Measuring a Blended Performance: Managerial Insights from the Field of Impact Entrepreneurship

1. Introduction

The commitment to generating a blended value, which produces positive effects on society alongside economic returns, is spreading in the business sector. Corporations are increasingly asked to produce not only economic but also social value. Recently, Hart and Zingales have promoted this idea, stating that, companies should maximize shareholders welfare, not value [1].

Therefore, on one end, the organization delivering social services has progressively acquired the know-how, tools, and models which usually characterize the business world, leading to the establishment of new enterprises defined as social ventures[2]. Social ventures (SVs) are hybrid organizations where their primary aim is to provide solutions to the most wicked problems – such as aging, climate change, refugee’s crisis – leveraging on forms of entrepreneurship to sustain their operations [3]. On the other end, we have observed an increased emphasis on more responsible, sustainable and inclusive practices that traditional for-profit businesses have been called to establish or observe. Companies have started to consider the integration of social and environmental concerns no more as initiatives needed to be compliant with mandatory regulations but as a strategic part of the core business and they are moving from a responsive to a proactive approach [4]. Corporate Social Responsibility (CSR) has shifted from being a side-unit of the company to strategic leverage for the creation of economic value [5].

Within this context, social impact assessment has emerged as an endogenous practice to improve accountability and transparency of a large range of organizations, as well as to enhance communication among various actors, both aspects being essential to foster the growth of the whole sector [6]. Moreover, several contextual elements are raising the need to include the practice of measuring social impact in the organizations’ operations: the attempt of public administrations to reengineer their procurement schemes according to the outcome-based paradigm; diffusion of evidence-based practices in philanthropy as well as in public policies; the emergence of the so-called social impact finance; and national governments are bringing in guidelines for measuring social impact [7]. Therefore, these elements increase the urgency for organizations to quantify and make explicit the social value generated. Indeed, social impact measurement and reporting can be strategic to improve their performance, access resources, and build organizational legitimacy.

Standards for measuring social value are still underdeveloped to date [8]. In fact, during the years, a large number of approaches, methods, frameworks and tools have been developed as an attempt to meet the diverse information needs of stakeholders in the sector. This ongoing proliferation of models is due to the fact the term social impact describes a very heterogenous array of effects on several users, different scales and type of activities [9].

However, such heterogeneity in approaches has not yet been fully systematized [10] and there is still an open debate on whether and how to find a common standard on social impact measurement. Those supporting the idea of a golden standard, used by all the organizations and harmonized among countries, state that it would allow the comparability of results and support the development of this domain. On the other end, the skeptical claim that this standard would lead to an excessive simplification losing the true soul of the social impact they try to measure. This would be detrimental for the sector because it raises the risk of the so-called purpose washing[11], namely when a business or financial institution claims to be impact-oriented without having any substantive social or environmental effects but just to leverage the momentum of the phenomenon for marketing purposes. Instead, they posit a transaction-based approach (a custom method and KPIs for each deal) is the most appropriate way to measure the real social changes an organization produces. However, this customized effort very often requires an organization to design a measurement infrastructure and gather specialized data from scratch. Therefore, specialized expertise is needed and this makes impact measurement and management very costly and time consuming especially for small impact ventures already operating in a resource-constraint environment.

Against this lack of a prevalent approach, organizations have many difficulties to surf this huge pool of methods, metrics, framework and processes.

Therefore, the purpose of this paper is to analyze existing practices of social impact measurement, with a specific focus on emerging ones, and discuss their characteristics. To this aim, we performed a broad review of academic and gray literature that focuses on social impact measurement and searched existing databases collecting relevant practices in the field. Based on the analysis of specific dimensions, we formulated a conceptual framework to provide a more clearly articulated view of the state of this domain and highlight the evolving trends to support organization approaching this practice to find their way.

2. Literature review

The goal of fulfilling a social mission raises the question of how the impact that these organizations have on society should be assessed to understand if and how they are achieving their objectives and contributing to the well-being of society. Moreover, enterprises blended social and business logics have multiple stakeholders to account to, raising the quest for transparency and accountability [12, 13].

First, the definition of what social impact means is still controversial and differently translated based on the domain it is applied [14].

Scholars have also used terminology such as social value [15, 16], social performance [17, 18], social returns [19] to express similar concepts. Different definitions could be found in literature as:

In this paper, we use a broad conceptualization of social impact to include considerations on the organizations’ capacity to deliver social and environmental value and of specific methods to measure it.

