Development impact

A development impact may be a new or somewhat unfamiliar concept to many companies. Development impacts can, however, often be a natural consequence of responsible business operations in a developing country. Aiming to achieve development impacts and identifying a company’s impacts can also open up new business opportunities. Here is an example of how the pathway to development impacts could be outlined:

1) Consider global challenges as opportunities. Presenting different perspectives to global challenges helps you link the contribution of your business to the big challenges. Example: the Finnish company Solar Water Solutions offers solar-powered water purification solutions in areas of rapid urbanisation. Sustainable Development Goal 7.

2) Act responsibly. Identify how you can make a difference with responsible business and how development impacts can become part of your business strategy. Take into account environmental, social and economic impacts. Our free application workshops and advisory services can help you identify and put a case forward for your impact.

3) Know your impact, set your goals. With some simple exercises you can begin to explore your impact. The following section introduces you to the UN’s Sustainable Development Goals, which you can use to help you set your own goals. For more information, see also the links at the bottom of the page.

4) Access new funding opportunities. There are many impact funding opportunities available. Such funding opportunities are linked to development impacts. The funding provider will also require reports.

5) Follow an example. There are several good examples of Finnish impact companies. Example: Perunamestarit is a company that develops potato cultivation in Tanzania, thus responding to the growing demand for sustainably produced food. Sustainable Development Goal 1.

The “Know your impact” guide helps companies to identify and articulate the development impact of their business activities. The guide helps companies to find new financing opportunities and to act responsibly. The guide was produced by Leapfrog Projects, familiar from Finnpartnership’s application workshops, and its material is based on the results of the Aalto New Global research project. You can read the guide here.

Finnpartnership is an operator in development policy under the Ministry for Foreign Affairs, and it contributes to supporting the achievement of the United Nations Sustainable Development Goals (SDGs).

These Sustainable Development Goals are a set of 17 significant development goals launched in 2015. The 17 goals have been subdivided into subgoals to facilitate the achievement of the goals and the measurement of the results.

The SDGs provide a global framework for achieving the challenging development goals. They provide a common language and framework for development funding and development cooperation.

It has been calculated that in order for the goals to be achieved by 2030, significantly more resources will be required than those generated through conventional development aid or measures such as money sent by immigrants. To achieve the SDGs, it is essential that new actors, especially from the private sector, are involved.

This is also the reason why Finnpartnership is working to help achieve the United Nations Sustainable Development Goals. By identifying the essential sustainability goals of their business, the applicants for the support can credibly validate the effectiveness of their business operations.

Here is a more detailed description of the Sustainable Development Goals. Each of the 17 goals also has subgoals; 169 in total. The SDGs are quite general and universal so that they can be applied to any industry.

You can also read more about the goals on the Ministry for Foreign Affairs, the UN and the Finnish Government websites.

Picture: UN.org

Goal 1: No poverty. End poverty in all its forms everywhere. Poverty manifests itself in various ways, such as economic and social inequality, or lack of educational opportunities or participatory powers. Everyone must have equal rights to economic resources as well as access to basic services.

Goal 2: Zero hunger. This goal focuses on ending hunger, achieving food security, improving nutrition and promoting sustainable agriculture. It is time to think about how we grow, distribute and consume food without burdening the environment and to ensure that everyone, especially the poor and people in vulnerable situations, have access to safe, nutritious and sufficient food all year around.

Goal 3: Good health and well-being. Ensure healthy lives and promote well-being for all at all ages. Although life expectancy has increased in many places, infant and maternal mortality rates have declined and vaccinations have become more effective, much remains to be done to eradicate many diseases and other health threats from the world. It is also important to strengthen the capacity of all countries, especially developing countries, to anticipate, minimise and manage national and global health risks.

Goal 4: Quality education. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all. Quality education improves people’s quality of life and acts as a vehicle for sustainable development. It is necessary to ensure that, by 2030, everyone has access to free, equal and quality primary and secondary schooling, leading to relevant and effective learning outcomes.

Goal 5: Gender equality. Achieve gender equality and empower all women and girls. Gender equality is not only a fundamental human right, but a necessary foundation for a peaceful, prosperous and sustainable world. This is why all forms of discrimination against women and girls must end everywhere.

Goal 6: Clean water and sanitation. Ensure the availability and sustainable management of water and sanitation for all. Water scarcity, poor water quality and inadequate sanitation negatively impact food security, livelihood choices and educational opportunities. Everyone has the right to safe and affordable water.

Goal 7: Affordable and clean energy. Ensure access to affordable, reliable, sustainable and modern energy for all. Sustainable energy generates opportunities – it transforms lives, economies and the planet. This is why the aim is to substantially increase the share of renewable energy in the global energy mix by 2030.

