5. Additional information

5.1 Frequently asked questions

1. How can trade-offs be anticipated or avoided?

It is important to bear in mind that society is a complex system and – with so many influences at play – it would be naïve to assume that an action will be effective just because it is well-intended. To understand system-wide consequences, and minimize the risk of unintended side effects, every potential course of action to achieve a Positive Pursuit should be subject to a holistic assessment of likely trade-offs.

Trade-offs can be defined as “compromise situations when a sacrifice is made in one area to obtain benefits in another.” [189]

For instance, a company may create a cheap, highly efficient, solar panel and distribute it to people that did not have prior access to energy. The fact that More people have access to energy is undoubtedly a positive outcome. However, if the creation of the solar panel requires a large amount of minerals which are often sourced from areas of armed conflict, it may also negatively affect the Break-Even Goal Natural resources are managed to respect the welfare of ecosystems, people and animals.

Anticipating trade-offs

To undertake a holistic assessment of likely trade-offs, a company should first seek to identify all potential impacts, social and environmental, which could be associated with the activities of its project or product – positive or negative, and intentional or unintentional.

To ensure that all possible avenues are explored, and to avoid bias, a company should solicit public input from civil society organizations and groups in the communities and sectors likely to be most affected by the project or product.

The potential impacts should then be segmented into positive outcomes and negative trade-offs. Whilst doing this, it is useful to keep three types of potential trade-off in mind:

  • Trade-offs in kind. For example, new production technology that reduces toxic emissions, but which is far less energy efficient, in a region where renewable energy is not available.
  • Trade-offs in place. For example, introducing a water-intensive process in one region which suffers from water stress, and committing to reduce water use by an equivalent amount in a different region (which fails to address the problem, since water stress is a localized issue).
  • Trade-offs in time. For example, operating a mine in a highly biodiverse region, but committing to invest significantly to restore and improve the area when operations eventually cease. While the end result may be beneficial, significant (and potentially irreversible damage) may be done to the local ecosystem in the interim years.
Classifying trade-offs

Trade-offs can then be classified in three ways: [190]

  • Acceptable: The positive outcome(s) is worth the associated negative environmental or social outcome(s);
  • Negotiable: The positive outcome(s) is worth the associated negative environmental or social outcome(s) if a caveat is fulfilled; or
  • Unacceptable: The positive outcome(s) is not worth the associated negative environmental or social outcome(s).

There is no single rule that companies can apply to determine whether a particular trade-off is acceptable or not. Judgements should be based on the best information that can be gathered at the time, research from credible bodies, and the views of key stakeholders.

Unavoidable trade-offs that are deemed acceptable should be acknowledged, and plans should be put in place to measure, minimize and mitigate their negative effects.

Alterations should be made to the proposed project or product so that negotiable trade-offs can be moved into the category of acceptable trade-offs, or be eliminated altogether.

Unacceptable trade-offs should be avoided at all costs. A trade-off should be considered unacceptable if it introduces a clear threat to people’s wellbeing or creates structural obstacles that impair (or even negate) progress towards future-fitness. One way to look at this is to consider the degree to which a trade-off would introduce a barrier to progress with respect to one or more of the Properties of a Future-Fit Society (see Figure 2).257

For example, providing access to renewable energy for an underserved community by building a hydro-electric dam, when downstream communities rely on that water source for food production and drinking, could result in a positive outcome for the first group but undermine access to water for the second.

Once trade-offs have been identified and analyzed, it is much easier to mitigate, minimize and even take action to eliminate them. For more information on how to measure and manage both positive and negative outcomes, see the Assessment section.

