Social impact is the impact that a business’ activities have on society. But, how can something as broad as social (or environmental) change be measured, and what does impact reporting look like? This article provides information on measuring social impact and impact reporting for businesses and social enterprises and will provide you with measuring impact tools.
Table of contents
- What is Impact Measurement for Business
- A Good Impact Statement
- Why Should Businesses Conduct Impact Measurement?
- Handy Frameworks for Measuring Impact
- How Do You Evaluate an Impact?
- What is Impact Reporting?
- Why should a business report its impact?
- The Principles of Good Impact Reporting
- Types of Impact Reports
- What should an impact report include?
- How do you write an Social Impact Report?
- Common Mistakes made with Impact Reporting
- What is social impact reporting?
- How do you present an impact?
- What are impact indicators?
- What should be included in a social impact report?
- Is impact qualitative or quantitative?
- Take Home Points
What is Impact Measurement for Business?
To put it simply, impact measurement is how a company or organization measures its long-term impact on societies, communities, and individuals, that result from activities or services provided by the company. This not only includes customers but also stakeholders and beneficiaries.
Measuring impact can take many different forms, depending on the type of business or the sector the company functions in. In general, impact measurement takes one of the following forms:
- Information on how the business is creating an impact.
- Monitoring and evaluating services and projects to determine their short- and long-term impacts.
- Internally reporting on impacts and using the data to improve performance.
- Externally reporting impacts to stakeholders and the larger public.
- Third-party evaluation and reporting to look at the impacts of the entire company.
Impact measurement identifies both the positive and negative impacts of a business on society and the environment. Once these impacts have been identified, the company must mitigate any harmful impacts and come up with strategies to better manage all impacts and to align these to the company’s goals.
A Good Impact Statement
These company goals can be included in an impact statement. Impact statements are statements that demonstrate how a company makes a difference in the lives of people and the environment. The statement must include accomplishments that create support for initiatives. It can be broken down into three sections.
First, the statement must describe the relevance of the issue or problem. What is the problem, and why is it a problem? The statement must then provide a response to the problem, and indicate which actions are being taken. Lastly, the statement must describe the impact, or the results, of the actions.
Why Should Businesses Conduct Impact Measurement?
Why is measuring important? Although each company or social enterprise may have its own reasons and motivations behind impact management measurement and reporting, here are five reasons why it is a good idea for businesses:
- The business holds itself accountable and can report back to stakeholders and investors with clear and credible data.
- Positive impacts can be used to attract new investors and raise funding.
- Internal reporting of impacts can result in improved performance and better allocation of funds and staff.
- Data showing positive impacts can be used in marketing and communication to promote the company.
- Findings from impact management reporting can be shared with partners in the industry and lead to beneficial collaboration between companies.
Handy Frameworks for Measuring Impact
It is difficult to standardize impact measurement as each business and social enterprise is unique. Despite this, two useful impact measurement frameworks have arisen that have benefited many organizations and helped with measuring impact.
- The Impact Management Project’s Five Dimensions of Impact Framework
This measuring impact framework lists five areas across which a business’ impacts can be measured. These five areas are what, who, how much, contribution and risk.
What determines the outcome that the business is contributing to (i.e. the impact of the business) – positive or negative – and whether this outcome is important to investors.
Who states who the stakeholders and investors are that are experiencing the outcomes, and how deserving they are of the outcome.
How much includes how many stakeholders were impacted by the business, how they were affected, and for how long.
Contribution indicates whether a company or stakeholder contributed to the outcomes and altered these to be better or worse than expected.
Risk details the likelihood that the impacts or outcomes would be different than expected.
These five dimensions are an important starting point for a business that wants to assess whether its projects or programs are creating change.
- The Theory of Change
The Theory of Change (ToC) is a simple measuring impact framework with a lot of power. This logistical tool explains an organization’s plans to achieve an intended impact -that is which changes will be made to reach the desired outcomes. The importance of the ToC framework is that it assigns accountability and raises awareness of any challenges that might arise while the business is working towards its intended outcomes.
The ToC Impact Reporting Framework consists of 5 components:
- Impact is the systemic change that the company wants to instill long-term.
- Outcomes are the intended and unintended changes that stakeholders might be experiencing due to intervention by the business. These are the benefits the company is working towards.
