IMPACT MEASUREMENT AND MANAGEMENT
Impact Measurement and Management are two sides of the coin for organizations looking to raise impact capital and continuously scale social impact through continuous learning and improvement.
IMPACT MEASUREMENT AND MANAGEMENT TODAY
Change is Emerging
Impact Investing Ecosystem
Impact Management project defines five dimensions of impact for each of its effects on people or planet: intended and unintended, positive and negative.
How to maximize the social impact of portfolios or programs in a short time? How do you understand the impact maturity of portfolio companies?
IMPACT MEASUREMENT AND MANAGEMENT OVERVIEW
What is Impact Meaurement Management?
- From counting “what” happens to understand “why” things happen
- Understanding how the “why” informs “what“ is important to measure
- Collaboration amongst stakeholders to select indicators appropriate to inform your decision making
- 01 What is the material?
- 02 How significant are the effects?
- 03 Who is affected?
- 04 What would happen anyway?
- 05 What are the risks?
WHY IMPACT MEASUREMENT AND MANAGEMENT IS IMPORTANT TO IMPACT INVESTORSIts all about understanding holistic impact and impact risks
IMPACT MANAGEMENT PROJECT
Reference framework for impact management
Impact Management project defines five dimensions of impact for each of its effects on people or planet: intended and unintended, positive and negative. For each effect, the level of performance is evaluated for all five dimensions.
The real challenge is that the investor should use a data-driven approach to assess impact. This is where Impact Cloud provides a flexible foundation of cross-reference services that allows the evaluator to assess results based on external and internal data.
Integrating Investor’s Impact Matrix
As investors gather better asset-based evaluation, the next task is to map their existing portfolio and then, over time, a transition that portfolio to be impactful in the way that best suits their intentions and constraints.
ASSET BASED VS SOCIAL IMPACT BASED
How Impact Funds Collect Results Today?
Private equity impact funds that often invest into the impact assets often have two types of investments.
Often invested into property or large assets such as solar farms, affordable housing programs etc in developed countries. The challenges of aggregating large assets is that often investee may not be motivated to provide all the results in return to the investment. While this may be initial hurdle impact asset manager can initially collect results and self-report, but as they grow they can work with assets to directly
Often invested into the property or large assets such as solar farms, affordable housing programs, etc., in developed countries. The challenge of aggregating large assets is that often investee may not be motivated to provide all the results in return to the investment. While this may be an initial hurdle impact asset manager can initially collect results and self-report, but as they grow, they can work with assets to directly
Social Impact Investment:
Social impact investment often focuses on social impact outcomes underrepresentation, under privilege, and emerging market. While investors and entrepreneurs often agree on key indicators to measure social impact, their data aggregation system is often weak.
- Most impact funds align around IRIS based impact indicators
- Often collect results in form of spreadsheets or do not collect any results at all
- Often aggregated results are often limited
- Use B-Analytics for GIIRS rating, but do not consider this as true social impact measurement
Depending on their relationship with investee they often work with investee to aggregate results, often in google spreadsheets or excel based approach.
INTEGRATING SOCIAL IMPACT FRAMEWORKS & STANDARDS
- Requires more flexibility to accommodate other qualitative/quantitative custom and standards-based metrics
- Requires a foundation metrics search, selection, data collection, analytics, and reports
End-2-End Impact Change
- Allows asset managers to define metrics specific to the context that is unique to each enterprise (asset).
- Allows enterprise and asset
managers tomeasure progress against their own unique targets.
simplifiedanalysis of assets with similar or different metrics.
- The results from different assets and asset managers can be nicely composed in a unified way, reducing tremendous data aggregation and reporting burden.
Still curious about an actionable impact management framework? Get a free copy of this e-book!
Impact Investing Frameworks
Using the language of impact investing is essential, whether you're working at a funding level (investors) or an asset level (i.e., receiving the investment). A shared impact investing language allows these stakeholders to define shared expectations for how the impact will be measured and reported. This is especially important if the deal structure is dynamic, based on reaching certain impact thresholds.
