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Social Impact Management

Strategy

Impact Measurement & Management

Step by step guide for impact investors & social businesses

Impact Measurement and Management Today

measure impact data"I want to learn from impact data but isn't  impact data collection and aggregation expensive?"

The answer? It doesn't need to be. Even though it is a common belief among mission-driven organisations that social impact measurement is too cost intensive, let us see why we can not get away from the need of impact data management tools and how instead of postponing it we can invest in it. And time is right now as finally, we can leverage new age technology.

 Impact investing has grown to $6.57 trillion in the U.S. While in any other industry such a large funding cannot skip measurement, we see little evidence of true impact measurement in impact investment today!

While the interest in impact investment is going mainstream, without a real understanding of impact we are likely to repeat the fiasco of Microfinance industry that took place a decade ago.

Though there is substantial evidence from international development agencies requiring to dedicate at least 5% of the budget towards Measurement & Evaluation (2011) and funders are asking for better impact evidence during their grant making process, a closer look at them shows a completely different picture. Aid agencies, foundations and impact funds define success metrics and receive regular Excel or PDF based results, but based on our interviews with different organizations we have found that many regulatory projects collect results from program agencies mostly for compliance reasons. Many of them simply don't have the tools to aggregate data in such a way that it can provide a comprehensive view. In fact, the situation is not any different for foundations or impact funds. Impact investing is still associated with financial return with a simple socially responsible label.

Also, while many corporates are starting to report sustainability through standards such as GRI, IRIS, GRESB, etc., their primary goal remains limited to a good PR instead of a systematic change. Most measurement in impact investment is limited to reporting for investors; in foundations, CSR programs, and international M&E projects it is still limited to reporting basic performance indicators.

 

Change is Emerging 

The biggest pushback comes from a common catchphrase used very liberally: "social impact measurement is expensive!". In spite of this common misbelief, there are thousands of social impact or M&E practitioners often building custom excel based frameworks again and again. Hiring such services has become an easy path for most organizations. But instead, they could invest in a system that can truly reduce the cost of measurement, since nowadays we have some fairly affordable technologies in the market.

However, due to lack of knowledge and evangelization of these new affordable tools, today's social sector is spending more than $230M (estimated considering US-based foundations and impact funds) plus over $1.5B (estimated considering US-based nonprofits) in impact measurement.

Even though cloud-based platform vendors such as Salesforce give away their technology in the social sector, most organizations do not have resources to successfully leverage power of the tool. 1.6 M of nonprofits need a more affordable and flexible data collection technology. The last five years have seen a massive amount of change with the potential to democratize or simplify data collection across the board. New age impact cloud solution can complete the data collection cycle with clean, constant, and integrated data pipeline to save time and money. To see other data collection tools review Is Impact Data Collection Changing?

 

Impact Ecosystem

Based on our personal journey we see that social development starts with an individual donor, impact investment or philanthropic organization. So, money for impact measurement and management should also come from the same source. In other words, if they are interested in moving the needle, they must have the ability to understand collective impact - whether they are foundations, impact funds, high impact nonprofits, or international development agencies. Some of the private capital and foundation are investing in civic technology like Nextdoor, Change.org, Waze, etc is a good start for civic engagement. However, none of these Impact Investing have invested in the tools that allow them to share their goals systematically, collect their results and drive change. 

See How to Leverage SaaS Technology for Social Good

We have invested in research to develop great methodologies and standards of metrics (like SDGS, IRIS, GRI, ESG, etc), now is the time to leverage new age technology to define, collect, aggregate, measure and manage the change. 

 

Listen in-depth summary and step by step journey to IRIS+, Impact Management Project and SDG Impact certification below ( Listen Time: 10 min )

Impact Management Overview

What is Impact Management?

Social Impact Management is a process of defining the positive and negative effects of enterprises and investors actions on people and planet, and then figuring out ways to mitigate the negative and maximize the positive impact. 

There is a growing need to improve both Impact Measurement and Impact Management both.  Because most organizations are still figuring out how to measure impact, impact management remains of utmost importance. It can help: 

  • From counting “what” happens to understanding “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

How to create impact management strategy?

