What came first, the impact or the profit?

Posted by:

We have been exploring social value recently. Why? Because business needs to get better at analysing and communicating the value it adds to sustainable development. In conversation with international NGOs and multinational companies we are exploring the killer measures, the values they track to help make real decisions on their operations. There is a very constructive overlap between business and development measures. Just look at Bond’s Impact Builder and Anglo American’s Socio-Economic Assessment Toolbox (SEAT) to see the direction social impact measurement is moving.

Paul Polak is the author of’ “The Business Solution to Poverty.” He insists that we give far too little attention to achieving attractive bottom line profit and too much on detailed measures of impact. We asked him to identify the social value measures that help transform business, and this is what he said on Business Fights Poverty

Here’s my approach to impact measures:

1. What is the basic mission built into the DNA of the company, and to what extent is social impact inherent in the basic mission statement?

For example, if bringing electricty to customers without access to it at a price they find attractive and doing it at scale is built into your mission statement, and you are successful in accomplishing your mission, then the impact is built in. There is plenty of convincing information about the contribution REA made to development in the US south, for example, and it should be pretty easy to outline some related key measures of impact

But then the key challenge is making attractive profits, which requires applying all the principles of running an excellent business, and this is far tougher to do than measuring social impact.

2. From interviewing thousands of poor people, I am convinced that helping them increase their net annual income is the single most important social impact measure. From the perspective of poor people themselves, all the other impact variables, like improved quality of life, improved education, empowerment, education,and health, flow from impoved net income. So i put a major focus on measuring improved net income, compared with people who are not company customers.” PAUL POLAK

It is a powerful point. For those businesses with a mission to serve the base of the pyramid, profit and income are the two powerful measures. Of course, business profit and impact can get a bit chicken and egg, but let’s not talk about that now.