Standard Impact Investing Frameworks
- Sustainable Development Goals (SDGs)
- IRIS Metrics
- GRI Sustainability Reporting
The Sustainable Development Goals are a set of 17 objectives announced by the United Nations in 2015. The purpose of the goals is to spur global collaboration, mobilize capital, and catalyze new solutions to the world's most pressing problems.
The Goals enable organizations of all types to frame their impact in terms of these categories and measure progress using the UN's comprehensive indicators list.
For example, for SDG 7: Affordable and Clean Energy, there are 5 general targets and 6 indicators. The target is more of a global goal (e.g., "By 2030, double the global rate of improvement in energy efficiency") while indicators can be measured on an organizational level by funders and their assets (e.g., Indicator 7.1.1 is the proportion of the population with access to electricity.)
The most used impact investing metrics, IRIS, is a standardized system originally conceived by the Rockefeller Foundation, Acumen, and B Lab. They were built upon dozens of existing standards from a variety of sectors. Today, there are about 400 metrics in the IRIS catalog, which can be accessed for free. An example of an IRIS metric can be seen in the image below.
The Global Reporting Initiative (GRI) developed the world's first standards for sustainability reporting. Organizations use these standards to guide the information they disclose regarding social, environmental, and economic impacts. It also includes a set of principles to structure that reporting process further.
The GRI has a comprehensive resource center to help any organization start using the GRI as a reporting framework. This includes a document detailing how to link the GRI standards with the SDGs. For a document detailing how to connect GRI with IRIS metrics, click here.
IMPACT MEASUREMENT SYSTEM
Conversations with Jane Riesman and Veronica Olazabal
Learn Impact Management Project, IRIS+ & New Norms in Impact Measurement.
- How do you build an effective impact measurement system?
- What is the current state of impact measurement and management?
Watch the video to learn from Jane Reisman and Veronica Olazabal, sharing how to integrate standards, use different frameworks for different sectors, and incorporate impact measurement learnings from the data to make strategic decisions. Learn how Impact Measurement, Impact Management Project, and IRIS+ are advancing end-to-end impact management. Pandemic has pressured businesses, impact investors, and philanthropy to rethink social impact and sustainability. We must innovate upon traditional monitoring and evaluation.
Watch video: Impact Measurement Norms for Powerful Results
Conversation with Sara Olsen
We are at the beginning of an impact revolution. While the impact revolution may not be as big as the tech revolution, it has the potential to drive a significant shift from corporate boardrooms to nonprofits around the globe. The rise of new frontiers of social impact has given birth to so many unique models previously limited to the charitable model. Socially responsible investing, ESG, Impact Investing, Social Impact Bonds, Venture Philanthropy and traditional philanthropy, and more. Just impact investing is growing 100% year after year. As we all are familiar with data from the GIIN, impact investing continues to double every year in the last few years and is expected to reach $1 Trillion in assets under management by next year! While this growth is unique, the overall allocated capital is still tiny compared to the world's total AUM.
We also see more significant trends in the $36 Trillion ESG sector. While ESG is gaining pace, there are still major impediments for impact accounting. We are witnessing a rapid interest in those who are following ESG reporting to start looking at impact accounting and reporting to communicate their impact. In some cases, there is a remarkable growth in building an ESG framework that aligns writing around SDG and other impact management principles. These sectors need to grow beyond impact washing or SDG washing to sustain growth since investors need high-quality deal flow with proper impact evidence before they invest in the enterprises. Today in the webinar, we are blessed to have someone who has seen this trend for the last 24 years.
