Learn how to measure social impact. This article will show you the different types of metrics, and what type is best for your business.

What is social impact?

Social impact is defined as the effect on people and communities that happens as a result of an action or inaction, activity, project, program, or policy.

Measuring impact has now become a key business activity for any organization wishing to develop shared value.

Shared value refers to the concept that contemporary business organizations are required to act beyond the mere scope of profitability and pursue social and environmental change. 

And here lies a challenge. 

In business, there are many possible ways to measure “traditional” business results (such as return on investment) or profitability, but there are far fewer that can be used to measure more intangible elements, which are at the core of social and environmental action. 

We are led to take for granted that there is always a clear cause-effect relationship between our business initiatives and their impact on the world, but unless we’re able to effectively measure the difference our efforts are making, it can be really challenging to understand if we have been successful in our endeavors. 

Before delving into measuring frameworks, it may be helpful to start from a more conceptual point, connected to defining success, and what this means for a business.

What are the different ways to measure success for a company?

We have touched upon this topic in other sources of our blog, such as Fashion Sustainability: Measuring Success: From ROI to Social Return on Investment, which we recommend reading to understand some foundational elements to assess success in business. 

In general terms, however, the foundational issue with measuring success is that we tend to connect it entirely to profits. This is a major issue, especially in consideration of the fact that social impact can be much broader than the mere economic impact of an initiative. 

This is why it can be challenging to identify the right metrics to understand the effectiveness of a project. At the moment a variety of approaches are being scrutinized, but the one that seems to better fit the bill comes from an adaptation of the Nesta Foundation framework.

Just like in other areas of business and research, a more scientific approach seems to be the way to go.

This is why we’re looking into this model in detail in the next paragraph of our post.

Measuring Social Impact with the Nesta Framework

According to the Nesta Framework, there are  5 levels of impact management we can consider in the context of our business strategy. These 5 levels can be used to fully take into account the success of our project. 

The 5 levels of impact measurement start from low to high, and provide a variety of benchmarks to help businesses understand what is expected of them in terms of project structure and management. 

Level 1. 

At this level what happens is that there is an established relationship of causality between your strategy and your expected impact but you are not backing this connection up with any collected data.

What this means is that in principle the activity you have undertaken is causally related to the goal you are trying to pursue. Other than that, however, there is no evidence that your program will have the desired effect and in what measure it will impact the problem.

Level 2.

At level 2 we have data, but it’s just data connected to what you did, to your initiatives. You don’t have data connected to the effect that these activities had on the communities you were trying to help.

What this means is that you have collected some data on what you are actually doing to help but you have no information on the effect of those activities.

For instance, you may be investing to build infrastructure to help grow a developing economy, but you may not have any information on the way your investment actually made a difference as in getting people to work, or even start a new venture.

Level 3. 

At level 3 you have data connected to the outcomes of your strategy but you don’t necessarily have a clear understanding of how the outcomes achieved are dependent on your own actions or on any other environmental factor.

What this means is that you have collected evidence on the impact of your initiative but you cannot say to what extent the measured results are actually due to your work, or are a result of chance or other environmental factors.

Level 4.

At this level, you have all of the previous information, plus you have conducted experiments with control groups to assess the causal relationship between your activities and the impact they had on your target population.

At this level you are using the full scale of academic research and analysis, to design experiments that will establish the actual difference you are making with your project.

Using control groups you can actually test whether your work is able to make a difference and understand to what extent you are able to impact the communities you are trying to help.

Level 5.

At this stage, not only do you have all of the necessary proofs discussed so far, but you also have proof of generalisability, so that your approach to the issue could potentially be scaled.

This is the most important level because at this stage you are able to show – also at a business level – the impact and potential scalability of your project. If you are able to get a high social return on investment, what could otherwise be a ‘one-off’ project could fully become the core of an impact-first business model. 

Not only that, but throughout your work, you will have developed a lot of best practices and standards of operations that can be used by other companies who will be inspired by your success and will want to follow in your footsteps.

Why should managers care about measuring their performance?

Why is this such an important aspect of running a business?

Because nowadays, with increasing customer demands more and more companies are doing “all the talking but very little of the walking”.

In other terms, greenwashing has become widespread, as in using environmental and social claims as communication strategies to engage with younger consumers, who expect companies to tackle relevant social challenges as part of their value proposition. 

Being able to present data and evidence of the results that have been obtained through social impact strategies is what allows firms to set themselves apart from this noise and show in a transparent manner their responsibility and social accountability.

Great. Now that we’ve covered all bases, it’s time to draw a few conclusions.

Conclusions

There you have it! As we’ve seen in this post, measuring social impact is a challenge for many businesses, but it can be done.

Resorting to an approach based on academic research, like the one suggested by the Nesta Foundation seems to be one of the most fruitful approaches to measuring something that could otherwise be perceived as intangible. 

If you’d like to explore cause marketing further, don’t hesitate to browse our blog: you’ll find plenty of free resources on the topic, to help you be the change you want to see in the world!