Measuring Social Impact

Key to the ongoing success of any social venture is its ability to generate an SROI, or social return on investment. In recent years, with the growing investment in social ventures and the increased transparency and accountability of businesses that claim to be socially-/environmentally-responsible, it's become a necessary to demonstrate SROI along with financial ROI.

At Saturday's GSVC Symposium, I attended a workshop led by Sara Olsen of the Social Venture Technology Group with participation from Candace Taylor, currently the Director of Wal-Mart's Corporate Strategy & Sustainability Initiatives and co-founder of Urban Oasis Development.

Sara was part of the team that developed The Double Bottom Line Methods Catalog through the Research Initiative on Social Entrepreneurship (RISE). The primary goal was to establish a rigorous, systematic and disciplined approach to measuring social outcomes for hybrid organizations seeking both financial returns as well as social impact--an approach that was quantifiable (though not necessarily monetizable).

The primary output of the research was to develop an Impact Value Chain, a simplified model that forces the social entrepreneur to align its inputs and activities with desired outcomes. Here's a graphic (with examples) that I threw together based on the RISE methodology (click to see details):


In Candace's Wal-Mart example, the company is seeking to 1) be supplied with 100% renewable energy; 2) create zero waste and 3) "sell products that sustain our resources & environment" (essentially meaning smart consumption). To illustrate her point, she discussed how the company is seeking to double the efficiency of its truck fleet by 2015; work with their vendors to reduce packaging by 5% globally and make energy-intensive products 25% more efficient by 2011.

We then broke into groups to put SROI into practice by identifying how a business can meet social needs (i.e., health, wealth, earth/environment, the sustainability of the business and the impact, etc.).

I took away a few key learnings from this exercise:

1. Measuring SROI can help you spot the holes in your social business, identifying what is having an impact and what is not, and help to inform future actions and inputs.
   
2. While the process of change and determining real impact can be slow, it seems critical to set timeframes, goals and baselines for achieving social returns.
3. When you are receiving support from donors or grants, SROI is important for creating transparency. I think this is why Kiva is so successful: it's giving people a way to see where there money has gone.
   
4. And related to #4, from a brand-building standpoint, demonstrating SROI and building success stories is important for generating loyalty, support and engagement with your stakeholders.

I think that the process of measuring SROI is not only important for social ventures or non-profits, but also as an exercise for all businesses and individuals to examine their habits and activities to determine whether their own actions are generating value as well.