We’re very excited about today’s guest, Sara Oleson. Captivated by the idea that investors should not only report their financial performance but also their social ROI, Sara Olsen founded SVT Group, an impact management firm, in 2001. SVT Group is a “best for the world” certified B corporation and impact management firm that designs and implements systems to measure, manage, and communicate social and ecological impact. The firm has developed and assessed the social and environmental impact of over $9B in assets. SVT’s diverse and inspiring clients include Yo-Yo Ma, Beneficial State Bank, and CalPERS’ Environmental Investment Advisor. Sara is a co-founder and board member of Social Value US, the United States affiliate of Social Value International. Sara’s other exciting contribution is toward field building in the impact management space. I was very impressed and inspired to be part of a group of forty or so global leaders from around the world who convened last May at the Haas School of Business in Berkeley. Sara led this collaborative effort to drive toward consensus among impact management practitioners about essential practices. Everyone believed that Impact Management Project is critical in impact evidence and impact reporting. Second, most felt that stakeholder voice engagement is vital to gathering impact evidence.
An impact revolution is underway. Social impact management -- the end-to-end process of designing, implementing, measuring, and reporting impact -- is now more implementable than ever before.
Some naysayers would disagree or say that we haven’t really gotten anywhere meaningful in recent years in the creation, management, and accounting of social value.
But saying so drastically overlooks the fact that massive mindset changes occur across sectors, and with it, the emergence of the resources and tools makes that accounting actionable. Recently we heard Sara Olsen, and her ideas also resonated in this article, If I see one more post about the lack of progress on impact metrics, I'm gonna lose it.
Take note, impact practitioners, because in this article we’ll explain why it’s high time we stop complaining about “lack of progress” and instead make ourselves aware of the considerable progress that has been made.
And most importantly, get to know the right tools that can help put that progress to work in service of those stakeholders that matter most.
THE EMERGENCE OF IMPACT MANAGEMENT FRAMEWORKS
Recently we heard Sara Olsen do this talk, and her ideas resonated. They were as follows...."
Demand for social value accounting (driven largely by impact investors needing to be able to account for those returns) has led to the emergence of frameworks that can support that journey and help us get closer to a consensus about how to do that.
We’re not just talking about those early frameworks -- ESG, Venture Philanthropy, Social Impact Bonds, etc. -- which tend to be targets of criticism even while those critics overlook the inertia those frameworks have built to help us further refine impact management and creation.
We’re talking about frameworks developed by organizations like Social Value International (SVI) and the Impact Management Project. Both have developed frameworks that support the actionable implementation of impact strategy, from design to reporting.
Social Value International
We’ll start with SVI. Founded in 2008, the organization has been consistently developing clear frameworks to promote social value accounting across sectors. Specifically, they led the Social Return On Investment methodology, or SROI, which employs financial proxies to quantify social values (outcomes). They offer training and even accreditation, further promoting the movement towards standardization of certain practices. Also, SVI developed the Seven Principles of Social Value.
Source: Social Value International
It is no accident that “Involve stakeholders” is the first principle. Indeed, many of the following principles would not hold as much weight if they weren’t considered key stakeholders, especially beneficiaries, in mind.
In fact, in a recent webinar hosted by Sopact, Sara Olsen (founder of SVT group), when talking about impact management and the Seven Principles, emphasized: “If there is one universal in impact management, it is the importance of stakeholder's voice.”
Of course, probably all impact practitioners would agree with that. Actually, there has been little disagreement in the sector about the importance of each of the Principles developed by SVI.
However, a lack of resistance or disagreement doesn’t necessarily correlate to the widespread application of those principles, which brings us to our second organization that has developed frameworks to catalyze actionable impact management.
Impact Management Project
The Impact Management Project emerged to address those calls for more transparent impact management and measurement structures. Their primary directive is just what those critics have been calling for: consensus.
At this moment, they have successfully convened under their platform more than 2,000 organizations (including Social Value International and Sopact) to share best practices and debate technical topics to get closer to a wider consensus on accounting for social value.
So, in what areas has some consensus been reached? A significant milestone was reached when member organizations worldwide reached an agreement about the Five Dimensions of Impact.
