How to Measure Invisible Social Impact?

When it comes to social enterprise, there’s always an issue being brought up—how to keep those social innovations financially sustainable? It is not only closely related to scaling, but also relevant to generate long-term impacts within a specific area. In the article A New Approach to Funding, it suggests in order to close financial-social return gap and enhance security of social innovations, enterprises should provide different risks and returns to different kinds of investors, [1] including governments, charities, for-profit companies, etc. While using pooling institution to design responsibility based on the needs of different investors, the bottom tranche, which, in most cases, is set for government, philanthropy organizations who expect achievements of social impact and always take the risk of first loss. Thus here comes a major consideration—how to measure social impact reasonably to attract and satisfy this group of investors?

The article The Promise of Impact Investing provides some indexes to measure it, such as IRIS indicators which are based on case-to-case analysis and therefore, not comprehensive enough to provide guidance for many other real-world situations.

Recently, I searched on Ecoloo Africa, a hybrid of non-profit and for-profit social enterprise whose main goal is to provide green toilets in Africa. It is a typical case that attracts different groups of investors, including facilities sponsors, philanthropy associations, export credit guarantees as well as local governments. [4] Except for providing support to generating social impact, NGOs and local governments offer or closely connect with substantial amount of fund resources for the enterprise and take the front-line risk of loss. While for-profit investors, such as facilities sponsors expect stable monetary returns from the project. In order to maintain long-term partnership with public organizations who take the biggest risk for the project, it is highly recommended to set up criteria or metrics on the social outcomes with great precision and transparency.

The headquarter of Ecoloo Africa in Sweden has set up some general measurements for the project, such as creating job and business opportunities locally, the reuse of the organic fertilizer generated, [3] etc. However, most of them are measurements for economic outcomes rather than social influence, such as positive change in the mindset of average people.

My class group focuses on project about setting up green toilets in India and offering manual scavengers the right to charge those toilets, which will undoubtedly help improve their living condition and social status. In order to obtain the support of government and NGOs, we need to have indexes to measure living improvements of the targeted group of people. I come up with few solutions, such as investigating the income change, or spreading out polls to collect attitudes of local people towards them before and after the program. Which way is better? And how can we give virtual results to social investors before the program actually starting up?

Resources:

[1] A New Approach to Funding Social Enterprises (Bugg-Levine, Kogut, and Kulatilaka, Harvard Business Review, January-February 2012)

[2] The Promise of Impact Investing (Rangan, Appleby, and Moon, Harvard Business Review, July 25, 2012)

[3] http://www.ecoloogroup.com/

[4] http://ecolooafrica.com/