Written by Phyllis Klander Costanza, Jason Saul andrew dunkelman with Maya Giswiller
Companies working to achieve environmental, social impact, and governance (ESG) goals often have difficulty demonstrating the effectiveness of their social investments.
Now, with the advent of the Social Outcomes Market, coupled with a registry of nonprofits and social enterprises with verified outcomes, the costs and outcomes of corporate social spending can be determined objectively and all nonprofits It shows how to provide large-scale social contribution. Small; Black, Indigenous, and People of Color (BIPOC)-led access to capital.
Socially minded companies must take care to allocate resources wisely and as investors, consumers and employees demand more prosocial behavior. Leaders who see fostering social change as a business asset should consider this mechanism.
During verification social outcomes
For most funders today, aligning social spending and impact takes significant time and effort.
Imagine a publisher in Detroit wants to improve the reading outcomes of local third-graders. Corporate program managers spend weeks meeting with nonprofits and educational institutions, typically using limited data, to determine which organizations are making an impact and what intervention strategies they are using. , and may figure out whether those strategies are producing results.
That could change. The emergence of social sector first impact registries and the launch of marketplaces to make matches has made it easier to identify and fund nonprofits with a proven track record.
The Impact Genome Registry is an independent verifier that allows nonprofit organizations to report results against peer-reviewed, evidence-based standards. The registry also publishes a method of underlying data and proof points that organizations can access to determine the quality of their own data for specific interventions.
Now, the Detroit company’s staff has access to registrar-vetted nonprofits in the social outcomes market that can deliver reading outcomes to target populations in the city at a given cost, or cost per outcome (CPO). You can now access it.
A nonprofit’s CPO takes into account the total cost of a unit of change, such as getting one child to a reading level, including general operating and program costs. We also consider effectiveness rates, or the percentage of children who receive the intervention and achieve their goals.
If a company wants to improve learning for 10,000 children, the approach vetted in the registry has an 80% effectiveness rate, and there is a $400 CPO for activities such as tutoring each child. The company needs to invest $5 million to achieve 10,000 positive results. . In this way, businesses can channel social spending more efficiently and nonprofits can find immediate liquidity to fund their activities.
Scorecard for U.S.-based literacy nonprofits
Matching in outcome markets occurs in one of two ways: One is to purchase results on the spot from nonprofits that list verified impact credits for sale. or through procurement, OutcomesX validates a set of nonprofits, including local and community-driven nonprofits, that are eligible to bid for funding.
Creating a market for social impact
The latter is the case for the UBS Optimus Foundation, which has experience measuring educational outcomes through social impact ties in India. The company launched an emergency relief fund to raise money from customers to support children in Ukraine at a time when most humanitarian aid was going to support displaced families. We then turned to the market to match those funds with results.
OutcomesX recruited more than 60 nonprofit organizations working on two tangible outcomes for children in Ukraine: improved learning and improved mental health. Nonprofits have uploaded their data and cost information to the Impact Registry. Impact registries assessed data quality based on the rigor of collection methods, including anecdotes, time points, pre- and post-action assessments, or randomized controlled trials. Relevance to the outcome, such as whether the data is related to the specified outcome. and plausibility, i.e. how well the approach aligns with how benefits have been demonstrated elsewhere.
Based on this analysis and its relationship to registry benchmarks for outcomes in education and mental health, OutcomesX selected 25 nonprofits that could deliver outcomes and priced them per unit of impact. The UBS Optimus Foundation, through nonprofits including organizations like EdCamp and Divchata, has committed to purchase these Verified Impact Units (VIUs) from OutcomesX for $2 million.
When a nonprofit achieves results, relevant data is uploaded to the registry, where the achieved results are verified, a VIU is issued to the nonprofit, transferred to the UBS Optimus Foundation, and reported to clients and employees. . Although this approach may seem technical and transactional, the impact of the social outcomes market is personal. It promotes equity and can literally change lives.
The landscape for lesser-known nonprofits is also changing. Today, small, minority-led charities are often at a disadvantage when it comes to fundraising. Many organizations lack the social capital, expensive grant writers, and evaluation consultants that large, well-connected charities have. But social outcomes marketplaces level the playing field by providing organizations with a central resource to find capital and compete for capital based solely on their ability to deliver results.
Buyers can specify whether they want to invest in results from smaller or equity-driven organizations. This approach mirrors more traditional markets and provides nonprofits and social enterprises with the upfront working capital they need to deliver greater social benefit.
ripple effect for social change
Shifting social impact into assets sets the stage for more social sector opportunities and financial products to emerge, similar to the carbon offset market. One such product is a social index, which is a basket of social outcomes that investors can buy in a particular sector (such as health) or location (such as northern Ghana).
The marketplace will also allow rating agencies to assess companies’ commitment to social issues by tracking how much they spend and, more importantly, the social impact they create. .
The market has critics who worry that the human element is minimized by commoditizing social outcomes, or that standardization fails to address the nuances and complexities of social change. It’s not that there aren’t any. But its supporters say the market promotes fairness, allowing nonprofits of all sizes and geographies to report on consistent standards and gain access to capital based on merit, not marketing. do. This amplifies the human element and more effectively improves lives, alleviates suffering, and achieves the social, economic, and environmental outcomes desired by funders and nonprofits alike.
learn more About investing in social outcome marketplaces.
Phyllis Carlander Costanza is Co-Founder and president Result of X. Jason Saul is co-founder of OutcomesX and executive director of the University of Chicago Impact Science Center. Andrew Dunckelman is Head of Impact and Insights at Google.org.is a funder of OutcomesX. Maya Giswiller is CEO of the UBS Optimus Foundation.