Building Efficient Social Sector Initiatives Through New Generation Impact Measurement
March 3, 2016
The social sector is going through a massive change never seen before. Thanks to the advocacy of innovative foundations, impact investments are now becoming mainstream, along with collective impact programs and other initiatives like social impact bonds and Pay for Success programs. In the U.S. alone, impact (or socially responsible investing) has grown to $6.57 trillion. These changes allow for a shift from simple data reporting to outcome management.
Foundations are also shifting their philanthropic strategies toward a more targeted approach. As examples, we have the recent change at Ford Foundation toward combating inequality and a new generation of funders, such as Robin Hood Foundation in New York and Tipping Point in San Francisco. These organizations are now adopting outcome and impact measurement to ensure the success of the programs they fund. Many foundations are reducing their grant portfolio size in a shift toward with larger and often unrestricted funding. The overall result of this behavior is a higher engagement, and many more touch points throughout the grant process.
Major funding and program development organizations increasingly believe that a structural change in the social sector will happen when like-minded players start working collaboratively.
More and more, the success of new philanthropic models depends on the rise of collective impact initiatives and demonstrating impact evidence. “SSIR’s Metrics 3.0: A New Vision for Shared Metrics" presents a strong argument for a collaborative approach at the organization and the ecosystem levels, as the best way to achieve value generation in the social sector.
As these trends spread, we are witnessing the rise of thousands of collective impact ecosystems accompanied by improved impact investment models. These ecosystems incorporate different catalysts to social impact measurement. A few examples of diverting measurement interests include:
In this blog series, I will explore the key challenges in building an efficient collective impact measurement system. I will look at the transition from shared measurement to collective impact, and how impact evidence is critical for boosting the investor’s confidence and engagement.
|“The absence of a common impact language and supporting data infrastructure is a major barrier to achieving comparable and accessible impact data.”|
Good impact measurement has four major elements:
Let’s look at the first element.
Metrics have been cited since the creation of program-related investments (PRIs), which according to the Foundation Center are “investments made by foundations to support charitable activities that involve the potential return of capital within an established timeframe.” However, the state of current standards, frameworks and tools are too confusing for most people.
Funders can take months or even years to define core metrics and program/beneficiary organizations. The main reason for this delay is that the impact context differs between program/beneficiary organizations and impact aggregators such as funders and international development agencies.
A few scenarios and cases to consider:
Now, let’s suppose that one of the NGOs would also like to report other data to the foundation, such as cost and location of the immunization, since these factors have represented great challenges for them compared to other NGOs in the same program.
In this hypothetical case, the lack of a common context delays the selection of adequate metrics to capture the real impact.
Considering the SDG goals are global in scope, how can they address national, regional and local level indicators?
The bottom line: Whether the target is to build competitive social businesses and programs, or disruptive initiatives for basic services like education, the challenge is to identify programs focusing on common goals and build conjointly agreeable metrics.
There are many sustainability reporting standards available today. In fact, according to the Sustainability Disclosure Database and the Tri-State Sustainability Symposium, more than 10,000 organizations (firms and investment funds) are reporting to one or more standards currently.
At the same time, many UN agencies are using SDG indicators to fund billions of international development programs. And innovative community foundations, like the aforementioned Robin Hood Foundation and Tipping Point, have built internal metrics to measure outcomes from key programs that they support.
There are some catalogs and online services available, such as Global Value Exchange, which provide a decent aggregation of metrics.
But even with such systems, thousands of foundations, development agencies, businesses and nonprofits spend months just to pick metrics that meet their program goals. On the other hand, a big challenge lies in demonstrating collaborative impact even though similar organizations are reporting under different metrics.
Most successful standards such as IRIS, GIIN (commonly used for small and growing business reporting to investors), GRI, GRESB, CDP and SASB (commonly used for sustainability reporting to investors and other stakeholders), are still being used at the top-of-pyramid level.
These metrics are designed to communicate relative performance of social businesses that attract impact fund investments. However, their current approach is often limited to self-reporting, resulting in data that does not provide aggregated impact evidence of the overall program.
Collective impact and impact evidence are key to revolutionizing the social sector. First we need a new generation of impact measurement technology with the following key ingredients:
Also, if we want to encourage private capital to go into the social sector, we must demonstrate the success in programs like the ones mentioned above. To be successful, program agencies need to understand their performance against similar players and the best practices that others have adopted to achieve similar goals.
I believe that the highest efficiency in the social sector will only be accomplished when all the organizations start reporting with transparency on specific goals, and allow their data to be aggregated with other organizations’ in order to understand true collective impact.
Topics: Impact Management
Unmesh is the founder of the SoPact. SoPact is a personal vision that grew from 30 years of experience in technology, management, and the social sector.