How SOCAP showcased a new era of collaboration on impact standards
Investors and enterprises are increasingly speaking the same language when it comes to understanding the difference they’re making, as the Impact Management Project’s Olivia Prentice found at a major event on the impact investing calendar last month.
I’ve been going to SOCAP for a few years now, and one of the most interesting things about this year’s event was the way people were talking with much greater clarity and confidence about impact performance.
At my first SOCAP in 2015, the focus was still very much on impact measurement. Panels would debate the pros and cons of existing metrics, and people were still competing on whose methodology was best.
Recently, however, there’s been a noticeable shift. And from my conversations in San Francisco last month, I think that’s because people across the impact value chain are increasingly agreeing on two important points.
The first is that improving performance requires comparison, and comparison requires context. Counting the number of customers you serve (say) is all very well – but it tells you nothing unless you put that number in context. Equally, we shouldn’t just be using data to prove that impact has happened; we should be using it as a tool to improve that impact on people and the planet. The conversation is now less about impact measurement and more about impact management.
We shouldn’t just be using data to prove that impact has happened; we should be using it as a tool to improve that impact on people and the planet
The second key point is that it makes no sense for everyone to have their own impact accounting methodology. It’s confusing for everyone involved – whether you’re delivering a programme or paying for it – and it hampers collaboration between even the most like-minded organisations. Our financial system is made up of generally accepted norms, providing a shared language that have led to principles and standards for measuring and managing financial performance. Likewise, impact measurement and management requires a similar approach to navigate towards a more collective system.
It is these two ideas that have powered the growth of the Impact Management Project (IMP), a not-for-profit initiative that since 2016 has brought together over 2,000 stakeholders, from corporates to investors to policy makers, globally. Through a collaborative process – drawing on different areas of expertise – the IMP has enabled the field to agree on what we mean by impact, and what types of data are useful for assessing and improving impact performance. For example, instead of just counting service users, the five dimensions of impact, identified via the IMP, help us understand the extent to which these users needed that service, what positive and/or negative changes they experienced, and how that compares with what would have happened without the service. In other words, it helps us put outcomes data in context.
The next challenge for us as a sector is to make it easier for everyone to put this into practice using existing measurement standards. I spoke on a panel at this year’s SOCAP on assurance of impact practice – and it was clear that the five dimensions (and associated data categories) are being increasingly used to understand and manage the impact of investors and enterprises. (We would hear, for example, statements such as, “Our ‘Who’ is girls in Brazil”, or “We are looking for companies that have both ‘Depth’ and ‘Scale’ of impact.”) That’s a big step forward, because this common language enables them to have much more detailed and informed conversations about the pros and cons of different strategies, or the practical implementation challenges facing different practitioners.
The five dimensions are being increasingly used to understand and manage the impact of investors and enterprises. That’s a big step forward
But when it comes to implementation, many are still struggling to understand how it ties in with the myriad impact standards on the market. If you’re an investor, how do you sensibly compare a report compiled in accordance with globally-recognised corporate reporting standards, with a report built around bespoke Environmental, Social and Governance (ESG) ratings or in-house impact data categories? Unless we can compare like with like, we’re never going to be able to identify the models best suited to solving particular social or environmental challenges.
The IMP’s Structured Network is an attempt to address this challenge. Rather than adding to the array of options available, the IMP is instead facilitating collaboration between the 13 most widely-recognised impact/ESG standard-setters. All of them have committed, via the Structured Network, to work on a shared vision for a complete set of standards for impact measurement and management, and some have already started co-creating new standards in areas where there are gaps. For example, the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and Social Value International are working with the Organisation for Economic Co-operation and Development (OECD) to develop a holistic measurement framework that covers both ESG risks and positive impacts.
Judging by the conversations I had at SOCAP, there’s a real appetite for consolidation and coordination when it comes to standards. If we’re serious about meeting the UN Sustainable Development Goals by 2030, impact-driven organisations need to be competing on impact performance, not methodology. The Structured Network members are in the vanguard of this movement, but there are plenty of other organisations working together in the background to develop best practice – and in the coming weeks and months, we’re likely to see new partnerships announced that will accelerate this progress. By the time we’re back in San Francisco for SOCAP 2020, I think impact measurement and management will no longer be viewed as a nice to have, technical pursuit – but as an essential part of good enterprise and investment management.
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Header photo: An audience at SOCAP19 (credit: sreel Photography / Courtesy of Social Capital Markets)