New Deloitte Machine Learning Model Helps Predict and Quantify the Social Impact of Corporate Investment

New Deloitte Machine Learning Model Helps Predict and Quantify the Social Impact of Corporate Investment

As companies are becoming increasingly focused on the social impact of their business operations, Deloitte has developed a new Social Impact Measurement Model (SIMM), pioneering a machine learning tool that forecasts the results of a large corporate investment – such as opening a new office or headquarters – on a community, across more than 75 social measures. With a high degree of accuracy, the model quantifies the social impact of an investment at the US county level for the four years following the investment, and sheds light onto how different communities might respond with the same level and type of investment. The analyzed social measures span education; housing; family and migration; income and employment; transportation; and industry factors.

“With the rise of the social enterprise – those organizations looking beyond revenue and profit to understand their impact on society – many of our clients are raising the profile of purpose-driven outcomes,” said Janet Foutty, chair and chief executive officer, Deloitte Consulting LLP. “The Social Impact Measurement Model enables our clients to understand if their investments will pay social dividends, providing value to companies, communities and local governments.”

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Companies, communities, and state and local governments have traditionally focused on limited factors such as job creation, output and income figures to estimate the economic impact of new business operations in a given place. But many lacked the ability to understand social consequences. Deloitte’s SIMM seeks to address this gap by forecasting the results from a large capital investment – or what will or won’t likely happen in its absence.

“Businesses make many corporate investments each year, some of which induce fierce bids by local governments and generate strong debate,” said Darin Buelow, principal, Deloitte Consulting LLP and real estate and location strategy practice leader. “The ability to estimate the social impacts of a capital investment allows citizens, corporations, economic development officials, and other stakeholders to bring data to the debate, better informing decisions and portraying long-term social outcomes that were previously unknown.”

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The Huntsville Madison County Chamber in Alabama leveraged the SIMM to analyze the social impacts of eight investment projects in the region, totaling nearly $3 billion. Investments in two specific counties, Madison and Limestone, were projected to positively impact upward mobility factors, such as education scores and employment rates. Other forecast improvements included a 4 to 6 percent drop in child poverty and a 2 to 6 percent increase in test scores, depending on the county.

The SIMM does not isolate an investment as the sole cause of a change to a social measure. Rather, it creates a causal link between the investment and other contributing factors. In addition to measuring future impact, the SIMM also can take a rearview look and analyze investments made up to five years earlier. Why is this important? Because it helps businesses and communities evaluate recent investments through a social impact lens, guiding them to make better upcoming decisions about why, where, and in what they should focus investments.

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