The case for social impact in Startups: create real value for long-term benefits and attracting investors

Earlier this month an in-depth article was posted in the Harvard Business Review by George Serafeim advocating social impact that creates “real value”.

In his article, George notes the fact that until about a decade ago investors paid little attention to companies’ social impact or what’s known as ESG – Environmental, Social and Governance – data. Then there was a turning point and today these data are very important to many investors, who wish to put their money where their heart is (doing good business, i.e making an impact and ROI at the same time)and support companies that make real impact. 

First let’s look at what “social impact” is:

Social impact is a significant, positive change that addresses a pressing social or environmental challenge. Creating social impact is the result of a deliberate set of activities and a number of measures and assessments with a goal matching this definition.

Every company’s assets and resources can be used to create business innovations that provide a solution to the world’s biggest challenges.

Those interventions include immediate short-term outcomes as well as broader and longer-term effects, whether they are planned or even unforeseen.

How social impact is applied

But what does it mean for companies in actuality? Well, George addresses, and I agree with him, the issue that many companies boast ESG data and social impact strategies just as box-checking or “window dressing”. In other words, they talk about it but they don’t do anything about it.

This is an issue that I see in my work, not only with larger corporations but also with startups. On the one hand, it has become very trendy to speak about social impact in your communication, to show you “values” as a company on your website and your pitch deck, but little is done/tracked/monitored in the actual behavior and KPIs of a company or the products developed.

With larger corporations, it is often easier to create the image of impact and perhaps support it with some CSR (Corporate Social Responsibility) activities, but for a young startup with a limited team, it is not as simple. And quite a few times in my career, I have seen a startup say promising things but not deliver on them. With a small or young company, it’s rather easy to check on these things and any investor, doing their proper due diligence will see right through.

4 steps entrepreneurs should take when creating a social impact venture

So, for startups that want to attract the social impact investors there are a few things to consider:

1. Ask why – you have to ask yourself why you are doing this. What is your purpose with your company and your products? A deep sense of purpose/meaning and a top-down approach will help you connect strongly with the impact you wish to make. It will also shine through everything you do and your investors will see it and feel it. It will connect them too.
2. Strategy – as with everything else (your marketing, business development, product road-map) your impact strategy also requires planning, long-term view, and broad-picture thinking. You need to map out your vision with short term and long-term goals, you need to decide where you want to be, what you want to represent and who you want to help with your products and services. And then you need to lay it all down in a neat plan.
3. Measurement & Accountability – You have to put in place KPIs and measurement mechanisms that will hold you accountable. You have to be able to be accountable to yourself first but also to your employees, your customers and your investors. If you have a plan but no way to measure outcomes and report then the plan might as well stay on paper.
4. Flexibility – As a startup you begin small and take the first steps, but with a big vision and plan. However, you have to be willing to adapt and change as you grow and progress. You have to be ready to learn and make the operational changes needed to your Social Impact strategy and to your actual products and road-map, to support the purpose.

Putting your social impact strategy into action

These 4 steps will, in my experience, make it easier for entrepreneurs to find and attract the right investors, who will, in turn, support and advance the development of social impact ventures.

Social impact is a circle where the purpose feeds the funding which feeds development that supports the purpose.

It may not be as simple as it sounds but if you remember why you set out on your entrepreneurial journey, you will be able to find the right people to support you and progress with you.