- Outputs are the immediate results of any changes implemented and are required for the outcomes. They can function as indicators to judge whether the outcomes will be met.
- Activities are the steps that need to be taken for each output to happen.
- Inputs are the resources or funding required to make sure the activities can take place.
The ToC should ideally be aligned to the company’s mission, project, or program.
How Do You Evaluate an Impact?
- Determine your approach
Before you can start, you need to decide how to measure project impact. This involves determining the overall approach that will be taken to measure impact. This includes how impacts will be measured (through monitoring, evaluation, or research), and who will be involved. This decision will depend on resources available, whether internal or external expertise will be used, and how far along the company is in the impact management journey.
- Decide on the Focus
Due to limited resources, it would be best to determine focus areas upfront. Certain impacts and activities will be more important to measure than others. Learning questions can be used – that is questions that can be answered by available data, for example, “Did the activities produce the intended outputs in the short, medium and long term?”
- Develop Indicators
Once it is decided which changes and impacts to focus on, indicators must be developed that measure the success and duration of activities. Indicators provide clarity and can guide impact management.
- Plan Data Collection
Once you know what to measure, and have indicators to measure it, it must be determined which methods will be used to collect data. There is a wide range of data collection methodology available. There are validated online impact management tools available, or a company may decide to use their own custom tools. A mixed method approach may be the best approach to data collection, as it can look at an indicator in different ways.
- Develop Data Collection Tools
Once there is a plan in place for data collection, the tools can be developed. A commonly used tool is questionnaires, as these can be easily distributed and can gather a variety of data from stakeholders and the public. Data collection should not be biased, and should reflect the true situation.
- Collect and Manage Data
Employees should be trained to use the selected data collection tools. The tools should first be tested locally to see if there are any issues, before they are deployed. These tools can now be used in the planned fashion to collect and manage data. It is important that there are steps in place to safely store data and any personal information.
- Using the Data
At this point, high quality data will be available to analyze. This data can be used to generate reports, improve activities and promote the company to new funders.
What is Impact Reporting?
Why should a business report its impact?
Impact reporting is a crucial step of impact measurement, as it communicates the changes implemented in a company and the impact of the company on people and the environment.
Evaluating and reporting a business’ impact can help a business review their impacts against its mission, vision, and goals. It can also be used to motivate staff by celebrating achievements, and create a learning environment where staff can improve their skills to focus more on results and improved services.
Credible impact reporting is important as it has the ability to promote a business, attract new investors, and share information. It also fosters a culture of transparency and accountability. It can, however, be challenging to know what information to include in an impact report, and how to present the data.
The Principles of Good Impact Reporting
Impact reports can take many different shapes, depending on the intended readers and industry. However, there are some principles that should be kept in mind, no matter the type of report.
A clear report is a report that is structured well, readable, avoids jargon and does not contain long lists of statistics. Data must be presented in clean and understandable infographics. Readers must be able to quickly understand and find information.
The author of the impact report should consider the audience. The information must be available to whoever wants it, and must be available in different formats.
Reporting must be open and honest. Impact reports must not only show successes and positive impacts, but also shortcomings and any negative impacts.
Reporting connects a company with its stakeholders and the public, providing them with information. A company should therefore hold itself accountable for any impacts, positive or negative, and reflect this in the impact report.
Any reported statistics or data must be easily verifiable by readers of the impact report. The report must provide quantitative and qualitative data for each of the impacts identified.
The complexity of the report should match the size of the company, and the complexity of changes they are trying to initiate. Try summarizing certain topics where possible, when a lengthy explanation is not required. This will ensure that readers can easily find the information they are looking for.
Types of Impact Reports
- Annual Reports;
- Reporting directly to funders, investors and commissioners;
- Board Reports (that contain management information and organizational data);
- Internal Reports for staff, beneficiaries and volunteers;
- Marketing Material for fundraising and promoting;
- Sustainability Reporting;
- Impact Investment Reporting.
What is the differences between Annual Reports and Impact Reports?
It was often the case that producing an annual report was a “must do” for charities, social enterprises or businesses with social programs. The annual report would include all the information regarding finances, sponsorships, expenses and supporters.
