Assessing potential impact before making an investment

September 24, 2019

We invest in companies that will decrease worker vulnerability to exploitation and increase respect for labor rights in global supply chains. We do this within a detailed Theory of Change that aims to build the sophistication of tools which improve transparency of supply chains, enhance worker voice, facilitate risk-based decision-making, and enable responsible sourcing – all with scale in mind. Our goal is to support companies that have impact at scale while generating sustained revenue.

When looking at potential additions to our portfolio we apply a rigorous but flexible approach to considering the impact a company might have. Our approach is not one-size-fits-all. Some of our portfolio companies build tools that workers use directly; others help multinationals build transparency and accountability into their supply chains. Some of our investments have demonstrated that they are delivering value for workers already, and others are still building their products. Some investments enable buyers and employers to identify risks of labor exploitation while others help address those risks.

Regarding solution context:

  • What is the strength of evidence for the solution?
  • How targeted is this solution towards the most exploited or vulnerable workers (including through a gender lens)?

Regarding impact on workers:

  • Depth: How significant could the intended impact be for workers?
  • Reach: How many workers could this solution reach?

Regarding changes in corporate behavior:

  • Depth: To what extent does the solution go beyond the identification of risks?
  • Reach: How many market segments will the solution address? How many clients will the solution serve?

Regarding impact measurement:

  • Does the investee team have the capacity and skills to undertake measurement? Does the investee fully understand the claims it is making?
  • Availability of data on targeted social change: What types of impact data will be collected and reported?

Regarding impact risk:

  • Negative Risk: What is the potential for negative impacts to emerge from the solution?
  • Evidence Risk: What is the risk that evidence for desired outcomes will be unavailable?
  • Impact Risk: What is the risk that the desired outcomes will not be achieved?

How does this work in practice? Here are some examples:

Identifying vs Addressing Labor Exploitation Risks

Ulula provides better evidence for risks that are often already known to be material and encourages (but does not require) action to be taken. Altana Technologies could facilitate the identification of new and unknown risks in hidden parts of corporate supply chains by applying machine learning to big data sets, and could be used by regulators to compel action by brands and employers.

Evidence base for the solution

Transparency initiatives like Provenance and Supply Shift draw on experience gathered over the past two decades demonstrating that companies linked to risky suppliers in their supply chains will take steps to address those risks. Sundar logically proposes that digitizing design and procurement decision-making while facilitating the integration of sustainability criteria will result in corporate adoption and labor-rights impact. The Sundar approach builds on the movement for supply chain transparency but is new, so there is yet to be evidence of it working at scale.

Vulnerable Populations

We invest in tools that are directly focused on addressing the needs of the most vulnerable workers, as well as those that take aim at the broader conditions that drive vulnerability. Ulula and QuizRR provide tools through which vulnerable workers can make their voices heard and find solutions to challenges. Phylagen can illuminate unauthorized subcontracting locations where risks of severe exploitation are high. Sundar can match ethical buyers with responsible suppliers, avoiding high risk production locations. Fund staff’s post-investment engagement is often focused on ensuring that portfolio companies work with their clients to utilize these solutions in such a way as they are targeted at the most vulnerable workers, and that worker vulnerability remain a priority concern for the portfolio company.

Impact directness

We invest in solutions at a range of proximity to workers. By virtue of illuminating supply chain relationships and streamlining information gathering, companies like Supply Shift facilitate corporate decision-making to address labor rights. At the other end of the equation, QuizRR puts information directly in the hands of workers, at a potentially massive scale.

Importantly, after we have assessed impact and decided to invest we’re not finished. These initial assessments of companies help us identify where we will engage after an investment to strengthen or complete the impact potential. If, for example, we determine that a company doesn’t have the capability to measure impact, we will support them to build that capability. Where we have identified that there is the potential for negative impact risk we will facilitate the adoption of good-practice controls. If the company lacks evidence of its solution we will seek partners with whom it can undertake programs to fill that gap.

Our approach interrogates the impact theses of the entrepreneurs whom we meet, and maximizes the impact potential of each potential investment, without requiring that they fit a pre-defined approach to improving the lives of vulnerable people in supply chains.