Impact management is a continuous process, a continuous loop of understanding the people and planet, setting financial and social goals, and defining intentions and constraints - to be able to deliver and improve impact. Impact management, as described by the Impact Management Project has five dimensions, which are to understand:

 

1. What is material?

What is going to affect or be affected by the activities of an organization's intervention, and/or what will affect the overall performance of that organization? These are the material elements to be aware of.

2. How significant are the effects?

Thinking about the extent to which a program or intervention is expected to have certain outcomes, it can be useful to map the significance of those outcomes for the communities/beneficiaries involved.

3. Who is affected?

There should be a clear understanding of a) who the different stakeholders are for any given program, activity or intervention and b) how the execution of those activities is intended to affect those individuals or groups.

4. What would happen anyways?

Crucial and often overlooked is the fact that if your organization or intervention didn't exist, something would have happened anyway. Your impact needs to be assessed against that scenario to really understand the depth of the impact you created.

5. What are the risks?

Understanding the risks enables you to put in places processes to mitigate those risks and therefore be pretty prepares should such scenarios take place. This protects you and also the impact you seek to create for your beneficiaries.

These questions will guide organizations to start to improve positive impact and to prevent the negative.

Did you know that of nearly 500 international companies surveyed in 2017, 62% of them included the Sustainable Development Goals (SDGs) in their reporting? Furthermore, 37% prioritized the SDGs in their strategy, and 79% of those companies chose SDG 13 Climate Action.

What's most intriguing is that nearly 3 out 10 set quantitative targets and linked those to their societal impact. (Source: SDG Reporting Challenge 2017)

In other words, many companies are starting to align with UN Sustainable Development Goals. And yet, are they moving beyond simple impact washing?

It remains hard to tell because while there are multiple impact frameworks, standards, and tools available today, most organizations still struggle to understand and manage their impact.

 

 

Why Impact Management Is Important to Investors

Millennials are the fastest growing generation and are much more impact savvy than previous generations. They are asking hard questions beyond the simple "how many people did you impact. And, on the funder (investor) side, they have a more unique understanding of the nuances of impact portfolio composition.

One of the biggest challenges facing private equity, corporate, impact investors, and other asset owners is how to build a portfolio that defines and generates true impact. There is an ongoing effort by Impact Management Project (IMP) aligned with TONIIC T-100 and OCED group to solve this challenge.

According to Impact Management Project, "Asset owners are increasingly interested in the impact of their investments on society and the environment. Against this backdrop of growing interest from asset owners, asset managers are increasingly looking to assess and communicate the effects of investments on people and planet."

For Asset owners there is no single linear impact management process; the process is iterative, with different entry points. The time has come to apply a flexible approach that allows anyone to select and cross-link any standards like SDGs, IRIS, GRI, and Custom Metrics for their asset/investment/grantee. At the heart of the problem, Impact Management Project (IMP) is defining what’s called Portfolio Impact Categories, Assessment, and overall Portfolio Analysis tool.

This process is essential to asset owners because it catalyzes in-depth feedback from each asset. At Sopact during the last three years we have been experimenting and collecting feedback from hundreds of social sector companies, working with multiple standard bodies, and bringing in our experience to solve the challenge of building a similarly flexible integration of the entire impact ecosystem.

We have built the SoPact Impact Cloud to do just that. It simplifies all the impact jargon using a simple impact search enginealigning Theory of Change (TOC) with the processes put forth at the Impact Management Project (IMP).

Impact Cloud also enables a simpler metrics selection process, aligned with Sustainable Development Goals, IRIS, GRI, and even custom metrics based on your internal goals, and targets.

In Uniting the Impact Ecosystem: A Call for End-to-End Impact Management, we introduce the players in the impact ecosystems, all of which can benefit from our cloud-based solution, from Asset Owners, to Asset Managers, and Assets themselves.

 

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, level of performance is evaluated for all five dimensions.Figure: Five Dimension of Impact

 

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 both external and internal data.

Impact Categories & Evaluation

Figure: Working Example from Impact Management Project: Evaluation process for each effect based on a data-driven process.

 

Integrating Investor’s Impact Matrix

As investors gather better asset-based evaluation a next task is to map their existing portfolio and then, over time, transition that portfolio to be impactful in the way that best suits their intentions and constraints.

