Hi, my name is Sara Olsen and I’m a founding board member of Social Value US and the CEO of SVT Group, an impact management services firm I founded to “make impact management ubiquitous worldwide.” And I’m Kate Ruff. I am an accounting prof at Carleton University in Ottawa, Canada. I study how organizations measure and report their social results (outputs, outcomes impact), focused on accounting problems, such as standard setting, materiality, relevance, presentation and valuation, as they apply to social impact.
Lessons Learned: There has been a lot of talk in impact investing and other circles about the need for “impact measurement standards,” but many if not most efforts to promote a fixed set of measures have met with overt or covert resistance, and failed to gain traction.
Recently we co-authored an article discussing a potential solution to this conundrum. Standardized indicators of impact can only get us so far because they are often insufficiently relevant to the decisions these different parties must make about how to understand and improve their impact. At the same time, having complete discretion over what to measure makes measures incomparable and hinders the development of an efficient social capital marketplace since it becomes virtually impossible to understand or improve impact at the portfolio, sector or systemic level. What’s an impact investor to do?
Drawing lessons from the evolution of financial accounting, we propose that the solution is skilled impact analysts:
“[I]t is possible to achieve comparability by focusing on the analytical skills needed to compare social impacts without mandating a rigid set of required metrics. The premise is that efficient capital markets demand analysts who are capable of interpreting and comparing apples and oranges. Why? Because they understand fruit. The market is best served when each organization can measure its social impact in the way that is most meaningful and insightful to its aim and operations, as long as it follows common principles for good measurement.”
We term this approach “bounded flexibility,” or choice within limits. We assert that it, “coupled with consistency (pick a method and stick to it) and disclosure (fine print gives details on methods used), is the solution to understanding impact that will enable the social capital markets to flourish.
Rad Resources:
- For more information about the SIM TIG, see here. To join the SIM TIG, see here.
- Social Value International is a professional home where folks from different domains (accounting, finance, philanthropy, evaluation, sociology, environmental economics, data science etc) have come together to work on changing the way society accounts for value. SVI has chapters in the US (newly), Canada and 18 other countries worldwide and members in many more.
- Our article in the Stanford Social Innovation Review delves deeper into this issue and what it looks like in practice. It develops ideas that were first published in Ruff, K “The Role of Intermediaries in Social Accounting: Insights from effective transparency systems” in Mook, L. (Ed.) Accounting for Social Value. University of Toronto Press, 2013.
The American Evaluation Association is celebrating Social Impact Measurement Week with our colleagues in the Social Impact Measurement Topical Interest Group. The contributions all this week to aea365 come from our SIM TIG members. Do you have questions, concerns, kudos, or content to extend this aea365 contribution? Please add them in the comments section for this post on the aea365 webpage so that we may enrich our community of practice. Would you like to submit an aea365 Tip? Please send a note of interest to aea365@eval.org. aea365 is sponsored by the American Evaluation Association and provides a Tip-a-Day by and for evaluators.