Concerning social impact measurement, a comprehensive review of the literature indicates two historical trends: one addressing social accountingand audit, and the other on social impact assessment[23]. Social accounting and audit is defined as “a systematic analysis of the effects of an organization on its communities of interest or stakeholders” [24], p. 309 and has become a commonly used label for what has been named, among others, corporate social reportingor social responsibility accounting[25]. Essentially, it includes reporting on an organization’s social activities, environmental impact, interactions with the employees, the community, customers and other stakeholders and, possibly, their consequences [26]. Social impact assessment “includes the processes of analysing, monitoring and managing the intended and unintended social consequences, both positive and negative, of planned interventions (policies, programs, projects) and any social change processes invoked by those interventions.” [27], p. 5. [9], p. 1174 stressed that assessing social impact consists of “providing evidence that an organization is providing a real and tangible benefit to the community or the environment”.

The field has grown to use a diverse terminology to indicate slightly differing approaches within the same field, including impact assessment, impact measurement, outcome measurement, performance evaluation, performance measurement, social accounting, social and environmental reporting, social impact measurement, social performance, and, triple bottom line reporting. These terms typically cover a range of approaches that have their roots in program evaluation and performance measurement in the public and non-profit sectors [28].

More recently, in a seminal article on the Stanford Social Innovation Review, [29], p. 6 stressed the fact that “an impact evaluation should help determine why something works, not merely whether it works.”

We use the terms social impact measurement in the manner employed by [30], to encompass the broad range of practices adopted by an organization to measure its progress towards its social goals.

Measuring social impact is crucial for many reasons. Lall [31] distinguishes between two fundamental factors: external, or measuring to prove, and internal, or measuring to improve.

On one end, the measurement process is thought to be capable to improve an organization’s performance, because it allows a deep understanding of how to best allocate resources and efforts to maximize social outcomes. On the other end, the practice of social impact assessment may be seen as the process of providing validated evidence that the organization is generating a real and tangible benefit to the community or the environment [9]. [31, 32] also observe that the purpose and perceptions of impact measurement in impact investing processes actually change from legitimacy to learning in the course of time. Whereas [33] underlined that investor-investee relationships negotiated through the impact measurement process are generating a new set of impact measurement practices, which are relational and non-transactional in nature with an evolving and ongoing learning process for both. Trends in corporate sustainability have further enhanced the emphasis on impact measurement needs.

Therefore, social impact measurement and reporting are considered to be strategic to improve performance of the organization, access resources, and build organizational legitimacy [34].

However, the lack of a well-established framework for social and environmental accountability may prevent organizations, and particularly social ventures, to operate at their best capacity in the economy. In fact, the absence of reliable metrics may limit the investors’ willingness to provide funding to the enterprise, due to the fact that they may not be able to make informed decisions on how to channel their funding in the most effective way to generate social value [6]. Moreover, the lack of a consolidated measurement system may be detrimental for the organization’s management which may not have adequate information to support effective decision making and maximize social outcomes [32].

In recent years, there has been considerable progress in developing measurement and evaluation methods with numerous approaches being developed at the practitioners’ level and a prominent role being played by foundations and impact investors [30]. Indeed, attention to impact has been often driven by funders who want to know whether their financial resources are making a difference on society, and the growing field of responsible, sustainable and impact investing has highly contributed to developments in this area. Other practitioners such as social analysts and managers of social ventures have also repeatedly tried to develop an appropriate framework for measuring and comparing social value creation [35].

Despite, the practice of social impact measurement has evolved quite rapidly in the last decades, scientific research has lagged behind. Therefore, a proper theorization of how to measure and compare the results of social value creation processes is still missing in the academic community [36]. The most sophisticated approaches in impact evaluation are experimental and quasi-experimental research designs, such as randomized control trials (RCTs) or the difference-in-differences technique have been rarely employed (e.g., [37, 38]). On the other hand, some of the most consolidated approaches have been developed by practitioners. For example, the Balanced Scorecard [39] was initially developed for corporates and it has been adapted for the non-profit and the social enterprise sectors [40]; the Social Return on Investment (SROI) has been widely used by a large range of actors [41]. The impact investors’ community, especially in the United States, has widely adopted the Impact Reporting and Investment Standards (now IRIS+) developed by the Global Impact Investing Network (GIIN) to report on the impact of their investment in the sector. In the business world, a lot of companies have started to assess their social impact through the B Impact Assessment developed by B Lab, to obtain the B Corp certification. Simultaneously, sustainability and Environmental, Social, and Governance (ESG) accounting practices for businesses have been largely shaped by the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB). These few examples clearly highlight how the various perspectives of organizations in the sector resulted in an increasing number of models being developed but a comprehensive and systematic vie of them has not been yet developed.

