Progressive businesses are increasingly seeking to define their impact on society and tackle pressing social issues, from improving health and access to safe water in developing countries to creating education and work opportunities for underprivileged communities.
The smartest among them are addressing those issues that are most important to the longevity of their business, building relationships in emerging markets and identifying tangible commercial opportunities by ‘doing social good’.
Since the launch of the Social Stock Exchange (SSE) in June 2013, some companies, including renewable energy firm Good Energy, can officially refer to themselves as ‘social impact businesses’.
“The core product or service of all companies listed on the SSE exists to solve a specific social issue,” explains Pradeep Jethi, Founder and CEO of the Social Stock Exchange. “Typically, at least two thirds of their revenue is derived from making a positive contribution to society.”
Jethi sees social impact as separate from traditional CSR initiatives, which he defines as instances where companies first make money and then give back to the community. Social impact in the business context, he believes, is the ‘sweet spot’ where social good and commercial interests meet. And investors are responding to the increased transparency offered by ‘social dividends’, he confirms.
Getting off the starting block
Isolating the effects of a company’s actions on complex social systems is a steep challenge, particularly when it comes to capturing the impact of the entire value chain.
Cost associated with intensive data collection and authentication, and establishing a ‘social baseline’ can prove challenging. Then, there’s defining what activities are impacting whom and where, and planning what to measure and how to measure it – not easy given the myriad of techniques available.
Moving further to establish whether certain activities are really helping to improve the issues they’re intended to tackle, and to what extent, is even harder. And ultimately, can any positive changes be directly attributed to your company’s actions?
“There’s no silver bullet,” says Jethi. “The most important thing is crystallizing your intention at the outset, aligning it with your business model and creating a theory of change – a map that plots your social impact journey. Everything should be measured in relation to your intention.”
Adopting a holistic approach
An organisation needs to be culturally ready to address and measure social issues, according Gayle Peterson of Oxford University’s Saïd Business School, and it can take years for a company’s true impact to become clear.
“The commitment to driving social change has to come from the top,” says Peterson. “Inspiring a willingness to tackle social issues is fundamental, as is collaboration, empathy and honesty about what’s working. Companies need to develop strong stakeholder partnerships, engage with people on the ground, prepare for the complexity of tackling social issues, and recognise the risk of unintended negative consequences.”
Selecting the right measurement technique
There’s no ‘one-size-fits-all’ solution when it comes to measuring social impact, Peterson and Jethi agree. It’s about tailoring the techniques available to fit a company’s social strategy.
- Mapping the social value chain
A popular method used by impact investors and social enterprises is mapping the social value chain. This starts with understanding inputs (financial and human resources), outputs (specific metrics to quantify the number of people reached by a particular initiative), outcomes (the consequences) and finally impact (the overall difference it makes to people’s lives).
- Running randomised control trials
Social impact consultancy ID Insight recommends using randomised control trials – comparing the outcomes experienced by a beneficiary group with a ‘control’ group unaffected by an initiative – to clarify the difference a company has made. This is particularly useful for companies seeking to measure their impact on millions of individuals.
- Calculating Social Return on Investment
The Social Return on Investment (SROI) model is a set of seven principles for creating a comprehensive overview of a company’s social impact. It includes the ability to monetize the outcomes, although this is of secondary importance to the journey of stakeholder engagement it advocates, according to SROI experts at nef consulting.
SABMiller is using SROI to track the progress of its ambitious 4e ‘Path to Progress’ entrepreneurship programme in Latin America, where 60% of its revenue is derived from small retailers. Having launched the project in 2013, it plans to invest $17m over five years, reaching 40,000 retailers and up to 10 million people through their families and communities.
By equipping people with business, life and leadership skills, the company aims to help them succeed commercially, improve their families’ quality of life and become a force for good in the community, according to SABMiller’s Catalina Garcia.
The programme follows the success of a pilot project in El Salvador, which reached 600 retailers and helped to increase retailers’ total sales by 39%, while improving the quality of life of some 57% of participants.
- Reporting via the LBG framework
LBG is described as an ‘international standard for measuring corporate community investment’. It’s used by more than 300 companies worldwide to evaluate the performance of their social contributions, and typically covers CSR and philanthropic activities such as cash, time and in-kind donations.
- Seeking stakeholder feedback and independent analysis
Stakeholder feedback is vital to understanding impact. Sky is seeking stakeholder feedback and independent analysis on the impact of the Sky Academy, its major social initiative to build the skills and confidence of one million young people by 2020 through sport, entertainment and the arts.
The company’s specialist education research partner – Chrysalis – reviews and analyzes the students’ responses to understand how well the Academy’s programmes are fulfilling Sky’s intention. This involves online surveys, case studies and interviews with teachers, mentors and students. Sky then uses the research findings to make improvements, as well as evaluating the influence on brand favourability.
“The qualitative aspect of understanding social impact is just as important as selecting the right measurement framework,” says Rachel Depree of Sky. “By sharing people’s stories, we’re making a compelling case for further investment.”
Some 12,000 young people visited the Sky Academy Skills Studios in 2012, with preliminary research revealing that 93% of teachers agreed it helped to develop students’ creativity skills. Similarly, more than 1,500 schools participated in Sky Sports Living for Sport projects in 2012-3, with 96% of participants showing improved self-confidence.
- Combining social impact with carbon offsetting
Just this month, Jaguar Land Rover (JLR) announced its intention to create opportunities for 12m people by 2020. It plans to improve the lives of at least 5m people through its carbon offsetting projects with ClimateCare. Similarly, in 2013, Aviva became the first company to include the social impact generated from its carbon offsetting projects within its LBG report – recording 200,000 lives improved. Both JLR and Aviva are using the framework to monitor and compare the performance of all their social activities.
“Clients are increasingly asking us to help them reach their social goals through their offset projects,” explains Rob Stevens of ClimateCare. “And they want to be able to equate their input with a result. For example, Jaguar Land Rover is now supporting an entire geographic region – 700,000 people – of the LifeStraw Carbon for Water project.”
ClimateCare applies its experience of the rigorous carbon monitoring process to measuring social impact. Following the social value chain, it conducts carbon and social monitoring simultaneously to understand how individual households are using equipment such as clean cookstoves or water filters.
Looking to the future
As businesses continue on their social impact journeys, there’s plenty of opportunity to learn from and collaborate with social enterprises and NGOs. And while standardization is still some way off, the drive to understand best practice in measurement is firmly underway.
Ultimately, achieving greater proficiency in measuring social impact will help companies to prepare for the next big step – the shift to reporting net positive impacts – as big business gears up to make the move from ‘doing less bad’ to make a positive contribution to the environment and society.
This article was originally published on the 2degreesnetwork site.