The Essentials of Impact Reporting for Startups.

As a startup, impact reporting can be a daunting subject to tackle — one that requires time, resources, and capacity to manage. This article aims to shed light on the purpose behind impact reporting and guide you toward incorporating impact management practices into your business activities, no matter the stage you are in.

The Basics

Impact reporting is a method to convey the change created and its magnitude within the external environment, as a direct result of your company’s business activities. It is a way for a company or an organization to measure its long-term impact on society and individuals. This includes customers, stakeholders, and beneficiaries of your company. Ultimately, the output of this can take the form of a published annual impact report, as well as website disclosures on impact-related KPIs and progress made for each area of focus.

An effective impact report accomplishes the following:

1.  It helps the beneficiaries’ voices be heard.

2. It (ideally) goes beyond outputs and describes the impact outcomes of business activities.

3. It uses a common language via known impact frameworks.

4. It describes the methodology used to obtain impact results.

5. It is transparent about any negative impact generated and/or areas of improvement needed.

6. It is designed with transparency and accountability in mind, sharing the logic and assumptions made along the way.

Typically, an impact report should talk about the following topics:

1. Need - The report should talk about the actual problems your organization is trying to address. What is the scale and scope of the problem you are addressing? This is your opportunity to set the context of your work within this problem statement and give potential contributors the opportunity to understand the direct relationship between what the problem and your contributing solution.

2. Activities - Explaining your operational activities along with your overall process is a good way to link your problem statement and solution to your direct business contribution. You can show various product and service offerings, as long as they are core to your business activities and relate back to the social and/or environmental issue you are addressing. The key is prioritizing and explaining clearly the link between your purpose as a business and the impact you are trying to achieve. 

3. Outcomes - You need to tie the activities that you carry out to the results that are achieved. This enhances the connection between the work that you do and its results, thus also helping investors and stakeholders know that their investments are being put to good use. As an early-stage startup, formulating a set of assumptions related to your expected outcome can suffice. The more transparent you are with your stakeholders, the better.   

4. Evidence - How do you know you’ve made a difference?  There needs to be clear evidence that the actions you have taken actually lead to the outcomes previously defined. Quantifying those results through rigorous data collection systems adds an additional layer of credibility to your claims. The evidence can be both qualitative or quantitative, such as sharing a client testimonial or pulling impact-related facts and figures from your internal database.  Case studies can be a powerful tool to showcase impact milestones as well.

5. Lessons learned - Are you learning from your process and potential shortcomings? One of the most important parts of an impact report is sharing the challenges you’ve faced, authentically. Even more importantly, explaining the measures taken to overcome these challenges can be considered a huge bonus. 

Remember, there is no use adding excessive information in your report in the hopes that more information will make for a better report. Easy to measure does not always mean good or useful data. You must figure out what data is most conducive to your core impact goals as an organization, and what is most relevant for your stakeholders to know. 

Good impact reporting is a lot like storytelling. It brings clarity and transparency to the work that your business or social enterprise does. It’s all about disclosing relevant data regarding your environmental, social, and governance policies. If you’re really passionate about the importance of such reports, you will also talk about some of the gaps you’ve come across and what your plan is to bridge them. Creating such a report on an annual basis also connects organizations with stakeholders, partners, and beneficiaries which builds trust and support, and provides accountability and reassurance in the long term.

Why Report Your Impact?

It may sound obvious, but communicating your impact means that more people get to learn about your work as a force for good. Without dedicated and effective communication around your impact efforts, it can be a missed opportunity to engage deeply with your community. There are several reasons for companies to report on their environmental, social, and governance performance.  Each is a powerful driver in its own right, and when acting in combination, they effectively compel companies to improve their sustainability reporting practices– or to start reporting altogether. Any claims made should be intentional, achievable, balanced, and verifiable.

1. First and foremost, a business should hold itself accountable and make sure to report to stakeholders and investors with clear and credible data. Operating with honesty and transparency can also support you in identifying areas of improvement for your impact beyond financial performance, both in the short and long term.

2. Being goal-driven and having the willingness to take the extra step for something you believe in makes you more likable and trustworthy in the industry and is seen as a big plus by investors who are requiring increasingly more impact information from their investees. This doesn’t simply include achievements and outstanding performance numbers, but plans of impact scalability as your business grows.

3. Impact reporting as an activity also helps companies build a strong workplace culture of cohesion and learning. This is due to the fact that the process of building an impact report is by nature extremely collaborative. It involves contributors across disciplines and fields, involving your community and supply chain actors.

4. Lastly, If all your actions are driven by your company’s mission and vision, then your impact report will simply be an extension of your annual financial report, and all actions taken will be part of your strategy roadmap going forward.

Where to Start?

The key to impact is to start somewhere, iterate, and improve your process along the way. Our recommendation is always to start defining your impact goals as an organization. What is the change you hope to achieve and see in the world? What is the scale of the problem you are addressing and looking to solve through your business activities?

This type of questioning takes a more philosophical approach, and that’s the point. Here’s our recommended roadmap to defining your impact:

1. Get Deep: Use tools like the Theory of Change and/or the 5 Dimensions of Impact to map out your long-term impact-related goals as an organization.

2. Align with Existing Frameworks: Select at least one recognized impact framework to adhere to. A good place to start is the United Nation’s Sustainable Development Goals. Aligning with a framework is a good way to use common and relatable language around your impact goals.

3. Define your Impact Metrics: We recommend defining 3 to 5 metrics to start. Think of these as your impact-related KPIs. They will act as the quantitative support to your impact goals and the context you are setting in Step 1.

4. Document your Methodology: Like any science-based research, transparency of process and data collection is essential to be credible and accountable. Make sure your numbers are backed up with source documents, and your process is clearly defined and accessible for stakeholders to view.

5. Make it Relatable: Impact is incredibly contextual, so adding a qualitative dimension to your Step 3 helps paint a clear picture of your impact focus. Add case studies, and visual infographics to illustrate your impact metrics as clearly as possible.

6. Be Authentic: Keep it real, don’t inflate your numbers. It’s important to share your limitations, challenges, and opportunities along the way. As per Step 4, addressing assumptions and risks related to your impact goals and metrics is essential. The goal is not to have it all figured out but to share your thought process and milestones along the way in the short to long term.