Goal 8: Decent work and economic growth. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all. Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not harming the environment. Everyone, including young people and persons with disabilities, has the right to full and productive employment and decent work.

Goal 9: Industry, innovation and infrastructure. Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation. This supports sustainable development and standard of living in all societies. Regional and trans-border infrastructure also supports economic development and human well-being.

Goal 10: Reduced inequalities. Reduce inequality within and among countries. Inequality can take many forms, and it is exacerbated by different educational opportunities, for example. Developing universal practices also turns the focus on the most disadvantaged and marginalised people.

Goal 11: Sustainable cities and communities. Make cities and human settlements inclusive, safe, resilient and sustainable.  Urbanisation is a growing trend worldwide, as more than half of the world’s population currently lives in urban areas, and by 2050 the proportion is expected to increase to 70%. Everyone has right to adequate, safe and affordable housing and basic services.

Goal 12: Responsible consumption and production. Ensure sustainable consumption and production patterns. Systematic collaboration and information sharing between consumers, manufacturers, researchers, decision makers, media, organisations and businesses is needed in order for the goals to be achieved. The 10-year framework of programmes on sustainable consumption and production will be implemented in all countries, with developed countries taking the lead, taking into account the development and capabilities of developing countries.

Goal 13: Climate action. Take urgent action to combat climate change and its impacts. A major proportion of the increased greenhouse gas emissions in the atmosphere come from the fossil energy we use. As a result of the increased emissions, the planet’s temperature may rise. An increase in temperature would have serious consequences for ecosystems, human safety, food production as well as health, for example. The Climate Objective supports the reduction of poverty and sustainable development.

Goal 14: Life below water. Conserve and sustainably use the oceans, seas and marine resources for sustainable development. Marine pollution must be significantly reduced and prevented, and marine and coastal ecosystems must be protected. Many of the oceans’ fish stocks are overexploited and global action is therefore needed to adopt measures that promote the restoration of the threatened stocks.

Goal 15: Life on land. Protect, restore and promote the sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss. Biodiversity is a vital foundation for Earth’s life-sustaining systems and forms the basis of our current and future welfare. The long-term sustainable use of natural resources is an important factor in enabling people to lift themselves out of poverty permanently.

Goal 16: Peace, justice and strong institutions. Promote peaceful and inclusive societies for sustainable development. Peaceful societies cannot be achieved in a context marked by violence and conflict. Everyone is subject to the rule of law and everyone has the right to an effective state administration with responsible institutions and transparency.

Goal 17: Partnership for the goals. Strengthen the means of implementation and revitalise the global partnership for sustainable development. Together with governments, the private sector, civil society, the UN system and other actors we can achieve the goals set out in the Agenda 2030.

The eligibility of supported projects is assessed from the development impact perspective. All industries approved by Finnpartnership have development impacts. Support may be granted to any sector not included in the exclusion list defined by the Ministry for Foreign Affairs.

In addition, the environmental impact of projects is assessed in accordance with separately determined environmental and social responsibility principles.

‘Development impact’ refers to the project’s estimated and actual direct and indirect impacts, such as the following factors:

• creating national income (additional value, such as wages, lease income, interest and profits that remain in the country);
• employment in the target country;
• diversifying production in the target country;
• state tax and other similar income in the target country
• technology and knowledge transfer;
• increasing the expertise of workers in the target country (education);
• working conditions and social benefits of the company and its environment (adhering to ILO provisions, occupational safety, wage levels, housing/health and other benefits);
• especially positive environmental impact (e.g. renewable energy or another production method that supports sustainable development);
• gender equality;
• improvements in the general infrastructure of the target country;
• currency reserves of target country.

The development impacts of some industries are listed below by way of example. Depending on the project, there may be others:

By supporting private and third sector projects in developing countries, Finnpartnership aims to enable and support the creation of development impacts and the channelling of investments to developing countries. Finnpartnership offers services ranging from idea level to the implementation phase of a project.

Business Partnership Support is a government grant awarded to Finnish organisations that aim to start or enhance long-term and economically viable businesses in developing countries that have a positive development impact. Business Partnership Support is intended for the assessment, pilot and training phases of such a project. The application, granting and reimbursement process for Business Partnership Support is managed by the Ministry for Foreign Affairs in cooperation with Finnpartnership.

Business Partnership Support can be applied for by organisations that are registered in Finland or Finnish-owned (company, association, organisation, etc.) for countries listed as developing countries by the OECD Development Assistance Committee (DAC).

The Ministry for Foreign Affairs is responsible for the development policy implementation, the application process, grant decisions and reimbursements for Business Partnership Support.

The Finnpartnership programme, operated by Finnfund, provides the Ministry for Foreign Affairs with consultancy services related to the service, such as training, marketing and advisory services, as well as the expert analyses required.

