrower? The Social Impact Bond Projeto Família is an intervention that works with children at risk, and their families, to prevent unnecessary foster-care placement. These children are an especially vulnerable population for whom there are not many support options, given the complexity of the problem at hands and the lack of monetisable ways to address it. Projeto Família works exclusively with underserved populations.

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3. HOW MUCH?

Break down this question into parts: scale, depth, and duration. Simple enough: how broadly can the solution expand, in solving the problem? To which degree is it solving it? How long does change last? Impact enablers tend to focus too much on depth. Sometimes,a marginal scale that lasts through time, in the case of complex problems, is just as good of a way to strike against. Goodbag is a startup from the first cohort of Maze-X, our pan-European impact startup accelerator. The team developed a smart reusable shopping bag that connects the customer’s phone and rewards them with exclusive discounts while allowing users to plant trees every time they bring their bag. Even though it would be difficult to solve the plastic problem by using only a reusable bag, Goodbag’s scale potential can certainly make a dentin the problem.

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4. CONTRIBUTION?

Tough one. It means assessing how the impact achieved compares with what would have happened anyway. In an ideal world, it would mean experimental or quasi-experimental research conducted to verify that the solution is, in fact, the reason why the problem is getting solved. However, such studies represent a bureaucratic and cost burden that is difficult for most enterprises to justify and, as such, we must settle for the limits of reasonability. Relying on being reasonable, can be tricky if the incentives push us towards assuming that our answer is the reason why the puzzle is being solved. Even so, it is often the case that solutions are designed in a simple enough way, to anger an economist, by making correlation mean the same as causality. Take the example of the Academia de Código Social Impact Bond. Academia de Código is a startup that works with unemployed people and teaches them to code, over the course of 14 weeks. Sofar, more than half of the students that took part in the Social Impact Bond have entered the job market, working primarily as coders. We have not conducted a randomised controlled trial, but it seems reasonable to assumeAcademia de Código’s significant contribution in changing these people’s professional path.

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5. RISK?

Tougher one. It is essential to measure a project’s risk pulse: understand possible negative externalities,the efficiency of the solution, the alignment of the incentives, and all other potential caveats. Since taking risk is necessary to change the status quo,we may find ourselves lured into risk-taking, without properly contemplating the consequences. Risk is good, but not always. Uncertainty is risk: what you do not know, you cannot mitigate against.

When framing an assessment using these five questions, the process of screening for projects is more accessible. The goal, rather than determining whether my impact is bigger than yours, is to be conscious of our decision-making process and set informed targets for the future.

Finally, the third issue: the path forward. The discussion on the future of impact investing usually flirts with the desire to make things comparable. Although standardisation is important, it cannot be the holy grail. More often than not, complex problems require a box of tools, where different solutions, addressing different stakeholders and targeting different geographies, strike against the same challenges.

That is why the value of the IMP lies in understanding more deeply how solutions are designed, rather than ranking them against each other.

To learn more about the Impact Management Project, please refer to: https://impactmanagementproject.com/

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This content was originally published in MAZE-Impact.