Businesses of all sizes across all sectors are acknowledging the need to respond to changing socioeconomic and environmental pressures. From CEOs acknowledging that meeting societal needs is important, to governments passing increasingly stringent regulations, we are witnessing a global shift toward more responsible ways of doing business. Larger companies are often the most discussed actors in this movement, as they have many touchpoints with customers, investors and regulators. But for large organizations, change takes time. It is smaller companies – and in particular social enterprises – who have the ability to respond rapidly and radically to changing market forces, that are stepping forward to lead the way.
How, then, can we help social enterprises realize their potential, and chart a path to success in this rapidly evolving business landscape? This is where the Future-Fit Business Benchmark (FFBB) comes in. Up to now the most visible adopters of the Benchmark have been multinational corporations, but this free-to-use tool can be applied to many different businesses.
In fact, social enterprises can benefit from using the FFBB in two specific ways. First, the Benchmark can be used by companies to understand the social and environmental implications of all key business decisions. Social enterprises can apply this to ensure that as they develop, they stay true to their social mission. And second, the Benchmark makes it possible to articulate the social and environmental implications of a business model in a credible and concise way. This can help social enterprises clearly explain the unique benefits of their approach to potential investors.
A collaborative study on how Future-Fit can help social enterprises
To test how well the FFBB can meet these needs, we have been working with Shell Foundation, an independent UK registered charity that catalyzes enterprise-based solutions to global development challenges. Shell Foundation maintains a portfolio of around 60 partners, each one a social enterprise that is deploying new technology and/or enterprise models to solve renewable energy or sustainable mobility challenges in emerging markets. Shell Foundation works with these partner companies to help them prove their offering, achieve financial independence and operate at scale.
The first phase of our collaboration, which involved four Shell Foundation partners, was an 18-month study exploring two questions. First, how feasible is it for a small organization to gather the data necessary to self-assess their performance against the FFBB? And second, to what degree might such an assessment be used to convey the impacts of a business – both positive and negative – in a way that can inform investor decisions?
“We see outsized benefit in creating a benchmark that provides transparency
and assurance on the positive and negative impact that enterprises have on the SDGs.“
Richard Gomes, Director of Market Development, Shell Foundation
Question 1: How usable is Future-Fit for social enterprises?
Throughout the project, the Future-Fit team helped each partner to identify where they were already collecting information relevant to the FFBB indicators – or could easily do so – and whether they had access to any complementary data that could be used to create a useful ‘snapshot’ of the company’s progress. Benchmark topics where the partners were not actively monitoring their performance were also identified, to highlight potential blind-spots that could pose business risks.
Results were presented using the Benchmark’s Break-Even Goals and Positive Pursuits. Each Break-Even Goal focuses on a specific business area – such as procurement or product design – to provide actionable insight on where attention is most needed. Positive Pursuits help a business to understand and articulate how – and how much – its offerings are benefiting society.
The four participating partners were enthusiastic about the results, and saw the potential of the FFBB to help them see their business impacts in a more holistic way.
“This tool is useful for surfacing risks and exposures… it could also help us understand which levers to pull in order to increase our impact. Some of the data from the weekly KPIs we publish could integrate easily into this.”
Alex Eaton, CEO & Co-Founder, Sistema.bio
Question 2: Can Future-Fit help social enterprises attract investors?
Launched in 2015, the UN Sustainable Development Goals (SDGs) offer a shared vocabulary for discussing today’s biggest challenges, and they have quickly become the way for governments, investors and companies to talk about each other’s impacts.
We therefore translated the business-focused metrics of the FFBB to the SDG structure, to enable partners to paint a meaningful picture of their contributions in a format that can be widely understood, and which can be replicated consistently across different industries and company types.
Challenges such as poverty reduction, sanitation and waste prevention can of course be addressed in many ways, and any two companies – even ones operating in a similar sector – can take significantly different approaches. So it is no easy task to present SDG impacts in a way that enables investors to compare companies on a like-for-like basis. That said, initial results did succeed in highlighting both the SDG opportunities and risks facing each partner company, in a way that could help investors see where they can get the biggest SDG return on their investment.
“There is growing interest in results-based financing, and a lot of measurement is becoming SDG-focused. [FFBB] is very helpful because it takes a sophisticated approach and gives us a good framework to connect the underlying causes to the SDGs.”
Gaurav Mehta, CEO & Founder, Dharma Life
Future-Fit is now working with Shell Foundation on a second phase to develop a tool that makes it possible for any social enterprise to apply the FFBB, to identify where attention is most needed to reduce risks, and to automatically produce its own SDG impact statement. In parallel to this development work, we are refining exactly how the final output should be presented to better meet investor demands for credible and consistent data. The tool will be tested with all of the partners in Shell Foundation’s portfolio. This second phase will be completed in 2020.
This article on our blog offers some tips on how social enterprises can start using the Future-Fit Business Benchmark.