In addition to Business Partnership Support, Finnpartnership supports the achievement of sustainable development goals through Matchmaking as well as education and advisory services, including separate SDG training. Free application workshops and environmental and social responsibility consulting help companies to identify the link between their sustainability goals and their business.

Finnpartnership organises monthly application workshops in collaboration with Business Finland’s Developing Markets Platform and Fingo, where participants are provided with advice on how to apply for the funding. The workshops help identify the potential development impact and participants learn to describe their impacts in an understandable way. The workshops are also a free opportunity to learn more about development impact. The workshop schedule can be found here.

Companies applying for Business Partnership Support are also offered a free consultation on environmental and social impact, which aims to promote sustainable project implementation, the creation of development impact and risk prevention. Read more about the consultancy services in the section ‘Environmental and social responsibility’.

Matchmaking refers to identifying and promoting business partnerships between organisations in Finland and in developing countries through marketing and direct contacts.

The goal of the Matchmaking service is to bring together companies in Finland and developing companies that have the potential to enter into commercial cooperation. Matchmaking can lead to development impacts in the target country through increased bilateral trade or the creation of a joint venture, for example.

The main tools of the Matchmaking service are the Matchmaking database on the Finnpartnership website, directly connecting companies, events in Finland and developing countries as well as the Team Finland cooperation, company spotters and other networks.

All Business Partnership Support projects must aim to have a positive development impact in the target developing country. Projects’ development impact assessment plays a key role in the preparation of Business Partnership Support decisions.

The applicant must first assess its project’s development impact as part of the application by answering both open-ended and closed questions. The applicant must also make a written commitment to comply with the laws of the target country as well as international regulations. Finnpartnership reviews the applicant’s assessment of the project’s development impact. Development impact training and related communications can be accessed at Finnpartnership’s monthly application workshops; it is recommended that all applicants attend these workshops.

Finnpartnership staff analyse the development impacts of the submitted Business Partnership Support applications using their own expertise, Finnfund experts and development impact assessment tools. Since the support is often targeted at the early stages of projects, the development impact assessment is carried out by evaluating the impact that, if successful, the project is likely to create in the future. The development impact assessment assesses both direct and indirect impacts. Finnpartnership experts may contact the applicant, if necessary, for any additional information required to carry out the development impact assessment.

Projects are scored on the basis of the development impact assessment. Finnpartnership staff also evaluate applications in terms of the applicant’s expertise, financial and human resources as well as the viability of the project.

The measurable development impacts identified in the project development impact assessment policy include: impacts in the target country on employment, gender equality, improvement of work-related skills, knowledge and technology transfer, diversification of production, improvement of overall infrastructure, working conditions and social benefits in the company and its environment, especially positive environmental impacts such as renewable energy or other production methods that support sustainable development.

Particular attention is paid to the project’s potential negative and positive environmental and social impact. The environmental and social impact assessment of applications is carried out by a Finnfund expert who classifies the projects, gives them requirements and recommendations and provides guidance to applicants.

Finnpartnership adheres to clear guidelines as to which projects are not eligible for support. The guidelines can be read here.

The final decision on the grant is made by the Ministry for Foreign Affairs, using Finnpartnership’s assessment. If necessary, the Ministry also draws on reports by other experts before making the decision.

Finnpartnership’s main principle is that projects aided by Business Partnership Support are to adhere to internationally accepted environmental and social responsibility standards and local legislation pertaining, among other things, to the environment and employee rights.

The basis of the projects’ environmental and social responsibility evaluation are the World Bank and IFC (International Financial Corporation) standards that govern environmental and social impact and their management and are accepted by international financing institutions (for further information see the IFC Performance Standards and World Bank Group EHS Guidelines). It may be an advantage to the project if it applies higher standards than those mentioned above.

It is important and beneficial to the company to consider and manage the environmental and social impacts and risks already very early on when preparing the preliminary plans for the project.

Applications for Business Partnership Support can be submitted for investigating environmental and social impact as part of the feasibility study (e.g. environmental and social responsibilities associated with the activities of the business partner and when selecting a location for the business). If necessary, the applicant may seek advice on how to apply the above-mentioned standards in projects from Finnpartnership, which uses Finnfund’s environmental experts in issues related to environmental and social responsibility.

An environmental expert will classify the projects based on their expected environmental and social impacts. The nature and phase of the project significantly affect the level of detail in the analysis and the necessary information. The aim is to ensure that the project includes as few as possible negative health, social or environmental impacts.

Environmental classification

• Environmental Class A: a project that may have significant negative environmental impacts that could potentially extend beyond the project’s location. In practice, this refers to new production facilities and significant expansions to production facilities in critical industries and projects which are located in sensitive areas or in their immediate vicinity or that may have a negative impact on sensitive areas, for example.
• Environmental Class B: a project that may have some negative environmental impacts, which are however less impactful and can be better managed than in projects classified as Environmental Class A.
• Environmental Class C: a project that does not have any, or only minimal, potential negative environmental impacts.

