Only 12% of millennials and Gen Zers believe businesses help mitigate the effects of climate change protect or improve the environment, according to the 2019 Deloitte Global Millennial Survey.
However, more and more businesses are trying to change that by weighing how they fit into a larger ecosystem incorporating economic, social, and environmental concerns then applying those metrics to their everyday business in a process called impact measurement.
Table of Contents
- What are impact metrics and impact measurement?
- Why is Impact Measurement Important?
- Different Types of Impact Measurement and Reporting
- Global and National Indicators
- Impact Investment Indicators
- Nonprofit or Charity Indicators
- International Development Indicators
- The 3 main social impact metrics
- How to Develop an Impact Measurement Plan
- Step 1: Define Framework and Your Focus
- Impact measurement questions to ask:
- Impact metrics questions to ask:
- Step 2: Organize the Information
- Step 3: Match the Idea to the Results
- Step 4: Decide on Specific Actions
- Step 5: Use the Data Analysis on Multiple Platforms
- Step 6: Troubleshoot Problems Through an Impact Assessment
What are impact metrics and impact measurement?
Impact metrics are a way to measure the impact of your business on society, the environment, and governance. They’re also called non-financial metrics because they don’t always (directly) relate to your company’s financial performance.
Like any other measurement method, it doesn’t make sense to use impact metrics if you don’t know what they’re measuring, how they can improve your social impact, or how they can be applied in context. Impact measurement is the process of evaluating your organization’s impact on the planet within a larger societal context. Many organizations must weigh internal factors in determining their overall role in society and their actions toward community members either directly or indirectly.
Why is Impact Measurement Important?
Impact measurement is an important part of any philanthropic effort. It is the process of measuring and evaluating the success of a project or initiative, allowing stakeholders to assess its impact on their target audience.
By measuring impact, organizations can accurately track their progress and identify areas for improvement. Impact measurement also provides quantitative and qualitative data that can be used to inform decision-making.
This data can help organizations measure social impact by revealing how effective their efforts have been in improving people’s lives. In addition, it allows for a more comprehensive evaluation of a program or initiative, which helps improve its effectiveness over time.
Ultimately, impact measurement is essential for organizations to ensure they are making the greatest positive impact possible with their philanthropic efforts.
Different Types of Impact Measurement and Reporting
You may hear different terms used to describe impact metrics, including:
- Environmental metrics: These represent an organization’s environmental impact.
- Social impact metrics: These represent the social impacts of an organization’s activities, such as its treatment of employees or how it relates to customers.
- Governance metrics: These include regulations and policies related to corporate governance and ethics. In some cases, they might also include information on executive compensation packages or other perks given in exchange for top management performance.
- Risk metrics: These measure factors that could potentially pose risks to community members and investors’ financial interests if not effectively managed by a business or other entity.
But beyond these, there are several other indicators that help measure outputs to ensure you have an effective management strategy.
Global and National Indicators
Global and National Indicators are key tools used to measure the progress of the United Nations Sustainable Development Goals (SDGs) and are considered a global reporting initiative. These indicators provide a way to track, analyze and report on the progress of SDGs set by global organizations.
Each indicator is linked to specific targets and objectives which help to assess the impact SDGs have on countries, regions, or even globally. For example, an indicator might measure the poverty rate in a certain region or monitor changes in natural resource usage.
Global and National Indicators can also be used to compare different countries’ performance in achieving certain SDG targets. This data collection can then be used by international organizations to better understand how their initiatives are impacting sustainable development objectives worldwide.
Impact Investment Indicators
Impact Investment Indicators are used to measure the success of investments made for social and environmental impact alongside a financial return. The Global Impact Investing Network (GIIN) has developed a standardized system, called IRIS, which provides an array of metrics that can be used to report on the impact of investments made. These indicators are particularly useful when assessing whether investments have contributed to achieving SDGs.
Theory of Change is also employed by investors to understand how their impact investments have created positive social and environmental impacts alongside a financial return. By understanding these Impact Investment Indicators, investors can accurately measure the progress of their investments and make decisions based on evidence-based data collection.
This helps them to understand the overall effectiveness of their investment strategies and make adjustments where necessary. By doing so, impact investors are able to ensure that their investments are making a positive contribution to sustainable development goals and creating meaningful social and environmental impact alongside a financial return.