3. Methodology

4. A decision-making framework for social impact measurement

4.2 How to implement a social impact measurement

The analysis of the 116 approached identified also enabled to outline a reference process that an organization approaching the design of its social impact measurement might follow. The process presented in this section emerged from the review of the implementation procedures and tools entailed by the existing methodologies. Indeed, for each of the step, we also provided a reference to one or more methods that the organization can look at.

The process foresees the steps outlined in Figure 1 and described in the following sections.

4.2.1 Measurement objectives and internal boundaries

The scope of this first phase is setting the objectives of impact analysis (why and for whom), the level (e.g. portfolio of social investments/individual social enterprise), the available resources, the motivation for measuring social impact, the leader of the process (internal resource or a consultant).

More suitable models for the needs of this phase are EY Total Value, EPIC methodologyand WBCSD Measuring Impact Framework.

4.2.2 Impact statement and impact Mission

In this phase, the organization defines what the impact perspective and the impact ambition are. First of all, it is fundamental to analyze social needs and their relevance linked to the context. This analysis implies the study of the effects and changes that could be generated in the long term by the activities of the organization. In this part of the process, stakeholders will understand the needs, the type of impact and the approach of measurement (social, environmental or integrated).

To achieve this objective, the actors could agree on several founding principles to guide their work as proposed by the UNPRI Operating Principles for Responsible Investment, one of the approaches that could be used to develop the impact statement and impact mission. Other principles, for example, are developed by the EY Total Valueand the EPIC methodology.

4.2.3 Stakeholder analysis

Stakeholder analysis implies the identification of the main actors that can affect or be affected in some way by project activities [49]. This analysis should start with the mapping of internal and external stakeholders. Once the most relevant stakeholders have been identified and classified according to their nature, it would be crucial to investigate, one by one, their specific interests or needs, the main capabilities they can devote to the project and all the possible actions the organization can implement in order to involve them, foster their participation into the project and satisfy their needs [50].

Finally, it is interested to assign priority to stakeholders in order to classify them according to their level of power to influence the project and the level of interest in the service/product offered by the project. A reference to undertaking this step is the Power and Interest Grid[51].

Social impact measurement models that better interpret this phase are the Social Return On Investments (SROI)and the Social Impact Assessment (SIA).

4.2.4 Define the changes

The further step of the social impact measurement process is the definition of the Social Value Chain [52]. This tool allows to graphically represent the process of change that a project can generate in relation to a specific social problem. The main objective of this step is to identify the logical framework and the cause and effect links between the different elements that compose it.

By developing the Social Value Chain it is possible to understand the social value’s creation process. Moreover, it is an easily understandable representation of the logic through which the short-term results on beneficiaries lead to the generation of long-term impacts on the community of reference.

Theory of Changeand Impact Management Projectare two models that well describe this phase.

4.2.5 Define the indicators

Once defined the outcomes and impacts that the organization’s activity is generating, it is possible to define the indicators (KPIs) to use in order to assess the generated social change. The and international institution such as IRIS +, GRIand SASB Standards, provide a huge repository of indicators that can be consulted, nevertheless, sometimes the impact dimensions do not coincide with those present on the existing repositories and therefore it is necessary to conceive ad-hoc indicators.

4.2.6 Data collection

After the definition of the indicators, there is the data collection phase.

Once identified which stakeholder to involve, there is the definition of the modality of the collection (interviews, focus group, questionnaire, observation) which is chosen according to the nature of the data to gather, the number of stakeholders to involve, and the available resources, and the mean of the collection (digital platforms, email, pa56per questionnaire, phone call) that should be consistent with the modality of collection selected. The last aspect to define is the timing of the collection, namely when the data collection phase should take place. According to the overall measurement process, data could be collected periodically, or at the beginning and at the end of a project or a pilot, etc.

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4.2.7 Impact quantification

After collecting data, and verify their reliability, it is necessary to analyze them, calculate the quantitative indicators and describe the qualitative ones, according to the defined times and methods.

If it was not already available, the first assessment will provide the baseline or, in other words, the identification of the starting point. Then, it’s important to periodically repeat the measurement, evaluating the results by comparing them with the defined targets and historical values.

