“As citizens, we have an expectation that our companies contribute to make the world a better place. If the companies don’t buy in on that premise, they will have a hard time.”
For years, Richard Georg Engström has been at the forefront of the field of Nordic entrepreneurs who insist that business must provide solutions to social problems. Now he raises the bar again.
In the company Impact Business Modeling System, he and his partner Mikkel Trym run Nordic startups through coaching programs that provide tools to create noticeable social and environmental change – and to document their claims wholehearted.
“We can no longer continue just telling great green stories. The expectation is that you can document your claims. Otherwise, you will be accused of greenwashing. We must move from intention to evidence. This is essentially what the EU’s Green Deal with its associated taxonomy is about,” says Richard Georg Engström.
Impact must be taken in with the mother’s milk
It is the new reality, with expectations from citizens and demands from legislators, that Richard Georg Engström is preparing companies for. And it must happen while they are at an early maturity stage, he believes.
“If early-stage companies get the mindset of delivering documented impact with the mother’s milk, then it is natural for them,” says Richard Georg Engström and continues:
“If not, it will be an add-on that someone demands that they can deliver on. And then it will cost more to build the understanding of impact into the product, the operations, and the company’s competencies. So, it pays to get it in early.”
For him, it’s about making an impact at the core of the business.
“The impact must be integrated at the core of the business. Then we do it operational and measurable,” says Richard Georg Engström.
From symptoms to deep causes
In addition to being the name of his and Mikkel Trym’s company, the Impact Business Modeling System is a method for companies to systematically understand and document their own impact.
And it begins with a step backwards.
“Many companies have developed a product. And then they look around the world to see which problems they can solve with their technology. We say: ‘Let’s back off and look at what kind of problem you’re working with. Then we can find out afterwards whether you are the solution – or whether you are part of the solution, and if so, which part you provide’,” says Richard Georg Engström.
It may seem obvious and completely self-evident, but in practice it is a change from symptom treatment to solve the root cause.
Richard Georg Engström uses headaches as an example.
“Most people take a headache pill if they have a headache. They should rather be asking themselves: ‘Why do I have a headache?’ ‘Am I sleeping too little?’ ‘Do I need to change job or lifestyle?’ ‘Should I exercise more or eat differently?’ That’s the same exercise we do with the startups we work with,” he says.
Understanding, imagination, change
Using the Impact Business Modeling System in a coaching program lasts from 2-3 months to half a year and starts with understanding the problem, explains Richard Georg Engström.
The first step is for the companies to understand the problem they are concerned with and what negative consequences the problem has.
Next, it’s about imagining a world without the problem – and defining what changes are needed to eliminate the problem.
The next step is to find out if the company can deliver the necessary change or part of it, or if the company needs to refine its technology, product or activities to bring about the change.
And the last step is to measure whether the desired change takes place in practice.
“To build rigorous impact metrics we look at what to measure, what data is needed and where to get that data from,” says Richard Georg Engström.
Small companies can become better suppliers
It is not an easy task for the smaller companies. But it is worth the effort, believes Richard Georg Engström.
In addition to bringing themselves into line with consumer legislation, they become better suppliers to larger companies, he states.
“From 1 January, companies with more than 500 employees must report on the EU directive on corporate sustainability reporting, CSRD. If startups can put numbers on the change they create with their products, the big companies can include it in their reporting. If small companies have brought this into their business model, they are more likely to become the preferred suppliers of the large companies,” says Richard Georg Engström.
The future lies in change
At the same time, there is a safeguard for the future in moving from symptom treatment to dealing with the cause of the problems.
“If you produce headache pills and a new manufacturer comes along with a product that works faster and is cheaper, then you are out of business quite quickly,” says Richard Georg Engström:
“But if you instead focus on what can make life easier for those who have headaches and can provide a range of services that help them to change their habits, then you will continue to be relevant to customers and investors.”
The fundamental solutions can be decidedly disruptive or market-changing, he points out.
“Airbnb didn’t just sit around and think about how to improve the hotel experience by 15 percent. They said, ‘If you don’t stay in a hotel, where do you stay? What does the future market for residential rental look like?’ The same is now happening within sustainability. If you focus on change, you help change the market,” says Richard Georg Engström.
Promotes long-term change
The development towards a more systematic creation and measurement of impact is driven not least by investors, Richard Georg Engström underline. Venture capital funds are also his main customers.
One of them is the Finnish impact fund StartMore Impact, which invests in hydrogen technology, new technology from the Nordics and social impact. And here partner Svein Erik Sogn believes that the program lays a good foundation for the collaboration between the foundation and the companies it invests in.
“I think it plays well with the corporate culture, which is the basis for creating a brand. And for me this is about people coming together for a common goal,” he says.
The goal is to create an impact, emphasizes Svein Erik Sogn, and this requires breaking with traditional investment horizons and thinking long-term.
“We need to have maybe 20-25 years to create proper results. Therefore, it is important to delve into the fundamental problems and ask questions about the underlying causes. Because if we don’t understand the problems, it’s difficult to make change that lasts in the long run,” says Svein Erik Sogn.
Clears out greenwashing
Since autumn last year, StartMore Impact has run 20 startups through the Impact Business Modeling System’s accelerator.
And Svein Erik Sogn’s view is that the companies will benefit greatly from the process.
“They become more aware of the impact they actually create. And that means that they get to clean up potential greenwashing stories,” says Svein Erik Sogn.
At the same time, they become better at communicating about the difference they make, he believes.
The Impact Business Modeling System is also a helpful tool for the foundation itself, explains Svein Erik Sogn.
StartMore Impact must meet the EU’s requirements for sustainable investment funds. This means that the fund must be able to stay on target for its investments.
“The companies must meet certain requirements in order for us to invest in them. The Impact Business Modeling System is part of the assessments we have in our investment process,” says Svein Erik Sogn.
Currently Impact Business Modeling System has customers in Sweden, Finland, Estonia, and Germany.
Richard Georg Engström is convinced that the market will grow in line with the increasing demands and expectations for companies.
“We are at the forefront. But many startups can see that they need to answer the questions that are raised about sustainability. And we have a method that can help them provide evidence-based answers,” says Richard Georg Engström.
Thank you for reading Impact Insider. As a social entrepreneur or investor, you know that quality is not free. We depend on subscribers paying for our journalism. So, if you think it’s worth having an independent media that constantly chases the best and most effective solutions to societal problems, you can subscribe here.