Nonprofit or Charity Indicators
Nonprofit or charity indicators are metrics used to measure the impact of a nonprofit organization and are often tracked by organizations such as GuideStar. These indicators can be divided into two broad categories: social impact metrics, which measure outcomes related to a nonprofit’s mission or goals; and impact metrics, which measure inputs, outputs, and activities associated with achieving those goals.
Impact metrics can also be further divided into operational indicators, which focus on efficiency and effectiveness, and resource allocation metrics, which focus on organizational resources. A framework for measuring these indicators provides a consistent method of analysis that is essential for assessing the performance of nonprofit organizations. Through this framework, nonprofits can identify areas of strength and improvement in order to better serve their mission-driven objectives.
International Development Indicators
International Development Indicators are metrics used to measure and report the progress of a country’s development. Indicators can range from economic growth and poverty levels to indicators related to health, education, and gender equality.
These indicators are also known as performance indicators as they can be used to measure the impact of development initiatives. Disclosing these indicators is important for governments, civil society organizations, and international organizations to track progress on internationally agreed-upon goals.
The use of indicators has become an integral part of the international development process, allowing stakeholders to understand the progress made in different areas, identify challenges, and design strategies for improvement. Ultimately, these indicators help countries to make informed decisions about their development efforts by showing where resources should be allocated in order to have maximum impact.
Social impact metrics measure the positive and negative effects of an organization, group, or individual on society. These metrics can be used to evaluate the success of an organization’s social impact projects, programs, and initiatives. The three main social impact metrics are learning, longer-term impact, and metrics.
Learning measures if an organization is continually learning from its experiences and making changes based on its findings.
Longer-term impact looks at how sustainable the project is over time and how much it will affect the community in the future. Finally, the metric looks at different indicators such as financial performance or customer satisfaction to assess overall progress.
By looking at these three main social impact metrics together, organizations can gain a better understanding of their true social impact and make improvements where necessary.
How to Develop an Impact Measurement Plan
To accurately measure impact, organizations must consider what areas they want to focus on. This includes environmental impact and the impact on society. Doing so will help focus the entire project and determine the metrics to use and the tools that are needed.
To help define the impact measurements and later where the results need to be applied, consider ensuring the following items are addressed and have defined Key Performance Indicators (KPIs):
- Define the focus areas
- Construct a detailed project summary
- Define goals and objectives
- Obtain metrics for determining KPIs
- Enter KPIs
- Link social media platforms
- Be familiar with data collection methods (surveys, focus groups, interviews, email)
- License data collection software
- Gain access to community data
- Maintain reporting indexes
With this framework of action steps in place, collected data can be sorted and analyzed easier, and the results implemented sooner.
Step 1: Define Framework and Your Focus
Before applying the results from the impact measurements and metrics results, it’s essential to define the framework you used to get the results.
This step is the equivalent of getting all the ingredients out for a recipe before turning on the stove. Putting everything into perspective will give the results a more significant meaning and add context to the numbers and stories you would have collected during your campaigns.
These can then be used for social media when necessary. After implementing impact measurements and metrics, it is essential to consider the types of measurements, metrics, and the level of impact:
Impact measurement questions to ask:
- What changes were you hoping to generate?
- What exactly were we measuring?
- What were the intended results?
- What constitutes a “significant” impact?
- What does success look like?
Impact metrics questions to ask:
- Is the system of measurement standard or custom?
- Are results being measured quantitatively, qualitatively, or both?
- Is anything being overlooked?
- Are the results relevant to the business and the industry?
- Where can improvements be made?
- Can the results be duplicated under similar circumstances?
Aligning the proper measurements and metrics is a crucial component that cannot be overlooked.
A multi-step process to applying the results and ensuring that the metrics make sense and have measured the correct thing is half the battle.
Levels of Impact
There are two distinct levels of social impact measurement: program-level impact and population-level. If you took measurements on a program level, apply the results on the same scale.
The program-level impact is your actions/services’ role on customers, clients, or anyone else who directly participates with your organization.
Possible examples involve dramatic changes to work culture, changing internal goals and objectives, new customer initiatives, or even re-branding.
