Viewpoint: Why Impact Assessments Are Good for Non-Profits but Bad for Business

Wednesday, December 3, 2014

By Erik Simanis:

Impact assessments are a powerful – and necessary – part of a non-profit’s tool kit. Rigorously measuring how and how much a program solves a social ill and betters the lives of the poor ensures continual improvement. Impact assessments also serve as a report card back to the funders of non-profits. They assure donors that grant funds are being maximised and used for the purpose intended.

Yet in the hands of corporations aiming to profitably serve the world’s poorest consumers – the so-called base of the pyramid (BoP) – impact assessments can impede progress more than enable it. While jumping onto today’s impact assessment bandwagon may feel like the right thing to do, companies can unwittingly jeopardise a business venture and reduce consumer value by doing so.

Insisting that BoP ventures focus on broad social impacts sets projects up to be viewed internally as corporate social responsibility (CSR) programs rather than business opportunities. When that happens, attracting resources and securing the support of country managers – the people responsible for commercial activity in a territory – will be an arduous uphill battle.

The perception arises because social issues encompass factors that sit far outside the company’s control and scope of operations. Take, for example, the issue of childhood diarrhea prevention. While a company that makes anti-bacterial hand washing soap can influence diarrhea contraction, selling soap alone won’t solve it. Equally important factors include a child’s nutritional quality, the purity of drinking water, and hygienic waste and sewage disposal. Those factors can be directly related to parents’ level of education and income, as well as factors like gender and caste discrimination. In the end, selling a solution for cleaning hands has little in common with selling a solution for preventing diarrhea.

Source: The Guardian (link opens in a new window)

Categories
Impact Assessment
Tags
Base of the Pyramid, Impact Assessment, nonprofit, profits