How To Develop An Impact Measurement System That Actually Works For Your Organization

As we make progress on the Sustainable Development Goals, impact measurement matters more than ever.

Why It Matters

Despite several methods being used in the sector today, many organizations still struggle to meaningfully track and report impact. Why? There’s a need for measurement approaches that are standardized enough to be meaningful, yet contextual and flexible enough to account for unique impacts. Sara Olsen, founder of SVT Group, gives us an impact measurement primer.

In late June, the Government of Canada released a report called Towards Canada’s 2030 Agenda National Strategy — an interim document that lays out several steps towards implementing the United Nations’ 2030 Agenda. It also includes a first iteration of the Canadian Indicator Framework, a collection of “ambitions, indicators, and targets” that will help Canada measure its progress on the 17 Sustainable Development Goals.

While it isn’t completed or in its final form just yet, the framework’s development highlights an issue that’s frequently raised in social impact. At the moment, beneficiaries and investors, as well as social enterprises and organizations themselves, often lack tangible ways to know that they’re actually moving the needle in a meaningful way. And with multiple options on the table, why does the sector continue to struggle with impact measurement?

Let’s start by getting one thing clear: we know how to measure impact — the environmental and social sciences have got this. What they do not have, however, is how to make one organization’s measurement of impact, in their context, aggregable or comparable to another organization’s measurement of impact in their context. And thus, we can spend a trillion dollars in aid and development and have no idea whether it really made a difference or not.

Mission-driven organizations genuinely mean to create positive change, and many are doing just that, to some extent. But without also putting measurement systems in place, one can’t truly become great at generating positive impact, let alone troubleshooting and improving if one is unintentionally generating harm. 

A central problem has been that the world hasn’t agreed on a system of accounting for social impact that would fairly enable funders, investors, or the public to set targets and hold organizations accountable for delivering on them. In the for-profit world, when it comes to financial performance, it is clear whether a given investment manager is keeping up with, over-, or underperforming their peers. We take that for granted. But it all hinges on the fact that there is a generally accepted set of accounting principles governing the way financial performance is accounted for.

It was not always the case that this existed, though — developing that financial system took anywhere from 500 to 10,000 years, depending on when you start counting. So creating a new system is no small task.

Fortunately, in the past 20 years, there has been an acceleration of progress in figuring out a standardized way to account for impact: one that brings in a lot of the necessary context and nuance, but retains the essential quality of both consistency and aggregability. 

In the last decade, the impact field has piloted a number of solutions to the standard and meaningful impact measurement question, and has distilled some essential, durable characteristics of impact measurement across organizations. As Canada embarks on advancing and accelerating work on the SDGs, these are essential to understand.

 

Can you actually define your impact?

In recent years, we’ve arrived at an understanding of what constitutes “impact.” When speaking of impact, enterprises and those holding them accountable need to ask:

  1. Who is affected?
  2. What is changing for them (good or bad)?
  3. How much is that variable changing?
  4. What contribution is your organization or enterprise making to the change?
  5. What is the risk that this impact isn’t quite what we think it is? 

If your organization can answer these questions, you understand your impact. This definition is the consensus of thousands of practitioners globally, facilitated by the Impact Management Project.

 

Measure your universal ESG performance

Overall environmental, social, and governance (ESG) performance needs to be assessed for every organization or enterprise, no matter its size. Every corporation out there must account for and minimize their carbon footprint, because climate chaos is an issue that affects everyone — and everyone contributes to that problem.

There is also a set of other generally accepted issue areas that nearly all organizations or companies have in common. Do your employees have health benefits? Does your workforce reflect the diversity of the people where it does business? Is your company involved in frequent lawsuits?

All companies should track and disclose these considerations so that consumers, investors, and the public can understand their quality. On the measurement front, B Corp, the Global Reporting Initiative, and Fair Trade certification have all created solid solutions to ESG performance.

 

Measuring your organization’s individual impact

Beyond an overall ESG check, organizations also need to account for their particular material impacts. That means going beyond your mission statement — rather than simply saying you’re here to “employ and empower people overcoming barriers to work” or “provide solutions for a more connected, sustainable world,” you need to measure and report how you have meaningfully contributed to those goals. 

And then consider: have you caused any other change to people or systems that could be considered material? 

 

Challenges and opportunities

Of course, measuring individual material impacts poses a cardinal challenge to the sector’s ability to standardize and aggregate impact measurement. 

The impact-focused sector has shown that it has limits to its willingness to adopt rigidly predefined indicators of ESG performance, because too often they become too irrelevant to actually be meaningful to the organization or company they’re trying to describe. So, while an impact measurement tool like GRESB is apparently useful when it comes to measuring the ESG of $22 trillion in real assets (such as physical goods, real estate, or natural resources), they’re less useful for other sectors and non-tangible assets, like venture capital and philanthropy.

However, not all standardized measurement tools need to be so rigidly defined. One of the greatest insights in this industry in the past decade has been that there is a way to generate a widely-accepted standard from a universe of flexible indicators for assessing impact.

Professor Kate Ruff at Ottawa’s Carleton University is a scholar of accounting standards, including social accounting, and by looking back into how financial accounting got standardized — as well as how other standards gained traction — she has devised the concept of “bounded flexibility,” or flexibility within limits. 

“Standards that win,” says Kate, “permit flexibility within prescribed limits.”

Organizations seeking to gauge their unique impact must have the freedom to define indicators that are meaningful within their contexts, but within certain limits — such as the five dimensional definition of impact, noted above.

Ruff has spearheaded the Common Approach to Impact Measurement to devise an impact measurement standard that is both compatible with modern information technology and capable of meaningfully aggregating information about the social and environmental change caused by enterprises and investments. Imagine the possibilities here for Canada’s SDG strategy.

Defining and measuring one’s impact can be challenging, but it’s infinitely useful as both a guidepost and accountability tool. As you work towards implementing an impact measurement tool that works for your own organization or company, it’s worth looking through a few different options to see what works best for your particular brand of impact — and then staying open to trying new approaches as they emerge.