5 tools to measure the social impact of companies
By: Albert Vilariño Alonso
Tags: Sustainable Development, Corporate Responsibility, Social Impact, Sustainability

Note: This article was first published in Spanish and can be found here.

The sentence “what is not measured does not exist or can not be improved” is especially important and interesting when dealing with the measurement of the impacts of companies in their environment.

Beyond the discussion of whether the phrase is more or less true or applicable, one thing is clear and is the difficulty that organizations often have to quantify, assess and draw conclusions from their actions and activities related to corporate social responsibility and their efforts to contribute positively to society.

To assess these impacts, there are several tools that the Forética Social Impact Cluster has included in the guide “Midiendo el valor del Impacto Social Empresarial. Guía de herramientas de medición y valoración del Impacto Social Empresarial” recently published.

The measurement of this social impact will help companies to account for their social performance, externally value their contribution to society, improve strategic decision making and the management of expectations and results, and generate greater credibility in groups of interest such as customers, suppliers, investors or public administrations.

The social impact has already entered the business agenda

While in the environmental field there are already more standardized and consolidated measurement strategies, in the social field there is no consensus nor a single frame of reference, even existing methodologies with more than 20 years of existence.

All these methodologies have particular approaches, scopes and processes that must be adapted to each specific company and at the same time it makes it difficult for them to be used to establish comparisons of results and therefore be adapted as standards.

In addition, some organizations more concerned with these issues have developed their own measurement tools by developing existing ones.

Because all of this, it can be said that the social impact has already entered the business agenda.

For example, investors are integrating with great interest these impact metrics in their business models and in the valuation of investment opportunities.

The rapid growth of impact investment stands out in this area. which includes within its expectations of return, in addition to the financial, variables of environmental and social impact.

This social impact is also being integrated into public procurement and the concession and financing of large investment projects.

The public administration thus tries to have greater traceability on their projects, promote the social value of them and contribute to the improvement of the impacts.

The companies subject to this type of operation are the ones that, for the moment, are leading the efforts to develop measurement models and metrics that are increasingly more advanced.

The communities themselves also consider that they are interested in companies advancing measurement models that allow them to know and understand what the impacts of the activity are in the environment, since in this way they can control the process, legitimize their actions and contribute to the improvement of it.

Challenges and opportunities of measuring social impact

The methodologies for measuring social impact are still at a stage of incipient maturity, even in those organizations with greater exposure to the agents of change already mentioned.

Measuring social impact faces challenges, but also generates new opportunities.

Among the main challenges we find consequences of its novelty, such as the absence of a measurement model considered as standard and that is simple at the same time, the lack of management objectives in the field of measurement, or the lack of knowledge in the organizations for its implementation.

Also other challenges already existing in other areas of business management such as the lack of time and resources to devote to the measurement process, or the difficulty of obtaining and analyzing the data and material indicators.

On the contrary, as opportunities, the measurement of impact can bring about improvements in the reputation and external recognition and internal management, the generation of new business opportunities, the generation of a common culture and a shared purpose, or the contribution to Sustainable Development Goals (SDG).

Specific tools for specific cases

The Forética guide presents five different tools for the measurement of social impact, based on what it is specifically intended to be used for and to which interest group the result of the measurement will be directed.

The SDG Compass has also been added, although it is not a tool for measuring and assessing social impact, but it is relevant when assessing the contribution and impact of organizations in achieving the SDGs.

The Social and Human Capital Protocol is a methodological framework developed by the World Business Council for Sustainable Development (WBCSD) and emerges to respond to the need to try to create a homogeneous framework for the measurement and assessment of corporate social impact.

Its methodology is composed of four differentiated stages (object, scope, measurement and evaluation and application of results). It is a very complete framework, applicable to different sectors and industries, and can be used in conjunction with other models of social impact measurement.

The second proposed international tool, the LBG Framework, is a model for the measurement, management and communication of initiatives and projects of strategic investment in the community or social action based on an input framework (resources set by the company) and output (results obtained through the inputs).

It is also a useful framework for the measurement, management and communication of projects of third sector organizations, and is recognized by the Dow Jones Sustainability Indices (DJSI) as a best practice to inform the contribution to social action.

The Rockefeller Foundation, Acumen Fund and B Lab were the ones who devised the Impact Reporting & Investment Standards (IRIS) framework, characterized by being a catalog of benchmarks of performance (metrics) that guide and help impact investors to know the social, environmental and financial impact of an organization.

Its use is part of only one phase of the process of measuring social impact, which includes the identification of metrics or key measurement indicators. Each of the performance indicators are selected by each organization based on its measurement objectives.

For its part, the Social Return on Investment (SROI) is based on a purely economic indicator widely used in the business environment called Return on Investment (ROI) which includes the concept of social value (SROI), and we find it of two types: the forecast SROI and the evaluation one.

It offers a quantitative approach to understand and manage the impacts of an organization, project or initiative, assigning an economic value to each of the identified social impacts.

SROI refers to the perceived social value (not so much the economic value), which entails experiences, qualitative information, quantitative information and financial information about the changes that have occurred as a result of the results of an organization, project or initiative, thanks to which we can support strategic decisions.

Finally, the Socio-Economic Assessment Toolbox (SEAT)was developed in 2003 by the company Anglo American, and is an impact assessment model applicable to all stages of mine development.

The tool is designed to identify and manage social and environmental impacts from exploration to the closing of the operation, reflecting the complexity of managing such impacts in large-scale extractive operations at the local level.