Five Steps to Measuring the Impact of Your Social Enterprise

June 15, 2012 at 11:25 am Leave a comment

By Jacen Greene, Ames Fellow for Social Entrepreneurship at PSU

Darrell Brown

Darrell Brown, professor of accounting at Portland State University, recently led a session for the Social Innovation Incubator Circuit Program in his area of expertise—social and environmental reporting for business. Social entrepreneurs often face higher expectations than other firms in reporting their impacts to customers, funders, and partners, but impact measurement can also be an essential tool in validating and improving their model. Every social enterprise seeks to address a pressing social or environmental concern using business tools, and proper measurement can help them ensure they are truly making a difference.

1. Understand that “there is no intrinsic value to accounting”

Probably not a remark you would expect from an accounting professor, but Darrell Brown argues that measurement creates benefit in other areas, not simply by the fact of its existence. Measuring and reporting your company’s impacts takes time and money, so do it only if it creates real value: higher sales, an enhanced reputation, improved relationships with banks and donors, and most importantly, better practices. Real value exists in society and the environment; measurement should be used as a tool to understand how you’re creating (or destroying) that value. Don’t get hung up on measurement for the sake of measurement.

2. “Meet the audience where they are”

Before you start gathering data, you need to understand your audience. Potential employees? Donors? Customers? Supporters? Each approaches impact from a different perspective. Address issues relevant to them, use a vocabulary they understand, back up your statements with facts, and admit failures to help establish credibility. A great example is Patagonia’s “Footprint Chronicles,” a supply chain map aimed at consumers. Although it looks sophisticated, any company with a good understanding of supplier relationships could create something similar using Google Maps.

3. Information must be both useful and usable

Useful information is relevant, reliable, and leading. That means it’s meaningful for the intended purpose, accurate in what it represents, and can be used to predict future impacts. In short, the data enable you to make decisions that will generate a positive outcome.

However, data can be useful, but not presented in a manner that’s actually usable. How often have you seen a spreadsheet or PowerPoint slide that’s completely indecipherable? Even if you’ve collected fantastic data, it needs to be effectively communicated (both internally and externally), or it’s worthless. Usable data is credible, accessible, and engaging. That means sources and collection methods are transparent, you can understand it (and get your hands on the report), and  it grabs your attention. Sustainable Harvest’s 2011 impact report is a good example of a customer-friendly document.

4. Consider certification 

There are three types of certifications: process (think Food Alliance), product (such as organic), and affiliations (like Business for Social Responsibility). The number of available certifications can be overwhelming—Joel Makower calls it “Nascar syndrome” when products are covered in certification logos–but there are probably only a few that matter to your partners and customers. Find a certification that’s directly relevant to your model, says something meaningful, and helps customers understand your mission.

Service companies that may not qualify for Fair Trade, organic, or similar certifications can still apply for other marks of quality. One increasingly well-known certification for sustainable practices is the B Corp rating, which generates a numerical score for your company. A B Corp certification is one of the acceptable methods for Benefit Corporations, now a legal entity in eight states, to verify their sustainable practices. It also uses a common set of indicators, the Impact Reporting and Investment Standards (IRIS), that can help you measure your impact, simplify reporting through Salesforce, and share data with investors.

The Global Reporting Initiative (GRI) is a system that rates companies based on the transparency and comprehensiveness of their reporting. GRI reports can obtain certification, which simply guarantees the accuracy of the data. A full GRI report can be an expensive undertaking for a small firm, but the both the B Corp and GRI certifications send a clear message to consumers, funders and partners of your company’s commitment to impact.

5. Measure the important things, forget the rest

You can’t measure everything. Instead, pick the most important items—the ones that directly reflect your mission and impacts—and focus on those. For example, a social enterprise focusing on job training and re-entry for persons formerly experiencing homelessness or addiction would want to use the Social Return on Investment (SROI) calculation. But if you know what tool you’d like to use and  simply lack the staff time or money to conduct a full analysis, just select a few indicators and begin tracking and reporting on those. The IRIS indicators are a great, user-friendly place to start.

And once you have a good system for measurement and reporting in place, you may even feel that there is an intrinsic value in measurement: the satisfaction of knowing that you have the information to make your social enterprise even better at solving some of the world’s toughest challenges.

Tools and Resources

  • The TRASI database provided by the Foundation Center has a number of tools for measuring social impact.
  • The Roberts Enterprise Development Fund describes the process for creating an SROI, as well as evaluating the feasibility of a new concept.
  • seToolbelt offers an online library of social enterprise resources, including a list of impact assessment tools.
  • The Triple Bottom Line Initiative at Portland State University lists tools for measuring social impact.

Entry filed under: Impact Investing, Social Entrepreneurship. Tags: , , , , , , , , , , , .

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