2. What is a harmful substance?

A substance is considered to be harmful if one or more of the following is true:

  1. It has properties that make it dangerous to – or capable of having a harmful effect on – human health or the environment.
  2. The substance is designated as harmful by one of the following sources:
  1. Credible industry bodies relevant to the industry in question, which recommend the phasing out of the substance.258
  2. Lists of substances which are legally banned in one or more of the company’s areas of operations.
  3. Credible peer-reviewed research, which strongly suggests evidence of harm.
  1. The substance is likely to build up in nature if emitted. Categories of substances known to be ofconcern for this reason include, but are not limited to:
  1. Human-made synthetics that are novel or foreign to nature [57] (e.g. persistent organic pollutants (POPs) [58] including endocrine disrupting chemicals (EDCs) [59], radioactive materials [57], and nanomaterials/micro-plastics [57]).
  2. Metals and their compounds that are not naturally abundant in nature (e.g. compounds of heavy metals like mercury, lead, zinc and cadmium). [61]
  3. Stratospheric ozone-depleting chemical substances. [57]
  4. Aerosols. [57]
  1. The substance is likely to interact with other substances, as a result of its emission, in ways that cause 1, 2 or 3 to be true.
3. Why isn’t all energy from waste considered renewable?

Residual waste often contains a mix of biogenic materials like food waste and scrap wood, as well as materials from fossil sources, such as plastics. Because of the latter, energy recovered from such waste is not considered to be renewable.

4. How should credible product comparisons be made?

The best way to make credible comparisons is to start by defining the functional unit for a product. A functional unit is a quantified description of the performance requirements that a product must fulfil. [191] It enables a comparison of the overall performance of different products in terms of impacts per unit of delivered service.

A functional unit should, as far as possible, relate to the functions of a product rather than to the physical product itself. In this way, it is ensured that both the elements of product performance and duration (“how much” and “how long”) are addressed.

For instance, the functional unit for a light bulb should be along the lines of “annual lighting of a work area of 10m2 within 30 lux”. Alternatively, the functional unit for an office chair should be minimum 7 years of computer workstation seating support”.

There are several steps to establishing a relevant functional unit. These are: [192]

  • Identifying the market: It is via purchases on the market that customers can express their requirements for a product. This will help to identify the obligatory properties of a product. To avoid overlap and, in turn, ensure that all products targeted for a segment are considered substitutable by relevant customers, three elements should be considered when defining a market for a specific product:
    • Geography: natural geography (e.g. climate or landscapes) or regulatory geography (e.g. barriers to market entry or product standards)
    • Time: customers require products to be available at specific points in time/at a certain speed (e.g. peak hours or seasons)
    • Customer: Typical use situation (e.g. segmented by age, sex, income, education, culture, etc.)
  • Identifying the obligatory product properties: Obligatory properties are those which a product must have in order to be considered a relevant alternative. These typically include functionality, technical quality and cost. All obligatory product properties should be described in quantitative terms. It is important to keep in mind that the same product property may be obligatory in one market and not in another market.
  • Expressing the functional unit: The functional unit is a quantity of the product as defined by its obligatory product properties required in a specific market segment.

By specifying the functional unit as a “service delivered” (e.g. a transportation need) and not as a specific product or material solution (e.g. a compact car), wider comparison across a diverse range of products is possible.

For example, instead of comparing one car with in internal combustion engine to another to see which is more fuel-efficient, a functional unit will allow comparison between a combustion car, a hybrid car, an electric car and even public transport.

Once a functional unit is established, a company should then analyze its own product against all relevant alternatives across its use and post-use phases to see how their impacts compare.

For example, a company might wish to claim that its washing machine is the most water efficient on the market and so means that Others contribute less to water stress. In order to do this, the company must establish all of the market alternatives which fulfil the same function and assess these and its own product across use and post-use phases.259 Only after this assessment confirms that the company’s washing machine is indeed the most water efficient can the company credibly attribute a positive outcome to its product.

5. How can philanthropic donations be more effective?

A large number of organizations are working to tackle some of the world’s most pressing problems, but not all are equally effective. When a company is deciding on how to leverage its resources to support third-party organizations in a way that achieves the greatest good, it can be useful to consider the following:260

  • Outcome depth and duration: What is the scale of the potential outcome? Does the benefit accrue at a moment in time, or is it permanent? How many people could potentially benefit? For more considerations like these see the Assessment Section.
  • Outcome likelihood: How strong is the evidence that a project or program will achieve the meaningful outcomes it is striving for? If the evidence base is weak, is the potential benefit high enough to warrant the investment anyway?
  • Company contribution: How important is the company’s contribution to achieving the outcome? Is the issue of concern under-addressed? Is there a decreasing, linear or increasing relationship between marginal donations and good outcomes?