Therefore, in this stage an attempt is made to go beyond the measurement of the simple output - the immediate result produced in terms of product/service - and to understand how the changes on the beneficiary directly produced by the organization/project activity (outcome) contribute to generating wider effects and over a longer time horizon (impact) and finally to understand, and possibly purify, the “collateral” effects (deadweight, attribution, drop off, displacement, etc.) that are difficult to trace back to the organization’s activity. To overcome (or partially overcome) these impact measurement challenges (deeply explained into the fourth chapter), there are some analytical approaches like the counterfactual analysis that can be used in order to more precisely assess social impact.

Models that best suit the needs of this phase are, for examples the Impact Weighted Accountsand the Social Return On Investments (SROI).

4.2.8 Communication and reporting

The final stage of the social impact measurement process is reporting to stakeholders, communicating and using the results, and embedding the measurement process in the organization.

This phase is strongly addressed within the SDGs Compass approach.

5. Discussion and conclusions

This chapter contributes to theory and practice in different ways. It fills the gap in the academic literature of systematizing the existing heterogeneous pool of approaches to conduct social impact measurement. Indeed, we first identify 116 approaches (see the Table 7 in the Annex) which the most used so far; second, we suggest several dimensions that can be employed to analyze and classify these approaches. Third, we combine these dimensions to create a framework able to support organization eager to design their own social impact measurement infrastructure in selecting the proper instruments, metrics and approach.

Moreover, the findings support the idea that so far it has not been possible to establish a golden standardin the practice of social impact measurement. Indeed, we found several approaches with different characteristics to meet the heterogeneous needs of many stakeholders. Indeed, there seem to be tradeoffs between the scope of application of standards and the validity of comparison. Thus, it may be difficult for researchers and practitioners to develop direct social impact measurement standards that are universally applicable. Therefore, the chapter provides a contribution to practice by outlining a reference process that an organization can follow to design its own methodology.

In addition, our analysis confirmed to a certain extent that recent developments in impact measurement have been largely driven by impact investors. This clearly emerged by the results showing that most models in our sample, and particularly the most recently developed one, are designed to have funders and investors as their primary audience.

The analysis also reveals some open issues that should need to be addressed to advance the practice of social impact measurement and might represent avenues of further research.

The first challenge that hinders the practice of social impact measurement is the availability of suitable data.It should be crucial to increase the quality of data, where quality refers not only to availability but also to homogeneity, inter-operability and standardization. Scholars pinpointed the lack of database that directly observes the provision of social impact across multiple sectors and locations [53]. Second, there has been a global effort in recent years towards harmonizingindicators, instruments, and methods for assessing and analyzing results, assisted by international networks for data sharing and learning. Among them, we highlight the development of the Impact Management Project (IMP), spearheaded by Bridges Ventures, which has put together a structured network including the most influential organization in the field, such as the GIIN, B Lab, the Global Steering Group for Impact Investing, Social Value International, the International Finance Corporation, the World Benchmarking Alliance, UNDP, the Sustainability Accounting Standards Board, etc. The IMP is aiming to put forward a comprehensive framework, comparable to those used for financial analyses of traditional investing decisions, to be widely used to articulate considerations concerning impact.

Second, a recent trend is the emergence of a new generation of open-source platformsthat generate opportunities for complex projects that enable real-time data entry and analysis, as well as the data processing, analysis, and visualization facility. Leveraging on latest technologies, artificial intelligence algorithms and big data analytics, combined with large and small data [54], is seen from many [55, 56, 57] as one of the possible paths to improve the usability of SIM both in finance and in the social sector. Although the recognized potential, there are still many aspects hampering the ability to leverage the power of data and technology to tackle societal challenges [58] and particularly their application to social impact measurement as well as to program and policy evaluation. According to the literature, these issues concern different aspects i.e. data ownership and accountability ethical issues like risk of doubling down on bias, reproduce inequalities or gender or race discrimination [59]; methodological issues like the importance of realizing safety mechanisms that can complement the algorithmic decision-making process or the trade-off between big data analysis and the work on the field [54]. Many specific elements that should be complemented with a broader and multi-actors effort finalized to the construction of a proper data analysis infrastructure, an essential element to share data and resources as many [60] have been affirming in recent years.

To conclude, the analysis presented in this chapter adds to the debate on whether there is a need of a standard method in social impact measurement by underlining that the most promising path is not standardization, but harmonization to enable a minimum level of comparability and platforms to enhance the open sharing of data on social aspects.

Conflict of interest

The authors declare no conflict of interest.