The biggest difference between traditional annual reports and impact reports is the presence of financial information. Annual reports offer a high level overview of revenue and expenses for the year. An impact report has a different scope, and does not require financial information at such a level.
Impact reports and annual reports have different lengths and scopes. An impact report is more narrowly focused – on certain impacts, activities, or projects – and is therefore much shorter than an annual report. Annual reports offer a much broader and more comprehensive view of the entire year.
There is also a big difference in cost between impact reports and annual reports. Annual reports, being longer and more complex, involve a lot more expenses to put together. An impact report can be drafted in the office using freely available impact reporting software and is thus lower cost.
What should an impact report include?
The design of the impact report is important, as it takes the reader through all processes that were undertaken to achieve the impact. A basic impact report should at the very least include information on investments, the impacts measured, which measuring impact framework was used, outputs and outcomes, and the way forward.
The impact report should have three main sections:
- Executive Summary
The executive summary is critical, as it condenses the information captured in the report and can act as a quick reference for the reader. The summary should keep the audience in mind, and highlight sections of the report that are important to them.
- Impact Strategy and Goals
All impact management is guided by a strategy, and the report should identify which strategy is implemented. Any impact goals that form part of the strategy must be clearly communicated to stakeholders. These goals can be indicators or outcomes.
- Data Visualization
Data visualization enables readers to make sense of complex statistics. It makes data usable, understandable and accessible to the target audience. Select appropriate graphs or charts to showcase the data in the best way, and make sure these graphics get the message across.
How do you write an Social Impact Report?
As mentioned, there are different types of impact reports, however, following a set of questions can help any business or social enterprise design and write their impact management report.
- What is the problem?
The report should tell stakeholders about the company and why its work is important. Stakeholders should understand the context in which the company functions, and what the needs of its beneficiaries are. Stakeholders should get a clear understanding of why the work is important, and the impact the work has on people’s lives.
- How do we address the problem?
This is the section of the report that will describe all activities that are being done to overcome the problem. This can be straightforward for smaller social companies, but can be difficult for larger corporations.
- What is Achieved?
This question can be difficult to answer. It requires the company to look at its activities and outputs, as well as long-term outcomes and impacts. Any changes to work must be attributed.
- How can you be certain you are achieving the goals?
Clear and verifiable evidence must be provided that the outcomes are being achieved. This does not mean only statistics and graphs. Good impact reports will include feedback, case studies, survey results and even anecdotal evidence.
- Are you learning and how can you improve?
Finally, the impact management report must talk about setbacks and challenges faced. It must include what was learned from these experiences, and how it will be improved upon in the future. It is okay to write about failures, as long as it includes what was learned from these.
Common Mistakes made with Impact Reporting
Impact measurement has received its fair share of criticism.
Funders and investors often require high levels of data capture, which can be a costly exercise, and also leads to micromanagement. It can also be problematic if the wrong impact is measured. Focusing on short-term impact reporting metrics can create a sense of accomplishment that disrupts the long-term goal or shifts the focus from fundamental problems.
Frequently Asked Questions
What is social impact reporting?
To put it simply, impact measurement is how a company or organization measures its long-term impact on societies, communities, and individuals
How do you present an impact?
Impacts are presented in an impact report. The data you collected on your impacts can be presented in any fashion, but it is important that the audience of the report is kept in mind. An easy way to present impacts is through infographics (like charts and tables) that clearly represent the data.
What are impact indicators?
Indicators measure the success and duration of a business’ activities. Indicators provide clarity and can guide impact management. Indicators are visible, measurable and tangible.
What should be included in a social impact report?
- Executive summary
- Impact Strategy and Goals
- Data Visualization
Is impact qualitative or quantitative?
Depending on the type of impact that is being reported, it can be either qualitative or quantitative. As a rule of thumb, quantitative data will show you any problem areas in your organization, and qualitative data will indicate the reasons for these problem areas.
Take Home Points
Impact management and reporting are important because:
- It helps a company reflect on and take accountability of their work.
- It generates support and funding for programs.
- Helps a company to focus on initiatives and issues that may arise.
- Provides a clear path forward to implement positive change.
Although measuring impact of a projectand reporting may be challenging, it leads to innovative changes that can improve people’s lives. Impact management is not a once-off event, but should be done continuously throughout each project’s life cycle.