Measuring your impact

At MaRS we’re committed to accelerating the growth of social entrepreneurship in Canada.  In our first social entrepreneurship white paper, “Social Venture Finance” we identified some of the key challenges facing social entrepreneurs and committed to providing some insights and resources to support the growth of social ventures.  A common theme in our research was the difficulty in establishing and measuring appropriate metrics.

Common business definitions refer to metrics as any type of measurement used to gauge some quantifiable component of a company’s performance, such as return on investment, employee and customer churn rates, revenues and so on.

However, there is a growing need and expectation for organizations with a social purpose to measure the impact of their work on society and/or the environment.  This is typically complex to do and existing methodologies appropriate for financial metrics do not serve them.  Some of the challenges entrepreneurs grapple with include:

  • How do you quantify and systematically measure goodness?
  • How much effort should be expended on getting the best possible social metric?

These were some of the questions that MaRS, along with RealWorld Systems asked the social enterprise community.  The research is summarized in our new Social Impact Metrics report, part of the Social Entrepreneurship series.  RealWorldSystems also built a database from their research that you can find here.

This Social Impact Metrics report is intended to be a solid starting point towards understanding the necessity for and further development of social impact measurement. It will be the first of a series devoted to this growing area.

At the MaRS “Impact Investing” event in December 2009, former PM Paul Martin and Social Capital Partners’ Bill Young said they fundamentally believe that without appropriate social outcome measurements in place, a social venture risks diverting from their core mission. The venture will disproportionately concentrate on reaching their financial goals because they are easier to quantify and therefore justify their investment.

Fortunately, there are organizations attempting to bridge the divide between traditional business and social impact metrics.  Recently, The Rockefeller Foundation, Acumen Fund and B Lab initiated the Impact Reporting and Investment Standards (IRIS), an effort to create a common framework for defining, tracking and reporting the performance of impact capital.

Drawing on the many tools and frameworks created to date, such as Jed Emerson’s Social Return on Investment (SROI), the IRIS initiative aims to create a much-needed common language that will allow comparison and communication across the breadth of organizations that are primarily driven by social or environmental impact.  Similar to the role that International Financial Reporting Standards (IFRS) plays for financial terms, IRIS provides a model for reporting on social and environmental performance.

Once these new methodologies are fully tested, social ventures can approach social investors with greater confidence in delivering return on investment and quantifiable social impact.  According to Antony Bugg-Levine of the Rockefeller Foundation, “the small but rapidly growing impact investing industry stands at a pivotal moment in its development. There is increasing interest and enormous potential—some say it could expand into a $500 billion industry in the next decade. But the basic systems and networks necessary to identify, vet and monitor investments efficiently are not in place.”

As a social investor, we encourage you to read this white paper and let us know what you think.

To learn more about the work of the Rockefeller Foundation around impact investing and social impact metrics, join us at MaRS as Antony Bugg-Levine speaks here on April 6.