After considering all of the above, companies can make informed decisions about the programs or projects they feel are likely to be most effective at translating donations into positive outcomes.

6. How can the depth and duration of an outcome be calculated?
How to calculate the depth of an outcome

There are four steps that must be undertaken to assess the depth of an outcome.

  1. Establish a unit of measurement for the outcome;
  2. Establish the baseline level of outcome;
  3. Establish the actual level of outcome; and
  4. Calculate the depth indicator as the difference between the baseline and actual level of outcome.

Baseline level of outcome

The concept of baseline data is similar to that of market research – a company should establish what the situation is on the ground before attempting to create a positive outcome.

The baseline level of outcome should be measured using the outcome metric. For example, if the outcome unit is the number of people who are literate, then the baseline should capture the same information.

Actual level of outcome

The actual level of outcome is that which has occurred by the end of the intervention. It should be measured using the chosen outcome unit.

Calculating the depth indicator

The depth of a positive outcome is derived by comparing the actual level of outcome to the baseline level of outcome. Depth is, essentially, the differential between the two. This can be calculated as a relative change, i.e. as a percentage,261 or absolute change.262

How to calculate the duration of an outcome

The duration of an outcome refers to the timescale over which benefits from an intervention apply.

Three factors should be considered when assessing the duration of a positive outcome:

  • Outcomes have different durations. They can range from a one-time benefit (e.g. providing hungry people with a meal), through to a fixed period (e.g. meals provided for weeks or months, for example after a natural disaster), to a permanent or indefinite removal of a systemic obstacle to wellbeing (e.g. equipping people to produce their own food).
  • Outcomes may materialize immediately, or in the medium- and long-term.
  • Many outcomes go beyond the end of the intervention. This means that the affected stakeholder could still experience the outcome long after the intervention is over.

The duration estimate should be, where possible, a more specific time period. Duration estimations may be expressed in days, weeks, months or years.

Deriving a duration estimate can be done through several methods:

  • Survey the affected stakeholder on a recurring basis, from the start until the end of the intervention (or for even longer periods);
  • Evidence-based research; or
  • Market research.
7. How can counterfactuals be determined?
How to establish a depth counterfactual

The Impact Management Project provides the following guidance on how to establish a depth counterfactual:

To calculate the counterfactual side of depth, enterprises can use a number of approaches that vary in rigor and costs. Randomized control trials and quasi-experimental methods typically require significant resources but produce higher-quality insights compared to market research and stakeholder feedback. This is not always the case, however, as well-deployed market research and stakeholder feedback (covering large sample sizes) can yield valuable insights for (1) understanding what else may be driving the outcome, (2) building a ‘good enough’ counterfactual scenario, and (3) conducting the depth analysis.

These methods can often be combined to gain complementary findings. The list below covers the main analytical tools:

  • Stakeholder feedback: Stakeholder feedback requires consulting the individuals (or communities) affected by the enterprise’s activities to gain a nuanced understanding of the drivers behind the outcome (e.g. the enterprise’s activities, external factors, government interventions, cultural practices). If deployed well — covering a large enough sample and different points of view — stakeholder feedback can be used to build a counterfactual. This method should be combined with market research and/or evidence-based research, as they are mutually reinforcing.
  • Market research: By taking a thorough look at an intervention’s context, market research can be used to build a ‘good enough’ counterfactual. This method requires a deep analysis of secondary resources (e.g. industry reports) to identify what else may be driving the outcome — from other organizations, to government interventions, to external factors (weather, economic conditions), to individuals’ unobservable characteristics (self-motivation, cultural practices). Market research should be paired with stakeholder feedback and/or evidence-based research for complementary insights — and for strengthening the credibility of the counterfactual.
  • Evidence-based research: Enterprises can source depth contribution estimates through evidence-based research (i.e. rigorous impact studies of enterprises’ products, services, and other types of interventions conducted by third-party researchers). Often grounded in randomized control trials or quasi-experimental design – two methods that rigorously assess the counterfactual – evidence-based research produces outcome results that can be extrapolated to gain an understanding of an enterprise’s contribution.

