Social Impact Measurement: A Necessity, No Longer Just An Option
The Triple Bottom Line: people, planet, profit (preferably in that order). It is the idea of an economic system, business ethos and societal mindset that holds the lofty goal of maximizing value for all stakeholders rather than simply for the benefit of those moving the levers. No longer the “pie in the sky,” a sustainable, socially-responsible approach — often referred to as a ESG (environmental, social, governance) — is slowly becoming the standard to which, business in particular, is being held. “Eventually,” CEO of Brazilian impact investing firm, Positive Ventures predicts that, “what we call ‘social business’ now will soon just be called ‘business.’ There won’t be any difference.”
The demographic driving this trend is the segment of the global population referred to as ‘Millennials’ — loosely understood to be those born between about 1982 and 2004 — who now make up the largest share of the work force and are increasing daily in their global purchasing power. Research from Morgan Stanley shows that 86% of Millennials are interested in socially-responsible investing and are twice as likely to invest in a stock or fund that has social responsibility as part of its value creation thesis. The options available to meet this demand are growing, from prominent corporate social responsibility (CSR) initiatives in companies without a focus; to impact investing (an approach that looks to maximize social as well as financial returns); to even social businesses such as Tom’s Shoes and the microfinance companies whose profit motives are predicated on increased social impact.
It is a profound shift in societal expectations, as the private sector is increasingly expected to leverage its profit-driven efficiency for social good, a trend that interestingly-enough, has had knock-on effects on what is often referred to as the third sector of social non-profits. As a generation that has grown up with the internet, Millennials have made their presence felt when it comes to charitable giving. Online giving grew 7.9 percent in 2016 alone, with nearly 17 percent of online donations being made on a mobile device as mobile-optimized non-profit websites and crowdsourcing platforms have become commonplace. This means that there is a growing scrutiny of the non-profit sector about how the billions given each year in donations are spent, in a trend that matches the new standards expected of the private sector. Most prominently, this has meant that organizations with social missions of all types are realizing the need to measure their social impact.
Quantifying impact through social impact measurement is a fairly new concept that seeks to bring the structural rigor, private sector efficiency and most importantly, performance accountability, to a third sector that has traditionally neglected all these things in pursuit of their missions. It is no longer enough to simply say you are doing good; rather, increasingly, an organization needs to show how much good they are doing, the long-term effects of their actions and show the pathways to improving the good they do.
To this end, social impact measurement solutions and methodologies abound. The innovative B Lab provides an excellent an excellent assessment tool that is especially useful in helping organizations identify internal areas of improvement to optimize operational social impact, while many impact investor firms build their own sophisticated proprietary models tailored to their own impact specifications.
At Simpact, we sought to fill the need for the social impact quantification of an organization’s external activities but who lack the resources to build their own proprietary frameworks. Our third-party tool utilizes the Mission Alignment and Theory of Change social impact measurement schools of thought to easily, affordably and comprehensively assist any organization in gaining a high-level understanding of the impact of their external activities, the degree to which these activities align with the changes they want to see in the world, as well as a clear and compelling method of communicating their impact to the outside world.