Social Impact Assessments– methods, beginnings and continuation

Social ventures are gaining growing recognition not only for their social impact but also financial value. Measuring social impact and quantifying financial value is not always straightforward. While frameworks to guide these measurements continue to evolve, how should social ventures approach this field?

Many social ventures are appearing on the radar of promising startups in the traditional term. For example, Investopedia’s 10 Fastest Growing Social Ventures in 2016 lists SoFi, which also appears on Bloomberg’s list “These Are the 50 Most Promising Startups You’ve Never Heard Of”. Investopedia describes SoFi as the leader in student debt refinancing, as it pioneers new loan opportunities in the field of financial technology. Dealing with finances, it is understandable that its social impact and financial value can be calculated with monetary numbers. But is this true for all social ventures?

Let’s take a look at another of the Investopedia’s 10 Fastest Growing Social Ventures: Winnow, which aims “to tackle the global food waste epidemic.” Investopedia references the book Food Foolish to describe this huge challenge: “Worldwide, over 1 billion metric tons of food or about 33% of global food production is lost or wasted. Meanwhile, 800 million people go hungry a day.” Surely, cutting waste and availing food for the hungry is a self-evident value beyond financial terms, right? Well, Winnow is able to describe its impact in financial terms. Winnow targets kitchens as its customers, helping them save 3-8% on food cost and lists case studies to prove it. For example, “Pullman Dubai Creek City Center achieved 4% reduction in food purchasing cost in only 4 months”.

Social ventures sustain themselves financially sometimes by grants and charity, but mostly by a business model that generates income in the traditional sense. Like any other business, it must show customers financial value, as do SoFi and Winnow. But the social impact must still be accounted for. How?

Social impact assessment has gone through a history of evolution ever since 1957 and continues to generate debate. There are many resources and methodologies to measure social impact. The Stanford Social Innovation Hub lists several: Impact Reporting and Investment Standards (IRIS); Root Capital Global Positioning System (GPS) for Measuring Impact; Global Impact Investing Rating System (GIIRS); and Learning for Action Group Evaluation Framework. There is also Foundation Center’s Tools and Resources for Assessing Social Impact (TRASI).
 One popular idea is “evidence-based” investment decisions in philanthropy and social ventures. Giving Evidence sprung up to enable “charitable giving based on sound evidence.” It sounds straightforward, but there is debate here, too. The article “’Evidence-based’ Philanthropy Gone Wrong: The Myth of How Small Schools Failed” explains shortcomings in applying this method at the start of assessing the Small Schools Initiative but later got it right. “The real story here is that not all evidence is the same”; be careful of poor evidence or measuring the wrong evidence.

Whichever method is chosen, measuring social impact should begin with the social venture’s business model canvas; begin with the end in mind so you measure the right things. The Social business model canvas offered by Social Innovation Lab has an impact measure part in the Value Proposition section. The Social Lean Canvas includes a stand-alone Impact section. The Social Enterprise Canvas includes a section for negative Potential Consequences.

Assessing social impact is also a continuous process. McKinsey offers the Learning Driven Assessment over the strategy lifecycle. The assessment “should be built into setting strategy, designing programs, and defining program execution. Once assessment results are collected and interpreted, the lessons should feed into the decision-making process. The findings should also be shared externally with donors, nonprofits, policy makers, academics, and the general public.”

Social ventures have greater chances of achieving their missions if they consider the range of methods available to assess social impact and choose metrics that best fits. They would use it as they formulate their business model canvas. Each method may have shortcomings that generate debate, so using and re-evaluating the assessment should be a continuous process. Quantifying impact in financial terms is always relevant, especially for social ventures that offer products or services to customers in a traditional sense; the customer will offer a payment in exchange for a quantifiable value.