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

Many of us in the base of the pyramid community, myself included, often wonder, “is this business really making a social impact?” Sure, there are real indicators of success, but what action drove that particular outcome? As I ponder the social impact of business, I’m reminded of an old marketing adage: We know at least 50 percent of our efforts are working–we just don’t know which half. (Hat tip to Brian Trelstad for bringing this up in a meeting.)

In order to build truly inclusive businesses, our sector must start tracking impact over time. This we can probably all agree on. But the challenge is not so much in creating buy-in around the idea of measurement, but in finding a way to integrate an effective and user-friendly system for doing so in an already resource-constrained work environment.Because of these and other stumbling blocks in creating social metrics, Rob Katz and I were particularly intrigued by the newly released Measuring Impact Framework developed by The World Business Council for Sustainable Development (WBCSD). This framework, which has been in the works for nearly two years, is designed to guide companies–from small enterprises to large multinationals–through the process of measuring and assessing impact, and making better-informed future decisions within the context of a larger development paradigm.

The WBCSD framework is designed to be applicable across sectors and at varying points throughout a company’s life cycle. The core business activities suggested for analysis — governance & sustainability (including corporate governance and environmental management), assets (infrastructure, products and services), people (jobs, skills and training), and financial flows (procurement and taxes)–are flexible, open-ended and non-exclusive.

As someone with a limited background in program and policy evaluation, I can see how this framework could be helpful in conducting an internal impact audit. The WBCSD is effective in outlining and defining the various parts of any good analysis: understanding the relationships between a series of business activities, company resources, direct and indirect outcomes and large-scale impact. Assuming the same individuals conduct the impact analysis over consistent time intervals, organizations can use the Measuring Impact Framework as a tool for identifying goals, achieving internal benchmarks and measuring their own progress over time.

But to gauge an organization’s positive and negative contributions within a broader development context, it will become increasingly important to consider counterfactuals and to establish standard indicators as part of the assessment. By measuring against peer organizations as well as against itself over time an organization can protect itself from its own bias and see itself as part of a greater competitive landscape. Only through this lens will business leaders be able to make integrated and inclusive decisions for change.

It may be a long time before the social business sector (a vague and multi-faceted term in-and-of-itself) can agree on a set of standard metrics; but the work of WBCSD and others–such as the Aspen Network for Development Entrepreneurs–is encouraging. If nothing else, the Measuring Impact Framework is a tool that businesses can use to improve reporting processes, identify and communicate priorities with stakeholders. Hopefully, it will also serve as a catalyst for shared effort and continued development on sector-wide measurement tools.