Confidence in social impact claims 'shockingly low'

Pathak, Pathik (2012) Confidence in social impact claims 'shockingly low'. The Guardian.

Record type: Article

Abstract

Laura Fedorciow has made a persuasive case for social impact measurement, and many of her points are well founded.

What is more debatable is the assertion that "demonstrating impact opens new doors to the £1.235tn assets under management in the UK". The first point would be that not all of that finance is available to social enterprises. The second is that claiming social impact does not always influence social investors. Our research and experience of working with social enterprises in the UK, Europe and India certainly suggests this, and is reinforced by the findings of the recent Big Lottery Investment Readiness in the UK report.

Why is demonstrable social impact sometimes overlooked by social investors? We assume that social investors are looking for profitable businesses with a social impact they can evidence, so those who can demonstrate social impact have an advantage over those who cannot. The reality is that the paramount draw for social investors is the financial sustainability of an organisation. Those which have a tight business model and can generate financial returns will always be favoured, whether or not they claim astounding social impact.

Over and above this primary financial criterion, the credibility of existing social impact measurement tools is a major issue. Our research reveals shockingly low levels of confidence in the social impact claims of social enterprises. On one hand, these claims are treated with scepticism because of suspicions that the impact measurement process is engineered to hit a benchmark figure — a social return on investment of £6, for example.

On the other, it is widely acknowledged that at present there are several flaws and technical inconsistencies in the application of social impact measurement. This includes the application of discount rates, estimations of project lifetimes (and thus how long benefits accrue) and calculations of attribution (isolating the impact of a project, which is notoriously difficult to do). It is more than possible for the same project to be analysed using the same method by two analysts and for each to reach a different figure. We also sometimes forget that most social impact measurement tools are not designed for comparison – many explicitly warn against doing so – but the demands of the social investment market has meant that these disclaimers have been largely ignored.

While the investment market's discomfort with current social impact measurement is evident, this is not the only challenge. More broadly, there is a need to develop social impact assessment tools which can meet social enterprises' other strategic objectives. This means focussing on the things that any form of organisational assessment should aspire to: measuring performance, enhancing learning and reinforcing mission. These other strategic objectives seem to have been lost in the race to attract social investment but are vital to the process of making the sector more effective and investable.

To date, social impact assessment methods have been largely imposed on the social enterprise sector from those outside it, and the result has been an emphasis on pseudo-accounting frameworks which culminate in the grand declaration of quantified social impact. Because the emphasis has been on generating this headline ratio, other stages of social impact assessment have been relatively neglected. SROI, for example, is comprised of six stages. The first three are often the most important. These involve engaging stakeholders and defining organisational boundaries to draw an "impact map" which translates outputs (deliverables) into outcomes (causes effected). These qualitative processes can help all organisations, including smaller and early stage social enterprises, to improve understandings of their routes to impact. They can also, with adequate training, be conducted in-house without the need for consultants who can charge anywhere between £5-7,000 per impact evaluation. A number of tools are currently being developed (including our own collaboration with Unltd India), which offer a stripped down social impact map focussing on engaging stakeholders (including beneficiaries) and matching performance against sector-specific outcomes. We hope that over time these tools will help to widen access to credible and meaningful social impact assessment.

No-one denies the benefits of social impact assessment or of maintaining the momentum of reporting practices. It is a growing, evolving field which has a long way to go to maturity but equally where the scramble for finance should not be allowed to limit the potential of social impact assessment.

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