Transcript
The triple bottom line stands for profits, people and planet and it’s the core of a social business and what differentiates it from a for-profit business or not-for-social business. It says that instead of just focusing on profits, companies should also focus on people or the societal benefits that they add as well as really be careful with our environment. Instead of measuring a company success in just profit terms or financial metrics, they should be measured according to their impact on people and the planet as well. Only then can we assure that we reach our sustainable development goals. Only measuring financial performance obviously does not show the effects on the society or planet a company has. A company can have stellar financial numbers, they can have huge profit margins and amazing sales, but if to reach that they might have to underpay their staff or have hazardous work environments or they use harmful resources. And the question really is: should these companies really be awarded for this profit margin and get more investments?
As we have to move to a more sustainable world, it will be necessary that also non-social businesses are required to adapt their operations and business model to minimize the negative impact they have on society and instead increase their positive impacts. However, there are two problems in adapting to new measurement tools. First of all, the problem is that the current measurement tools, the impact measure tools do not truly allow to objectively measure impact. Or at least there is no worldwide consensus on how these tools and measurements should really work. As long as we are not able to objectively assess impact, you cannot expect investors to base financial decisions on them. And secondly, especially in the beginning, if non-social businesses suddenly need to divide their focus from just profit margin now also to look at our operations and how they can minimize the harmful effect or increase the positive effects, this will obviously have an impact on their bottom line and consequently this harms the uptake initially, even though lots of studies have proven that in the end the profit actually will go up. However, what is really necessary is that we make these measurement tools mandatory and as long as that is not happening, then social businesses that are watching their triple bottom line and thus maybe do not have the same financial performance or the X times growth that investors currently expect from startups will always have a backseat on getting investments.
As the new measurement tools are becoming standardized and hopefully in the future all businesses will be required to be measured by them, it will open up traditional financial investment sources that are currently not available. Currently, traditional investors, they expect a certain yearly return ratio that is just not realistic if you work in a developing country with a beneficiary that cannot pay your products. It requires more investments, it is less focused and a multi-sided business model approach that traditional investors shy away from. Many investors that I talked to when we said, okay, yeah, we’re in India and we’re also in the UK, they immediately back out because they want you to focus and this, as I explained before, it’s not always feasible. So when we include the new measurement tools as a new standard, we will create an even level playing field and this will open up a new investment opportunity for the social businesses.
It’s very important as a social business that you are able to prove the impact that you’re having because you’re not a for-profit business so your financial gain is not the only metric that you have to prove to watch your investors. You also have to show that you’re capable of actually making an impact in the community that you are at. And in order to do this, you need to start with this from the very, very beginning and you have to develop your theory of change. And a theory of change means that you have to decide what is your goal.
So for example, if I look at Avegen, our goal in maternal health care is to reduce maternal mortality. That’s a very big goal. So when you go to an investor, you, we’ll have to explain how you’re going to do that and how are you going to prove that you can do that. Maternal mortality is a very big goal and you have to break that down. So for example, in India, half of the women that die are caused by anemia. So you can say anemia is the goal that I have. I want to reduce anemia because if I can prove that I reduce anemia, I have reduced maternal mortality. And how do you do that? And that’s your theory of change. You do that by then looking at anemia and saying, what are the causes of anemia and how can I bring in an intervention or a product or a service that reduces that? So for example I can provide more information to women about anemia. I can motivate them to take their supplements. I can make sure they go to a doctor if they have high anemic levels.
So if you can prove that you have done these three, and if you can then prove that exactly the mothers that you are treating have a lower anemia level, then you have proven that your solution, that your intervention works. And if you have that, you can get investments, you can get revenue models, you can get attention from lots of big publishing houses or big speaking conferences, much, much, much easier. So it is super crucial that you develop your theory of change and that you can track these data points from the beginning onwards about your products.
