It’s an ever-relevant question for organizations working on social change — how do we know that we are making a difference? Social impact is difficult to measure for so many reasons. The world is a messy place, and tracking influence, or change over time is a daunting task. So how do companies measure this social change?
Social impact measurement is a process of understanding how much social change occurred and can be attributed to an organization’s activities. The integrity of the process is usually bolstered by an impact statement and a clear impact-driven, stakeholder-focused strategy.
The Sustainable Development Goals (SDGs) were adopted by all United Nations Member States in 2015 as a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030. Many companies have integrated the use of these goals in measuring their social impact.
For example, the Sustainable Development Goal (SDG) Impact Assessment Tool was created to help visualize the results from a self-assessment of how an activity, organisation or innovation affects the SDGs. It aims to stimulate the user to get a better understanding of the complexity of sustainable development and the different aspects of the SDGs. The result is companies will be better equipped to prioritize actions ahead.
Most companies are also being evaluated and rated on their environmental, social and governance (ESG)performance by various third-party providers as a measurement of social impact. Many stakeholders are increasingly relying on these reports and ratings to assess and measure this form of performance for companies. With growing interest in ESG criteria, investors need a way to objectively assess the ESG performance of a company. These ESG ratings are designed to help investors identify and understand financially material ESG risks to a business. These unique scores are used by investors as a proxy of ESG performance. Companies that score well on ESG metrics are believed to better anticipate future risks and opportunities, be more disposed to longer-term strategic thinking, and focused on long-term value creation.
For example, third-party providers such as Bloomberg, Ecovadis, GIIN, and MSCI collect ESG data for thousands of publicly listed companies globally. They evaluate companies on an annual basis, collecting public ESG information disclosed by companies through corporate social responsibility (CSR) or sustainability reports, annual reports and websites, as well as through direct contact. These providers will penalize companies’ ESG ratings for “missing data.” For example, if companies are being rated on a scale out of 100, they will lose points if they do not report on specific environmental, social and governance indicators such as carbon emissions, climate change effect, pollution, waste disposal, etc.
Data in relation to social impact is where organizations tackle many difficult and complex challenges. Getting the right data and information at the right time is essential to understanding what an organization needs to achieve, whether it is doing what it set out to do, and what impact its efforts are actually having. Yet, despite many advances in methods of measuring impact, there is dissatisfaction across the about how data is — or is not — used.
Companies find it difficult to quantify and prove results that they intuitively know are occurring, and they can find themselves confused by methodological options within the data. Monitoring and evaluation directors deal with others’ unrealistic expectations and they are often frustrated with their organizations’ inability to integrate evaluation findings into concrete decisions about strategy. Donors are disappointed by the fact that evaluation has too often overpromised and under-delivered in its efforts to measure an organizations’ impact.
New data methods, tools, and analytics continue to expand, but organizations struggle with this profusion of options and choices and to effectively choose among and use data analytic tools and techniques. Despite a growing movement to incorporate the use of data to evaluate social impact companies find that assessing this data has been quite difficult.
It may seem like coming up with better impact measures like methods, definitions, and standards would solve this issue. However, common measures like these measure the wrong things and miss the real impact. Context affects how we ought to measure impact. The more contexts vary, the more likely it is that a rigid approach displaces a more insightful one. The more we rely on common measures to solve difficulties in measuring impact, the more we end up compromising the meaningfulness of social impact measures themselves. This is why we cannot focus on having a common measurement system, but rather focus on the analytical skills needed to compare social impacts without mandating a rigid set of required metrics.
To tackle this issue, Deloitte has created a new methodology that shows how social impact can be better measured through advanced monitoring, evaluation, and learning. Three straightforward principles — purpose, perspective, and alignment with other actors — can help reinvent the approach to measuring social impact, turning data into an asset that benefits both organizations and those they are looking to assist. Being clear on where organizations desire to go with monitoring, evaluation, and learning can spur willingness to embrace innovation and experimentation.
The first principle, purpose, is about the “why” of monitoring, evaluation, and learning. Data collection and analysis should aim to more effectively put decision-making at the center of monitoring, evaluation, and learning efforts. In other words, measurement should aim to inform better strategic, operational, and portfolio decisions. This may seem obvious, but many organizations have historically struggled to outline and track metrics that are meaningful for effective decision-making. It is very common for people, for instance, when trying to determine the effectiveness of some effort, to ask what key performance indicators are available. This is a form of the “streetlight effect,” the observational bias of looking for data where it is easiest to find and not necessarily the best place to look. The tendency is to rely on the data that is readily available instead of data that although more useful, would be harder to collect. First companies must be clear about purpose, then about approach, and only then about the right indicators.
The second principle, perspective, speaks to the “who” of measurement and evaluation. It is about reframing who gets to define what is needed, what results in success, and what impact interventions are having. Organizations must think about who benefits from and controls how data is collected and used. Although empowering data collection methods are important, perspective is about more than methods. It’s about using data to gain insight and serve equitable goals, to change organizational cultures to promote inclusion, and to provide information and data tools. The collection and use of data is itself infused with power dynamics — and the way this is done can address or perpetuate inequities.
The third principle, alignment with other organizations, concerns the “what” of monitoring, evaluation, and learning. It is about more productively learning at scale: improving learning from and with other organizations — about the good, bad, and inconclusive — to better match the scale and complexity of today’s social and environmental problems. For example, removing forced labor from the supply chain, curbing greenhouse gases, instilling a culture of health, or promoting gender and ethnic equity cannot be accomplished by any single organization. Although these organizations may not have the opportunity to coordinate their social impact efforts, they can teach and learn from each other’s experiences. A great opportunity exists to make a bigger difference more quickly if companies can better combine insights across multiple organizations. New opportunities to develop collective knowledge and integrated data efforts that promote learning of social issues can enhance the use of measurement.
Redefining impact measurement doesn’t necessarily mean coming up with methods that are entirely new. Central to any innovation process is to look for and learn from where innovation is already happening. In the case of impact measurement, many organizations are already integrating elements of the three characteristics just mentioned. Figuring out how to spread them and adapt them to new contexts can play a critical role in effectively finding a way to measure impact. What separates this framework from others is that it focuses on the analytical skills needed to effectively use social impact data. This methodology moves away from having a common measurement system and is the next step in redefining how impact can be measured.
By Mahir Chowdhury