Before extrapolating results from a study, enterprises should first assess the quality of the estimate by considering the study’s methodological rigor, population group, country-setting, and type of intervention. For example, if an Indian enterprise relied on an estimate from an impact study that took place in Argentina – a country with significantly different socio-economic characteristics – then the quality of this estimate is likely to be low, rendering it unusable. In using this method, enterprises should exercise caution and aim to pair it with stakeholder feedback and market research. Sources of evidence-based research include J-Pal’s evaluations, Innovations for Poverty Action’s research and 3ie’s systematic reviews.

  • Randomized control trials (RCTs): RCTs measure the difference in outcomes over time among two randomly assigned groups:
    • A treatment arm (i.e. receives the intervention, such as a product).
    • A control arm (i.e. one that did not receive the intervention or received a placebo or another type of intervention).

The randomization ensures that the two groups are similar on observable (income, gender, health) and unobservable (self-motivation, energy) characteristics, creating a robust counterfactual. Although a popular method in international development, RCTs and quasi-experimental methods usually require significant resources.

  • Quasi-experimental methods: Quasi-experimental methods (e.g. regression discontinuity design, difference-in-difference) cover a range of statistical techniques to build experimental groups. Once these groups are created, practitioners compare the difference in outcomes over time between individuals who received the intervention and those who did not (the counterfactual). In contrast to RCTs, quasi-experimental methods require many more assumptions to develop a credible counterfactual.
How to establish a duration counterfactual

The Impact Management Project provides the following guidance on how to establish a duration counterfactual:

Calculating the duration counterfactual can be as simple as using market and evidence-based research or as complex as relying on experimental or quasi-experimental methods. While more rigorous and accurate, conducting an RCT with a long time span is inaccessible (and likely un-actionable) for the majority of enterprises. As a starting point, we recommend that enterprises leverage existing research to estimate the duration of the outcome that the market or system would otherwise deliver.

  • Stakeholder feedback: Stakeholder feedback gathers insights directly from the people who are experiencing the outcome. Stakeholder feedback could be a useful starting point for understanding the drivers behind the duration of an outcome. Enterprises can complement these findings with market or evidence-based research to further understand the estimated duration that the market or system would otherwise deliver (i.e. the counterfactual).
  • Market research: By taking a thorough look at an intervention’s context, market research can be used to build a ‘good enough’ duration counterfactual. This method requires delving deep into what else may be driving the duration of the outcome, from other organizations, to government interventions, to external factors (weather or economic conditions), to individuals’ unobservable characteristics (self-motivation, cultural practices). Market research should be paired with stakeholder feedback and/or evidence-based research for complementary insights – and strengthening the credibility of the duration counterfactual.
  • Evidence-based research: Relying on evidence-based research (i.e. rigorous impact evaluations, usually RCTs or quasi-experimental studies, explained below) can provide relatively accurate duration contribution estimates. When using this method, enterprises should determine the study’s methodological rigour, population group, country-setting, and type of intervention, in order to understand the quality of the estimate. For example, if an Indian enterprise used an estimate from a study that took place in Argentina (significantly different socio-economic characteristics), then the quality of this estimate would be considered low and likely unusable.
  • Randomized control trials (RCTs): RCTs measure the difference in outcomes over time among two randomly assigned groups: a treatment arm (i.e. receives the intervention such as a product) and a control arm (i.e. one that did not receive the intervention). Academic RCTs usually take place over two or more years and often go beyond the end of the intervention. By extending the evaluation period, RCTs capture reliable estimates of enterprises’ contribution to the duration of an outcome.
  • Quasi-experimental methods: Quasi-experimental methods (e.g. regression discontinuity analysis, difference-in-difference) cover a range of statistical techniques to build experimental groups. Once these groups are created, practitioners compare the difference in outcomes over time between individuals who received the intervention and those who did not (the counterfactual). Similar to RCTs, this method assesses data over two or more years (even after the intervention has ended), producing reliable data on the duration of an outcome.
8. How can depth and duration contributions be calculated?
How to calculate depth contribution

