Social businesses trying to solve a diverse range of problems, from homelessness to gender inequality, the refugee crisis to plastic pollution, often share the same conundrum — how to measure success. In an era of greater transparency, consumers and investors increasingly expect companies to look beyond profits and report their environmental and social impact.
For social enterprises, which are businesses that aim to do good as well as make profit, measuring impact is often a non-negotiable requirement from their funders. Unlike reporting financial results, there is no universal standard for impact. The outcomes for a business that tackles food waste, for example, will look very different to those for a business working to reduce knife crime. “It is a bit of a dark art, measuring impact,” says Jessi Baker, founder and chief executive of Provenance, a British social enterprise that uses blockchain technology to make supply chains more transparent.
Large companies such as Unilever and smaller social enterprises such as Canada-based African food brand Farafena are among businesses using Provenance’s software to show consumers how, when and where their products were made.
As a social enterprise itself, Provenance is also required to report impact to investors. Its software helps other companies measure their impact, but its own is harder to quantify. “Our work spans lots of different types of impact, which can be quite difficult to benchmark and quote — it is something we work on very hard,” said Baker. “We can help a shopper pick a product that is having a more positive impact but only if the positive impact is generated by the brands and products we work with,” she said.
Data rich, time poor
A common complaint from social entrepreneurs is reporting impact can be very time consuming, taking them away from the already challenging job of running a sustainable business at the same time as achieving their mission.
More than three quarters of British social enterprises measured their impact in 2017, according to a survey conducted by Social Enterprise UK, the body that represents the sector. It found 37 percent of these businesses measured impact to a “large extent,” 40 percent measured it to “some extent”, while nine percent took no steps to measure it.
Measuring impact can be particularly onerous for social enterprises with multiple investors who may have different reporting requirements. “There is a big danger that impact becomes about reporting to the investors, rather than what it is meant to be, which is working out how you can do things better,” said Jeremy Rogers, chief investment officer of Big Society Capital, a social investment wholesaler.
Big Society Capital, which invests in funds that support social enterprises and charities, keeps impact reporting requirements “as light as possible”, using a single metric. For example, a social enterprise that is trying to reduce unemployment might be required to report the number of people it got into employment.
Rogers explained social enterprises’ impact might also be qualitative, such as a human-centered story about the difference the business has made. “Impact measurement can get quite stuck in data sometimes and you can lose track of what the goal here is. The goal is really understanding if the social enterprise’s mission is working,” he said.
Understanding impact can provide social enterprises with useful insights that help them grow, but not all of these businesses are interested in doing so, he explained. “There are lots of really good social enterprises that have no interest in scaling. That group often sees impact as a bit of a distraction,” he said.