Establishing an Evaluation/Quantification Framework
In impact assessment, it’s crucial to design and establish an impact evaluation framework and KPIs that are linked to broader challenges and societal significance while focusing on the true appeal and value of the company, business, or activity, rather than relying on checklist-style evaluations and quantification.
Moving forward, we will build the framework for evaluation and quantification in three major phases.
- Defining Evaluation Items and Constructing the Evaluation Framework (Impact Model)
- For each item, defining the necessary KPIs and parameters for quantification.
- Finally, as needed, adjusting the defined KPIs and parameters, confirming their usability, and considering their weights.
Typologies from a Qualitative Perspective on Impact
When constructing an impact model, it is essential to first delve deeper into understanding the nature of the impact you intend to achieve. For instance, even in the field of healthcare, “reducing public expenses” and “extending lifespan” represent different directions (note: this does not imply they are mutually exclusive). Therefore, considering the characteristics of your business or activity, it is recommended to categorize the impact in each domain into four major qualitative directions for better understanding.
Value Addition
Further improvement in quality of life, self-realization, enhanced social status, and more.
Maintenance and Enhancement of Basic Values
Clothing, food, shelter, basic health, infrastructure, security, and more.
Ensuring Economic Rationality
Economic viability, efficiency, affordability, and so on.
Ensuring Social Rationality
Environment, society, and more.
The alignment of challenges in each domain with one of the four typologies mentioned above is not a one-size-fits-all solution, as it depends on factors such as the cultural, social, and economic development levels and characteristics of a country or region, as well as the relationship and positioning of the public and private sectors. Therefore, the key point here is to “recognize different types of impact as distinct entities” and organize them as a structure in order to proactively avoid trade-offs and critical risks, as discussed later.
Furthermore, it’s important to note that the factors that underlie the background and can be essentially considered as assumptions when setting the above parameters are separate from what we refer to as “context.” The concept of context encompasses elements such as the following:
Institutional Factors
Pension systems, social insurance programs, and more.
Sudden Factors
Natural disasters, pandemics, and more.
Structural Factors
Aging population, climate change, and more.
Cultural Factors
Gender discrimination, occupational biases, and more.
Typologies from a Structural Perspective on Impact
From a structural perspective, there are three primary typologies for the ultimate impact that should be generated. Depending on each pattern, it is essential to review impact models and KPI settings as outlined below.
Those with a single well-defined purpose
- Sub-impacts (outcomes) can be broken down into smaller components.
- Involves specific related elements given in advance .
- (e.g., energy-related)
->KPIs can be examined during the breakdown of impact.
Those with trade-off objectives
- Involves two or more significant objectives.
- In such cases, establishing compatibility is challenging.
- (e.g., balancing the economic viability and maintenance of basic values in healthcare and caregiving)
->It is necessary to focus the examination on one of the impacts.
Those with independent objectives
- Involves two or more significant objectives.
- In such cases, compatibility is achievable.
- (e.g., energy and transportation infrastructure in next-generation cities)
->Can be considered as independent impacts.
Typologies of Impact Paths
Impact paths are defined as the relationships between each impact item (impact, outcome, output, activity), and they can be categorized into four simplified typologies:
Basic Patterns
We will begin by focusing on these patterns:
Direct Impact Creation
- Specific impact creation leads directly to the creation of the same type of impact (e.g., GHG reduction, etc.).
Stochastic Impact Creation
- Specific impact creation leads to the creation of various other impacts (e.g., time savings due to reduced household burdens, etc.).
Ancillary Patterns
It is recommended to consider and conduct negative checks for any negative elements associated with the impact.
Bottleneck Resolution
- Eliminating factors that inhibit or nullify specific impact creation, for example, contributing to the expansion of renewable energy through the use of energy storage.
Mitigation of Negative Impact
- Mitigating or alleviating side effects or negative impacts resulting from specific impact creation, for example, addressing regional disparities accelerated by healthcare reorganization.
Points to Consider in Model Design
While various patterns can be envisaged in the impact model, we present below some typical cases that can pose challenges when considering KPI calculation.
Pattern with Multiplicative Factorization
- In cases where a specific impact is related to the multiplication of two or more outcomes, it is advisable to avoid this pattern. This is because, when calculating individual impacts, you would need to fix the parameters of each other, making it challenging to handle in estimation.
Pattern Incorporating Multiple Directions
- In cases where a specific impact holds two or more directions (variations in KPIs), it is advisable to decompose the impact into two or more outcomes and express the directionality of issue resolution explicitly.
Pattern Leading to Multiple Impacts
- In cases where activities or processes inherently lead to multiple impacts due to various utilities, it may be unavoidable to have multiple impacts. However, it is generally advisable to express them with the intention of converging them into a single impact whenever possible.