Responsible innovation criteria for investors
As the RRI approach becomes more rooted in Europe and beyond, several stakeholders have become interested in and affected by its evolution and actual implementation. This includes the investors group. Among the many types of investors, increasing numbers consider environmental, social and corporate governance criteria to generate long-term competitive financial returns and positive societal impact. Depending on their emphasis, these investors are labelled green investors, community investors, impact investors, responsible investors and so on. Whatever their label, these investors consider not only financial performance, but also impacts the investment will have on social, environmental and governance practices. Thus, their investment analyses and portfolio selections rely on a set of criteria that complement traditional, quantitative techniques of analysing financial risk and return with qualitative and quantitative analyses of environmental, social and corporate governance policies, performance, practices and impacts.
Impact criteria and indicators
Further research is needed into the impact of incorporating RRI, including the development of objective measures of investment returns in order to demonstrate responsible innovation business cases. Nonetheless, there are existing documents and tools that can help investors define criteria for responsible investment. Check out the following examples:
The EC report Indicators for Promoting and Monitoring Responsible Research and Innovation highlights and considers options for RRI indicators. The emerging picture is quite complex and is populated by several dimensions and criteria: to make monitoring manageable, the report suggests using a limited, tailored set of indicators according to the user’s own needs, goals and concerns.
The MORRI project has collected a core set of 36 RRI indicators. Detailed descriptions of each indicator are provided in their Metrics and Indicators of Responsible Research and Innovation report.
For a more practical and operational tool, Karim’s Responsible Innovation Criteria aims to provide both an introduction to the foundations of the emerging concept of responsible innovation and a practical guide for implementing such an approach within a project. The manual provides a snapshot of the new opportunities that responsible innovation can offer to businesses, aiming to help companies reconsider their business models, develop new products, services or technologies, or even improve their production processes.
A simplified version of these criteria is available in the SIJ Toolbox, where criteria are presented in a simple-to-use Responsible Innovation Grid. This tool is an analytical grid and a methodology for evaluating the potential social, economic and environmental impacts of an innovation project, based on 24 criteria. The grid helps users translate sustainable development objectives into innovation projects and identify looming questions and margins for potential progress. It also shows the way forward by questioning users on potential changes to make or paths to take, and offers opportunities for creating project dynamics and developing corrective actions.
Tools for impact investors and responsible investors
The following tools are mainly for impact investors and responsible investors. SMEs tend to focus more on the goal and the impact generated by their products and services. Large companies mainly focus on the Corporate Social Responsibility (CSR) approach, which implies adopting a more holistic assessment of RRI, taking the whole value chain into account–assessing products, processes, and corporate governance criteria.
For impact investors, who primarily check the impact of a new product or service, useful tools for detecting social and environmental impacts, as well as financial viability and sustainability, are the Social Business Model Canvas and the One Pager Tool, both available in the SIJ toolbox. The Social Business Model Canvas supports ventures, enabling them to tell a compelling story about their social impact, their market, their financial performance and their implementation plan. The One Pager Tool is a one-page summary of key points in a business plan that, once developed, can be distributed to potential investors and angels.
The SIJ toolbox also presents tools for preparing and running responsible pitching sessions. The Pitch Deck is a guide that supports the making of the pitch for a social/responsible enterprise. The pitch highlights key elements of a company’s core business; it is a way to define company structure, clarify goals and plan how to achieve them. The Responsible Marketing Pitch is a half-day workshop where 10 companies pitch their innovations in front of 30 people (for example: 1 expert in communication, 2 experts in social and environmental impact, and a majority of responsible innovators), who use signs and a feedback document to give their feedback in real time.
For responsible investors, CSR criteria might be useful, as CSR clearly meets some RRI objectives. The EU’s DG Growth website hosts a dedicated section on CSR, presenting definitions, useful documents and guidelines and principles, as well as the EC strategy in this area. RRI suffers from a lack of tools devoted to assisting industry in implementing RRI principles. CSR instruments can help significantly because they were developed much more explicitly with private industry in mind -for example, dealing with dimensions such as human wellbeing, ethical acceptability, and risk management related to social, ethical and environmental issues. Small businesses can get help from two practical tools for SMEs and their advisors and investors: the Awareness-raising Questionnaire, which helps SMEs think about the company’s efforts towards responsible entrepreneurship by raising questions on the possible ways they could improve their business in a profitable and sensible manner, and the Tips and Tricks for Advisors (CSR handbook for small business advisers).
The Responsible-Industry project's report RRI Tool and Product Matrix offers a starting point for companies interested in RRI but unsure of how to implement the RRI thematic topics. Investors can use these same tools to assess their responsibility and make investment decisions. The report’s discussion about firms’ motives in engaging with CSR tools demonstrates that, irrespective of whether firms are driven by competitive, ethical or relational motives, they can all use CSR tools to embed responsibility in corporate structures and processes. Three main types of CSR tools are reviewed -standards, global initiatives, and principles- as well as how RRI fits with each. All tools refer to incorporating stakeholder concerns into business conduct (customers, suppliers, employees and the general public, but also shareholders and competitors). For example, the AA1000 Stakeholder Engagement Standard (AA1000SES) provides guidance on the quality of stakeholder engagement.
Also useful is A Report on Responsible Research & Innovation by Hilary Sutcliffe, RRI expert and CEO of MATTER, who recaps the mechanisms of anticipatory governance to better anticipate and prevent the negative consequences of innovation. Sutcliffe calls on investors to pressure for new governance that is effective, adaptable and responsive.
The role of foundations in promoting RRI
For good insight on how foundations and other philanthropic organisations (e.g., trusts, charities) can support a responsible approach to R&I, check out The Role of Philanthropy in the Promotion of Responsible Research and Innovation and the RRI Toolkit section How to Incorporate RRI in Policy/Funding Institutions.