Investors's Impact Matrix 

The ultimate goal is to define a portfolio which maps all the assets who help communicate two important questions:

  1. Impact allocation for a portfolio that not only communicates composition by instruments and sector composition but also defines impact metrics of a portfolio. Such impact metrics can help clearly communicate a real impact footprint. For example, €220 billion portfolios of a pension fund may achieve much lower impact (because it focuses on avoiding negative impact) compared to the $10M portfolio of a family foundation that is focused on creating solution(s).
  2. Impact investors are now asking to provide an evidence of how their capital creates an impact or how beneficiaries are benefiting from the stated impact. This has been often a challenging subject as often outcome of impact investors are not aligned with an investee. Usually they do not speak the same impact language (e.g. defined outcomes), and often do not trust results/data collected from an investee. Creating an impact data pipeline from enterprise to asset owners through Impact ID describes how we can solve such outcome alignment and data trust issues between asset owners, asset managers and assets.

Integrating Social Impact Frameworks & Standards

UN SDGs, OECD, Social Value & Toniic T-100

During the last ten years, we have seen a rise in leading frameworks. We have also seen a lot of standards starting with Sustainable Development Goals (SDG) and IRIS/GRI etc. While these standards and frameworks are a good starting point, they are not sufficient to truly understand the impact of assets.

Other initiatives, such as TONIIC's T-100,  can help us build a more integrated framework ecosystem. For example, TONIIC’s T-100 provides a cross-linking between Impact Management, SDG, and IRIS.

Social Impact Frameworks

While these are definitely is useful, they still have few limitations:

  1. Requires more flexibility to accommodate other qualitative/quantitative custom and standards-based metrics
  2. Requires a foundation metrics search, selection, data collection, analytics, and reports

Many investors use this reference but they still have yet to streamline the process on their own. SoPact Impact Cloud provides a theory of change (TOC) & impact-management-project-driven life cycle management. An integrated approach helps asset managers and an assets both define, monitor and report impact results in a consistent manner.

End-2-End Impact Change Monitoring

Integrating Theory of Change 

Impact Cloud integrates SDG, IRIS & Impact Management framework defined by OCED, IRIS, and TONIIC. In fact, it even takes it a step further by delivering a flexible metrics catalog that not only provides enriched metadata at the metrics level but also cross-linked SDG goals, targets and indicators with GRI and IRIS.

On top of that, with each of the SDG targets, users can create a hybrid standard and custom metrics to further refine relevant impact (and context) metrics. This theory-of-change-based approach allows asset managers and the assets to collect data, report progress, evaluate, and analyze results to better communicate the impact to asset owners for capital allocation.

The Importance of Impact Data

Collecting the right data is a part of the impact management process. The right data enables organizations to more effectively report and communicate results. This will not only help organizations communicate to stakeholders, but also to future investors. Businesses are increasingly recognizing the significance of storytelling, not only as a management and leadership skill, but also as a key to get investors.

Technology can be leveraged to streamline the process for data collection, analysis and visualization to enable venture’s storytelling, which is powerful for strategic operational, financial and impact insights.

The key to the success of impact measurement & management is that the process be aligned with theory of change and should be completely integrated from impact framework creation, metrics selection, data collection, results tracking, evaluation, analysis, and communication.

Most Asset Managers today still aggregate results from the assets in an excel-based manual process. They often have a pseudo impact data aggregation framework, which requires investees or grantees to provide a data on a regular basis. Many even use B-Labs based B-Assessment approach. While they provide IRIS based frameworks to aggregate results most feel that this approach is too limited.

The best data aggregation:

  1. Allows asset managers to define metrics specific to the context that is unique to each enterprise (asset).
  2. Allows enterprise and asset managers  to measure progress against their own unique targets.
  3. Performs simplified analysis of assets with similar or different metrics.
  4. The results from different assets and asset managers can be nicely composed in a unified way, reducing tremendous data aggregation and reporting burden.

Impact Cloud reporting provides built-in widgets which beautifully provides an integrated theory of change model, and impact management reporting combined with portfolio or fund-level automatic reporting. The story-driven wizards allow dynamic table, charts combined with integrated impact learning and narratives from social media feeds.