You’ll notice that the SVI Principles developed before the Five Dimensions are clearly aligned with these five impact measurement areas. For example, Value Things That Matter is clearly aligned to the What and Who dimensions. Many of the Values encompass multiple Dimensions, demonstrating that SVI’s framework is a good place to start to implement impact measurement using the Five Dimensions.
So, what else is needed to go from consensus to action?
Practitioners need to have access to the right tools. There’s one in particular which can serve the needs of those practitioners, from end to end. But before sharing that tool, let's examine the buy-in element from key internal stakeholders because that will always be key before adopting any new tool.
GETTING BUY-IN TO INVEST IN AN IMPACT MANAGEMENT TOOL
One of the most significant perceived barriers to comprehensive impact measurement and management is that it is resource intensive. Any investment in platforms or consulting is perhaps not where organizational capital should be allocated.
But, of course, the cost is relative to the benefit. With the right tools and a good understanding of the actual value of the social returns, the investment is usually worth it.
How might one reduce costs in that process?
First of all, getting alignment between asset owners (e.g., investors), managers, and assets themselves about target outcomes is crucial. All parties need to learn from the data collected so that it can be applied to improve outcomes further.
This ability to derive and apply impact learnings from data is essential and is one of the benefits of investing in the measurement process in the first place.
Streamlining the alignment process, along with the effective and efficient design, implementation, analysis, learning, and reporting, will make that cost-benefit equation clear to even the most resistant executive or asset owner.
Sopact has created an online platform that enables practitioners to do those things from start to finish.
An All-in-one Tool for Your Impact Management Project Framework
Sopact’s Impact Cloud® allows asset owners and asset managers, and social purpose organizations to easily measure and manage their social and environmental impact.
And it was built with the stakeholder-centric approach in mind (remember SVI’s first Principle, Involve Stakeholders), with alignment to the Five Dimensions and shown in the image above.
Many of the platform's cloud-based tools are of the drag-and-drop variety, empowering even the less tech-savvy practitioners to wield impact data. Because it is cloud-based, everyone from asset managers and owners to the assets themselves can access the data, upload collected data, analyze existing data, or view results of analyses (understanding the impact learnings!).
Above all, it provides a place where collaboration can thrive, with no limit to the number of partners, countries, or metrics that can be managed.
Together, to sustain the considerable growth we have seen towards a consensus-based impact sector, we need to continue applying these emerging frameworks to avoid impact washing and obtain the real impact data that can help us achieve the global impact outcomes we seek to create.
It’s time for us to collectively roll up our sleeves and stop despairing about what still needs to be done in the impact measurement space and instead take advantage of the important progress made. It’s time we all started putting those frameworks and tools to fair use.
IMPACT MANAGEMENT RESOURCES
Resources at Sopact
- Actionable Impact Management
- Impact Management Project Strategy
- Social Impact Due diligence and Risk Management
- 17 Sustainable Development Goals: Which one is the Most Important?
- 5 Impact Learning When a Family Foundation Tried Impact Investing
- How Can Foundations Help Reach the SDG Targets?
- Aligning Your Small Business With The UN Sustainable Development Goals
- Impact Investing Funds & How to Find Your Ideal Match?
- 3 Tips for Managing Social Impact Measurement Projects
- How Can a Business Use Global Standards for Impact Reporting?
- Start Impact Conversation with Actionable Impact Management Guidebooks
- SDG impact data pipeline from enterprise to asset owners: Expectations vs. Reality
- Uniting the Impact Ecosystem: A Call for End-to-End Impact Management
- The Age of Impact Management - Importance & Principles
- How Ventures can Raise Capital through a Strong Impact Management Process
- The Future of Impact Management & Impact Reporting
- How Impact Management is Now Within Reach for all Impact Investors?
- New Trends in Impact Measurement and Management in 2020
- Design Effective Impact Experiment
Resources on the web