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.
Current state of social impact management
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 engine, aligning 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.