NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

The social sector is going through a massive change never seen before. Thanks to the advocacy of innovative foundations, impact investments are now becoming mainstream, along with collective impact programs and other initiatives like social impact bonds and Pay for Success programs. In the U.S. alone, impact (or socially responsible investing) has grown to $6.57 trillion.

Foundations are also shifting their philanthropic strategies toward a more targeted approach. As examples, we have the recent change at Ford Foundation toward combating inequality and a new generation of funders, such as Robin Hood Foundation in New York and Tipping Point in San Francisco. These organizations are now adopting outcome and impact measurement to ensure the success of the programs they fund. Many foundations are reducing their grant portfolio size in a shift toward with larger and often unrestricted funding. The overall result of this behavior is a higher engagement, and many more touch points throughout the grant process.

Major funding and program development organizations increasingly believe that a structural change in the social sector will happen when like-minded players start working collaboratively.

More and more, the success of new philanthropic models depends on the rise of collective impact initiatives and demonstrating impact evidence. “SSIR’s Metrics 3.0: A New Vision for Shared Metrics”  presents a strong argument for a collaborative approach at the organization and the ecosystem levels, as the best way to achieve value generation in the social sector.

As these trends spread, we are witnessing the rise of thousands of collective impact ecosystems accompanied by improved impact investment models. These ecosystems incorporate different catalysts to impact measurement. A few examples of diverting measurement interests include:

• The United Nations, as it seeks to roll out the Sustainable Development Goals from a global to a local scope.
• Impact investors who demand impact evidence from small growing businesses (SGBs).
• Efforts by big corporations, small and medium enterprises, and the public sector to demonstrate sustainability and social responsibility to different stakeholders.

In this blog series, I will explore the key challenges in building an efficient collective impact measurement system. I will look at the transition from shared measurement to collective impact, and how impact evidence is critical for boosting the investor’s confidence and engagement.

Good impact measurement has four major elements:

1. Collaborative metrics.
2. Better partner, investee and grantee engagement in the metrics/outcomes data collection process.
3. A scheme that provides a better understanding of the qualitative and quantitative impact results relevant to each initiative or program.
4. An integrated system that simplifies the use of the current but varied standards, frameworks and tools.

Let’s look at the first element.

Collaborative Metrics

Metrics have been cited since the creation of program-related investments (PRIs), which according to the Foundation Center are “investments made by foundations to support charitable activities that involve the potential return of capital within an established timeframe.” However, the state of current standards, frameworks and tools are too confusing for most people.

Funders can take months or even years to define core metrics and program/beneficiary organizations. The main reason for this delay is that the impact context differs between program/beneficiary organizations and impact aggregators such as funders and international development agencies.

A few scenarios and cases to consider:

• Imagine that a foundation focusing on health care wants to fund a few good impact immunization programs in West India. After looking at the IRIS metrics, managers decide to use metric PI3902: Health Intervention Completion Rate to measure immunization completion, which is calculated by dividing the number of patients completing treatment within the clinically recommended timeframe by the number of patients who started treatment and were expected to complete it. Then, this metric is given to the NGOs executing the immunization program.

Now, let’s suppose that one of the NGOs would also like to report other data to the foundation, such as cost and location of the immunization, since these factors have represented great challenges for them compared to other NGOs in the same program.

In this hypothetical case, the lack of a common context delays the selection of adequate metrics to capture the real impact.

• In a second scenario, international development agencies like FAO and WHO, are charted to lead the SDG “Goal 2: End hunger, achieve food security and improved nutrition, and promote sustainable agriculture.” They are working in eastern Africa with numerous regional and national agencies to implement the goal.

Considering the SDG goals are global in scope, how can they address national, regional and local level indicators?

• In the last scenario, there are several collective impact organizations such as HomeKeeper for affordable housing, CoMetrics for food-related social businesses, and Strive, a Cincinnati-based education example extensively discussed in an article published by Stanford Social Innovation Review.

The bottom line: Whether the target is to build competitive social businesses and programs, or disruptive initiatives for basic services like education, the challenge is to identify programs focusing on common goals and build conjointly agreeable metrics.

The challenge of metrics collaboration

There are many sustainability reporting standards available today. In fact, according to the Sustainability Disclosure Database and the Tri-State Sustainability Symposium, more than 10,000 organizations (firms and investment funds) are reporting to one or more standards currently.

At the same time, many UN agencies are using SDGs to fund billions of international development programs. And innovative community foundations, like the aforementioned Robin Hood Foundation and Tipping Point, have built internal metrics to measure outcomes from key programs that they support.

There are some catalogs and online services available, such as Global Value Exchange, which provide a decent aggregation of metrics.

But even with such systems, thousands of foundations, development agencies, businesses and nonprofits spend months just to pick metrics that meet their program goals. On the other hand, a big challenge lies in demonstrating collaborative impact even though similar organizations are reporting under different metrics.

Standards are used at the top of the pyramid

Most successful standards such as IRIS (commonly used for small and growing business reporting to investors), GRI, GRESB, CDP and SASB (commonly used for sustainability reporting to investors and other stakeholders), are still being used at the top-of-pyramid level.

These metrics are designed to communicate relative performance of social businesses that attract impact fund investments. However, their current approach is often limited to self-reporting, resulting in data that does not provide aggregated impact evidence of the overall program.

Conclusion

Collective impact and impact evidence are key to revolutionizing the social sector. First we need a new generation of measurement approach with the following key ingredients:

• The capability of building metrics from standards and goals, and adapt them to the program’s context.
• The ability to batch common metrics based on a certain goal or type of program.
• The ability to roll-up and roll-down goals without losing context.
• A compendium of the hundreds of already existing metrics. (There is no need to reinvent them.)
• An open platform to build a collaborative metrics pool.

Also, if we want to encourage private capital to go into the social sector, we must demonstrate the success in programs like the ones mentioned above. To be successful, program agencies need to understand their performance against similar players and the best practices that others have adopted to achieve similar goals.

I believe that the highest efficiency in the social sector will only be accomplished when all the organizations start reporting with transparency on specific goals, and allow their data to be aggregated with other organizations’ in order to understand true collective impact.

Unmesh Sheth is a founder of a for-profit social enterprise, SoPact, an impact evidence platform for social impact and sustainability.

Top image: Photo illustration courtesy of SoPact.