In order to calculate the depth contribution indicator, a company must have already calculated the depth indicator. It must also have a depth counterfactual – i.e. the degree of change that has occurred in a structurally similar context that has not experienced the intervention (project or product).

The depth contribution is the difference between these two pieces of information.263

How to calculate duration contribution

In order to calculate the duration contribution indicator, a company must have already calculated the duration indicator. It must also have a duration counterfactual – i.e. the outcome duration that has occurred in a structurally similar context that has not experienced the intervention (project or product).

The duration contribution is the difference between these two pieces of information.264

References

[57]
W. Steffen et al., “Planetary boundaries: Guiding human development on a changing planet,” Science, vol. 347, Feb. 2015.
[58]
“Stockholm convention.” UN Industrial Development Organization, 17-May-2004 [Online]. Available: https://www.unido.org/our-focus/safeguarding-environment/implementation-multilateral-environmental-agreements/stockholm-convention. [Accessed: 03-Aug-2017]
[59]
“Dirty dozen endocrine disruptors.” Environmental Working Group, 2013 [Online]. Available: http://www.ewg.org/research/dirty-dozen-list-endocrine-disruptors. [Accessed: 02-Aug-2017]
[61]
C. A. Azar, J. Holmberg, and K. Lindgren, “Socio-ecological indicators of sustainability,” Ecological Economics, vol. 18, pp. 89–112, 1996.
[189]
T. Hahn, F. Figge, J. Pinkse, and L. Preuss, “Trade-offs in corporate sustainability: You can’t have your cake and eat it,” Business Strategy and the Environment, vol. 19, pp. 217–229, 2010.
[190]
R. F. de Magalhães, A. de Moura Ferreira Danilevicz, and J. Palazzo, “Managing trade-offs in complex scenarios: A decision-making tool for sustainability projects,” Journal of Cleaner Production, pp. 447–460.
[191]
“Defining the functional unit.” Consequential LCA [Online]. Available: https://consequential-lca.org/clca/the-functional-unit/define-the-functional-unit/. [Accessed: 01-Jan-2019]
[192]
B. Weidema, “Short procedural guideline to identify the functional unit for a product environmental footprint and to delimit the scope of product categories.” LCA Consultants, 2017.
[193]
“What makes a charity effective?” The Life You Can Save [Online]. Available: https://www.thelifeyoucansave.org/learn-more/what-makes-a-charity-effective. [Accessed: 01-Feb-2019]

  1. For additional thoughts on the ways that progress toward future-fitness can be undermined, see the description of the Framework for Strategic Sustainable Development in the Methodology Guide.↩︎

  2. For example, the Zero Discharge of Hazardous Chemicals (ZDHC) initiative, the US EPA’s listing of six criteria pollutants and 187 air pollutants, or ChemSec’s SIN and SINimilarity lists.↩︎

  3. Any impacts which occur as a result of a product’s pre-“use phase” are covered by the Break-Even Goals relating to inputs and operations.↩︎

  4. The following questions have been informed by the work of The Life You Can Save, one of several organizations working to increase the effectiveness of philanthropic spend. [193]↩︎

  5. Mathematically: Relative change (%) = [(realized level of outcome / baseline level of outcome) – 1] * 100.↩︎

  6. Mathematically: Absolute change = outcome in period – baseline.↩︎

  7. Mathematically: Depth contribution = Depth – Depth counterfactual.↩︎

  8. Mathematically: Duration contribution = Duration – Duration counterfactual.↩︎