The basis of the social impact classification of projects is the potential negative social impacts of the project. Special attention is paid to projects that have the following characteristics:

• The project is in primary production, in forestry, agriculture or mining, for example, or employs a significant amount of uneducated and/or temporary workforce.
• The project is in a labour-intensive industry (especially in special economic zones).
• Production within the scope of the project utilises raw materials or processes that are a health hazard.
• Implementing the project may require people to be relocated or the project reduces work opportunities for the local community.
• The project is a privatisation project that may result in vast layoffs or reduce the availability of the community’s existing basic services.

In addition, the reports to be drafted using Business Partnership Support (e.g. project study, business plan, environmental and social impact assessment) are subject to specific additional quality requirements for those projects that may have significant negative environmental and social impacts.

Consultation on environmental and social responsibility and human rights

Finnpartnership offers Business Partnership support applicants a free consultation (so-called vouchers) for identifying and anticipating project-related environmental risks and risks related to social and human rights. Consultations are offered primarily to projects that due to their industry or target country, for example, have a particular need to identify and consider risks. The consultation is carried out by consultants appointed by Finnpartnership.

Finnpartnership experts and Finnfund’s environmental experts can also be consulted on how to consider environmental and social responsibility and human rights issues in individual projects.

Finnpartnership will provide more detailed information, upon request, on the criteria for assessing projects’ development impact, environmental issues and social responsibility.

Finnpartnership aims to ensure that supported projects are sustainable in relation to the economic, social and environmental criteria.

The basis for the evaluation is the feasibility of the projects especially in regard to their financial feasibility, profitability and suitability as funding targets. Financial profitability is an important part of development impact. Profitable business is likely to be long-lasting and will generate further development impact in the future.

The purpose of the Business Partnership Support is to support projects that have a realistic possibility of becoming profitable and that:

• promote the development of the target country;
• adhere to the laws and requirements of the target country;
• fulfil international standard requirements for environmental and social matters.

In the application, the applicant must show that they have experience and sufficient commercial knowledge of the project industry. The applicant must also have sufficient financial and human resources to implement the project plan. If external sources of funding are to be used to finance the project, the project’s business idea may also be evaluated from the perspective of the funding provider.

Development impacts are assessed during and after the project. Business Partnership Support is paid retroactively in one or two instalments, once the recipient of the support has carried out the activities included in the project budget.

Upon a reimbursement request, Finnpartnership checks the progress of the project as well as any issues, such as compliance with any requirements and recommendations issued to the project. The reimbursement is only made if the recipient of the support has complied with the support terms and requirements issued.

An assessment of the development impact is carried out with each reimbursement request. The applicant must describe the project’s progress, results and impact and future steps in the reimbursement request. Since the support is mainly targeted at the early phases of the project – reports, studies and surveys – not every project has had development impacts when a reimbursement request is submitted. Reports can, however, be used to identify development impacts that have been achieved and those likely to be achieved in the future.

Tangible development impacts are usually created only after the support has expired, when the business or cooperation in the target country has been properly launched. In order to also measure the potential development impact after the support has expired, the recipients of the support report to Finnpartnership on the development impact of the projects:

• in the final report when requesting reimbursement;
• in the first follow-up report (the year following the project’s expiration); and
• in the second follow-up report (the year following the first follow-up report).

Applicants are obliged to respond to monitoring questionnaires sent during the two years following the expiration of the support to determine the impact of the projects in the target countries. Finnpartnership reviews the recipients’ responses and compiles an annual follow-up report on development impacts and results.

You can also read more about the projects supported by Finnpartnership on our Success stories page.

Get an excellent insight into development impacts and responsible business in Finnpartnership’s monthly application workshops. You will also learn to evaluate the suitability of Business Partnership Support and the Matchmaking service to your project.

Know your impact booklet offers interesting ideas on how to identify development impacts and what business opportunities they can create.

Finnpartnership’s development impact reports can be found here. Find out more about what kind of projects have been supported and what their outcomes and impacts have been.

Here, you can read some success stories and get inspired by previously supported projects around the world.

Read more about impact investing on the Sitra and Finnfund websites.

Read more about the UN’s Sustainable Development Goals (SDGs).

https://unric.org/fi/kestavan-kehityksen-tavoitteet/

https://go-goals.org/fi/

https://kestavakehitys.fi/agenda-2030

https://um.fi/agenda-2030-kestavan-kehityksen-tavoitteet

https://sustainabledevelopment.un.org/topics/sustainabledevelopmentgoals