Social value matters: impact measurement in the hotseat

Social impact measurement is rooted in good intentions, but is that enough? Pioneers Post explores the progress and shortcomings of social impact reporting with Jeremy Nicholls, Chief Executive of the Social Return on Investment Network (SROI).

Pioneers Post: What are organisations using social impact reporting for?
Jeremy Nicholls: At the moment it’s used on three levels: marketing, business decision-making, and to allow beneficiaries and other stakeholders to hold organisations to account. There is some evidence that leading organisations are using social impact information for strategy decisions and for making resource allocation decisions. If you look at the top 10 enterprises on the RBS SE100 Index, I’m sure they are all using it for strategy decisions. Two past social impact champions on the index, FRC and P3 are doing great things, using social impact reports as a strategy and decision-making tool in the business.
At FRC, where I sit on the board, we use detailed information. It may not be that rigorous, but its good enough to inform our decisions. We are constantly trying to make decisions based on that detail, and we accept and account for the fact that these are decisions based on imperfect information in an imperfect world. Ultimately, anything that can help us to have better conversation and debate with the board and management is useful.
At its best social impact measurement is used to make organisations accountable for what they do, and give people good enough information to make decisions. At its worst it’s a box being ticked.
PP: What about negative social value? How often are companies measuring both positive and negative social value?
JN: Not often, and there is a risk that we’re not moving towards accountability. Organisations that want to do good things, tend to think, what are our objectives? How will our activities result in our objectives? Now we need some ways of measuring that. These are all sensible things to have in place as an organisation but it’s a relatively low level of accountability, compared to having wider sense of what happens as a result of your work. Some things will be good, and some will be bad. And you need to be accountable for that.
An organisation’s beneficiaries are supposed to get some kind of social return. They have zero ability to hold the organisation to account for that. They generally cannot move to the services of company, they cannot sack anyone; they have no legislative support for that. beneficiares do not have the protection that you have in private markets, where there are much more equitable relationships.
Social impact should be there to enable people to hold an organisation to account for the return that they are creating positive or negative. If that is what it is doing I think organisations will respond and improve much more quickly. They will have to change if they are being held to account for not doing good things. And they will start to maximise the amount of value they are creating. 
It’s accountability that drives us to change. Without it, we’ll end up in a world of 'we do good things, yes we do' tick.
PP: Where are we with standardising social impact measurement?
JN: Some people are saying we need to standardise measures. But you would never do that with private business. That would kill innovation. In the social enterprise and non-profit space, you’d end up with situations where an organisation might have a different way of creating social value. It may be a brilliant way of creating social value but if it doesn’t fit with the standard metrics that someone else has set they won't be able to use it.
The SROI network has members in over 40 countries and seven national networks from Japan to Canada. We use a set of principles to determine what should be included in an account of your social impact and what shouldn’t. The types of outcomes to be measured will be very different in different contexts.  We’re agnostic about what those things are, but keen on the thinking process that goes into deciding on them.
You can put social impact into categories like food security, but you won’t get a grainy enough understanding of what food security means to people in the North of England going to a food bank, and people in Ghana who are dependent on the annual cycle of the cacao crop. What value looks like and how you measure it will be very different in those contexts, even if they both sit under a big category called food security.
PP: How important is it that social impact reports are independently assured?
JN: I think impact reporting without assurance is closer to marketing.
It’s a natural human trait to be optimistic and as a result over claim social impact. Without assurance not only do you get inconsistency you get over-claimed inconsistency. It's changing but you also find that a lot of the information produced in social impact reporting is not really used very much. If you try asking people what do you use it for, you’ll be hard pushed to get them to talk about specific examples where they have changed their services and products as a result of that information.
One of the main reasons we suspect it doesn’t get used is that people don’t know if they can rely on it. At the back of their minds, if it hasn’t been independently assured they kind of know that they can’t rely on it, because it will be the organisation overstating its claims, because that’s human. Organisations push back against any negative things that have happened as a result of their work. An assurance process would be able to resist that, provides credibility and therefore make the information useful.

But, assurance is waking up. There are conversations around how this will be included in the Social Investment Taskforce’s processes, it’s a service we provide to our members and argue for, and, for example the Social Audit Network are also very strong on the importance of audit.

This article was produced in partnership with the SROI Network. The SROI Network event, Social Value Matters, is on June 12 and 13 2014.