By Anna Fielding – Cohere Senior Associate

One of the more curious aspects of the debate about social purpose in business is the way it so often fixates on the moral purity of business leaders and decision-makers, as the crucial (or even sole) factor in deciding outcomes.

But as I’ve argued previously, this focus often obscures more than it reveals. The reality is that most businesses that struggle in their attempts to be impact-led aren’t held back by bad people, but by structural barriers and silos between groups, interests and values. 

Committing to a social purpose is challenging in a world built for shareholder primacy, but it’s even more challenging to make that purpose real across every aspect of your work. This often shows up in a gap between a company’s positive intentions and the reality of their day-to-day activities. How can your ambitions for positive impact flow through to the detail of your day-to-day decisions? And how can one organisation make a meaningful difference to society’s biggest challenges? 

One of the most useful tools to help close this gap can be found not in the business world, but in the social sector: a theory of change. A theory of change enables you to articulate the positive changes you want to see in the world, how you intend to contribute to those changes, and how your work fits into a wider movement for change. It maps a strategic path to impact, through a logical sequence of stages: 

  • Your inputs (things you use)
  • Activities (things you do)
  • Outputs (things you create)
  • Outcomes (changes that happen as a direct or indirect result) 
  • Impact (the ultimate changes you’re trying to bring about). 

These elements are often presented in a simple chain or a more complicated web of cause and effect, showing the flow between activities, outcome and impact. A theory of change should also reveal the assumptions you are making in every link in the chain, as well more general assumptions about the way the world works and the context in which you work. 

A good theory of change will act as the foundation of your strategy and your business model, and it will challenge you to align your core operations with your aspirations to positive impact – rather than pigeonholing impact as belonging to your sustainability team. For maximum rigour and buy-in, it should be developed with the active participation of everyone who has a stake in your work, within and beyond the boundaries of your organisation, particularly those whose voices are usually silenced or ignored. Developing a theory of change collaboratively improves the breadth of your vision, the logic of your theory, and the validity of the assumptions you make. 

And there will be plenty of assumptions, believe me. Theories of change are gross simplifications of complex systems, from the workings of internal departments to global economic flows. It’s impossible to map all the elements of complex social systems in a way that’s accurate and useful (the US military tried and the results speak for themselves). That’s why it’s vital to see your theory of change, including its assumptions, as a hypothesis to be tested in practice, to be refined as you learn from the results. 

This shouldn’t be unfamiliar terrain for business: corporate strategies, business plans and risk registers are riddled with assumptions about how the world works and how it will or won’t change in the future. But making those assumptions explicit in your theory of change requires a high degree of honesty and intellectual humility, meaning it can be a painful process for people whose modus operandi is confident certainty. 

Like strategies, theories of change have a strong element of choice. You can’t solve every problem and you can’t provide every possible solution, so it’s vital to identify the issues you’re uniquely placed to address and the most relevant capabilities you can contribute. Contribute is the key word here: no one organisation (and no one sector) can change the world on its own. Your theory of change should identify who you’ll collaborate with and what pieces of the puzzle you’re expecting others to bring. This is particularly important for structural barriers to change, including those that limit your own ability to be impact-led

With a strong theory of change, you’ll know why you exist, why you matter, and why you should have a social license to operate. You’ll have a clear understanding of how you intend to have a positive impact and how you plan to operationalise this across all of your work. And you’ll have a powerful tool for connecting with your customers and community. 

But intentions are not enough: your theory of change must be a basis for action. Do not begin the process if the end result will collect dust, a memorial to idealistic thinking and inspiring away days. But if you want to build a shared understanding of how your work contributes to change, surface your collective assumptions and uncertainties, and establish where you need to realign your activities towards positive impact, a theory of change is a great place to start. 

Image from @jplenio

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