Impact Measurement Mastery: 5 Lessons Learned Working With Colombian Entrepreneurs
This summer New Ventures, which supports environmentally-focused small and medium enterprises (SMEs) in six key emerging markets, hosted its first impact measurement workshop for social entrepreneurs in Bogota, Colombia. Seventeen New Ventures Colombia entrepreneurs and fifteen additional Colombian social entrepreneurs attended the 2-day workshop, which was designed to collect environmental and social impact data while training entrepreneurs in impact measurement.
New Ventures has been tracking the impact of its portfolio companies for several years, each year refining the questions we ask of our entrepreneurs, our data collection methods, the way we use the data, and the way we frame the value of impact measurement. New Ventures uses the environmental, social, and financial data in many ways-to evaluate companies, back up environmental claims, pitch companies to investors, report to funders, track New Ventures performance, and strengthen companies.
Entrepreneurs are often bombarded with data requests from investors, intermediaries, supply chain partners, and customers. The data is often within the company’s grasp, but impact measurement requires some instruction and guidance to increase response rate and data quality. While the Colombia workshop was designed to collect impact data and train entrepreneurs in impact measurement, it worked both ways: Entrepreneurs learned to measure and report impact, and New Ventures learned and improved how to frame the value of impact measurement, as well as how best to train entrepreneurs and ask for impact data.
The five lessons that emerged from the workshop have both helped New Ventures make impact measurement a value-add to companies rather than a time sink, and collect higher quality data include:
1. Build the business case for impact measurement first. Collecting data can be a little like pulling teeth. While New Ventures has always highlighted the value impact measurement can add to a company, this business case was not always presented first to companies. But it should be. To successfully collect high quality impact data, a business case for the collection must be outlined to gain buy-in from entrepreneurs before diving into the details of the survey. There are many good reasons for impact measurement: ability to manage data demonstrates general competency, customers and suppliers are increasingly demanding environmental impact data, impact data helps identify potential risks, just to name a few. For SMEs that are looking for impact investment, however, investors’ requests for data is likely the most compelling reason.
At the workshop, impact investors Alberto Riaño from Fondo Inversor and Bernhard Eikenberg from Blue Orchard explained the value of impact measurement from an investor’s perspective during a panel discussion. Riaño distinguished traditional investing from impact investing by the very use of impact measurement; while traditional investors may feel they are doing something good, impact investors want to quantify and prove the impact. Eikenberg explained that, while the process is not yet perfect, impact data will be used to calculate and maximize environmental, social, and financial returns.
2. Provide support during the data collection process. New Ventures has tested several impact data collection methods-stand alone surveys, phone interviews, and now impact measurement workshops. Workshops and phone interviews have resulted in higher response rates. With in-person interaction, we are able to answer questions and clarify confusion, making the process less burdensome for busy entrepreneurs. New Ventures benefits from the process as well, gaining insight into how the New Ventures Impact Report is interpreted, where the challenges lie, and how it can be improved. Finally, scheduling a time to go through the impact report survey, through phone or in person, helps guarantee the survey won’t get lost in an entrepreneur’s ever-growing inbox.
3. Learn by doing. Impact measurement is a broad term that becomes much more clear once companies have the chance to look at the actual questions on the New Ventures Impact Report survey, which includes five sections-financial, social, environmental, operational, and basic information-and incorporates 50 Impact Reporting and Investing Standards (IRIS) indicators. New Ventures provided an overview of how to measure the impact of products, services, and operations. Then companies had the chance to complete the impact report, during the workshop, test their knowledge, and ask questions along the way. This structure proved to be a good balance, giving companies a basic “theoretical” understanding of impact measurement without spending too much time on abstract examples that aren’t relevant or don’t add value to their company.
4. Demonstrate how impact measurement can improve operations. With a nearly complete impact report in-hand, entrepreneurs will be eager to put the impact report to use in improving their operations.
Bart van Hoof, assistant professor at the Universidad de los Andes School of Management and for the Masters Program in Environmental Management, demonstrated how impact measurements can be used to improve operations, using the “Ecobalance” technique. Ecobalance examines inputs and outputs of a manufacturing process, analyzes the efficiency, and helps companies identify opportunities to improve operations while reducing negative environmental impact. The data needed to successfully use Ecobalance, such as energy consumption and water use, aligns with New Ventures impact data. The Ecobalance technique has been tried and tested in the Mexican program Liderazgo Ambiental para la Competitividad (Environmental Leadership for Competitiveness), where over 1,500 companies used Ecobalance, leading to average annual savings of greater than US$80,000 per company. Savings such as these make the time and cost of impact measurement worthwhile.
5. Improving the New Ventures Impact Report survey-form follows function. It can be easy to get carried away with impact measurement and the desire to measure and quantify every single environmental and social impact. However, measuring can be time consuming and expensive. So, where should companies and intermediaries draw the line? Impact measurement programs should design their surveys based on the use of data, and measure just enough for reporting to investors, to use in communications and marketing, to improve operations, and to build credibility and leadership. For example, at the workshop the company BioPlaza, a supermarket which sells hundreds of different organic products, had to decide whether to measure and report on every individual product or to group products. At this early stage of the company it would be too costly to tease out the environmental impact from every piece of fruit and vegetable sold, nor would it benefit the company to do so. Investors, however, would be interested in knowing how many tonnes of organic produce were sold and how many tonnes of fertilizers were avoided along the way. This process, of linking data to usage, has helped New Ventures cut down on superfluous asks, making the survey shorter, more practical and useful, and equally scientific and rigorous.