Impact measurement and management ultimately enables funders to make better decisions based on a reliable and effective process.

Further Reading

Still curious about an actionable impact management framework? Get a free copy of this e-book!

 

 

 

Social Impact vs Asset Based Impact Investments

How Impact Funds Collect Results Today?

Private equity impact funds that often invest into the impact assets often have two types of investments. 

Asset investment:

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 

Social Impact Investment: 

Social impact investment often focus on social impact outcome under-represented, under privilege , and emerging market.  While investors and entrepreneurs often agree on key indicators to measure social impact, their system of data aggregation is often weak.

 

Impact Manager - Impact Investor Portfolio

Remember:

  • 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. 

Impact Investing Frameworks for better Social Impact Management

 

Using the language of impact investing is essential, whether you're working at a funding level (investors) or at an asset level (i.e. receiving the investment). A shared impact investing language allows these stakeholders to define shared expectations for how impact is going to 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)

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.

UN-SDGs 17 GoalsThe Goals enable organizations of all types to frame their impact in terms of these categories, and also measure progress using the comprehensive indicators list also provided by the UN.

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 population with access to electricity.)

IRIS Metrics

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 here. An example of an IRIS metric can be seen in the image below.

IRIS metric percent recycled materials

GRI Sustainability Reporting

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 further structure that reporting process.

The GRI has a comprehensive resource center to help any organization get started 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 link GRI with IRIS metrics, click here.

Impact Management Resources

Impact Management - Expert Views

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 which were previously limited to the charitable model only. 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 total AUM in the world.

 

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 to look at impact accounting and reporting as a way to communicate their impact. In some cases, there is a remarkable growth in building ESG framework that aligns reporting around SDG, and other impact management principles. To sustain growth, these sectors need to grow beyond impact washing or SDG washing, 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 of 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 are occurring across sectors, and with it, the emergence of the resources and tools which make 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 in large part by impact investors needing to be able to account for those returns) has led to the emergence of frameworks which 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 which support actionable implementation of impact strategy, from design to reporting.

 

Social Value International

 

social-value-internationalWe’ll start with SVI. Founded in 2008, the organization has been consistently developing clear frameworks to promote the adoption of social value accounting across sectors. Specifically, they led development of 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. In addition, SVI developed the Seven Principles of Social Value

seven principles of social value-1

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 with 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 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 widespread application of those principles. Which brings us to our second organization that has developed frameworks to catalyze actionable impact management.

 

Impact Management Project

impact management project

The Impact Management Project emerged to address those calls for clearer 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) with the purpose of sharing best practices and debating technical topics in order to get closer to a wider consensus on accounting for social value.

So, in what areas has some consensus been reached? An important milestone was reached when member organizations across the globe reached consensus about the Five Dimensions of Impact.

Five dimensions of impact-1

You’ll notice that the SVI Principles which were developed prior to 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. In fact, many of the Values encompass multiple Dimensions, demonstrating that SVI’s framework is a good place to start in order 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 adoption of any new tool.

 

Getting Buy In To Invest in An Impact Management Tool

 

One of the biggest perceived barriers to comprehensive impact management and measurement is the thought that it is highly-resource intensive, and any investment in platforms or consulting is perhaps not where organizational capital should be allocated.

But, of course, cost is relative to 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. Then all parties need to be able to learn from data collected so that it can be applied to further improving outcomes.

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

 

IMP-Framework – 2

Sopact’s Impact Cloud® allows asset owners and asset managers, as well as 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 the Five Dimensions as well as show in the image above.

Many of the cloud-based tools on the platform 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, whether that is to 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 in order 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 that has been made. It’s time we all started putting those frameworks and tools to good use. 

 

Current State of Impact Management. Conversation with Sara Olsen

 

Listen Webinar (1 hour)

 

 

 

Impact Management Rubric

Where to start impact management process

The following resource provides step by step guide to start impact management process.

Ref:  

http://www.engagedx.com/_/im4e/

Key Topics:

  • Impact Management Rubric
  • How to apply Impact Management Rubric

  Credit :  EngageX . Karl Richter

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