The population-level impact extends well beyond just your own internal structures and reaches the larger community. Community-level social impact involves collaborating with groups outside of your organization and determining a specific focus area/group you want to impact.
See Related: What is the Collective Impact Model?
Step 2: Organize the Information
It may be tempting to start making changes right away, but first, it might be best to sort the results you received to ensure that when you apply them, you can back them.
The results can be sorted based on impact metrics and the type of received result. To continue the metaphor, this step is getting everything chopped, broken down, and sorted separately before cooking.
While you may just be sorting information and brainstorming ideas, this additional organizing will show in the final result.
How you receive the results will influence how the results are used. Impact metrics, for instance, consist of two different definitions, standard metrics, and custom metrics. Assign your results to either standard, custom, or both.
Standard Metrics vs. Custom Metrics
- Standard metrics refer to more well-known universal standards set and applied by research organizations and regulatory agencies. These clearly defined goals are easily understood and usually result in meeting a regulatory law or promising to meet it by a set date.
Scholarly metrics, for example, will have similar qualities to impact metrics.
- Custom metrics are specifically tailored to an organization and are not universal concepts. Two businesses within the same industry applying impact measurement may use different metrics just as they would for other companies.
- Although the two definitions exist separately, the best metrics come from a combination of both standard and custom metrics.
Quantitative vs. Qualitative metrics
Is the result quantitative or qualitative?
Another important part of determining social impact depends on whether or not the metrics yield quantitative or qualitative results. This result will also influence how the organization will use the data after collection.
Straightforward statistics. Usually, you can extrapolate a raw number or figure to determine how successful an impact output indeed was.
This often requires additional context as numbers alone don’t tell the whole story, but it is generally much more straightforward. You can use these numbers as statistics or bites of information for public outreach.
A quantitative metric could be a percent reduction in child hunger in a food bank case study. Perhaps the impact is then measured by a 25% reduction in families that suffer from food insecurity. This is a clear, tangible result that measures the success of an impactful action.
At this point, the business could add more food banks to help cover areas that were not addressed by the previous action or add to the existing food banks to encourage a larger map of service to the community.
After a few months to a year, a re-test will yield more data that can either support the changed plan or show it to be faulty and require another change.
These involve stories, emotions, and feedback. These usually require you to dive a little deeper to truly understand a social impact. It might be less scientific and more intuitive. While impact data collection and feedback loops can serve as support, these metrics require a bit more storytelling to fill in the gaps.
Back to the food bank study, a qualitative metric could be increased education initiatives.
As education levels increase within the community, there may be a dip in hunger levels and food dependency. However, there may not be clear and concrete data to suggest something like “increasing education levels by 20% leads to 10% less community hunger.”
Instead, this metric is more intuitive. As we see hunger levels drop, we know it can be attributed to an increase in education either because that is the metric changed or because of other positive effects happening elsewhere in the community.
Step 3: Match the Idea to the Results
Every business should tailor their action from the resulting measurements according to what works for them and the affected community. Most results will fall into one of four categories.
1. Cause and Effect
Involves understanding the connection between actions and outcomes. It weighs how a decision or policy might have short and long-term benefits and consequences.
Some of these changes may be intended, while others are unintended. It is also important to consider how consequential/inconsequential the results are and who/what is directly (or indirectly) impacted.
- If a business closes its doors one day a week instead of remaining open every day, the effect will likely decrease power consumption. If measurements support it, perhaps trialing one day a month, to begin with, and revisit the metrics in six months.
2. What if…
This hypothetical lens weighs the actual result versus what might have happened if you did not decide. It also considers what might have occurred if the business altered the action somehow. We can then weigh how impactful an action was and what could have made it more or less impactful.
- If a declining company decides to lay off 10% of its workforce, then a year later evaluate that decision. While laying off 10% of the workplace probably wasn’t viable, transitioning some of those employees to remote workers for six months may allow the extra revenue to protect the jobs of its remaining employees.
3. The Greater Good
This perspective focuses on impact based on the level of societal contribution. This might mean having a positive effect on the economy or the environment. It is the process of directly helping or assisting people (or the planet) and impacting the greater good.
- For example, a non-profit realizes how a fundraising campaign contributes to sustainable housing developments in an impoverished region. You can implement social media to advertise the fundraising campaign, with a dedicated day or week per year. The business revisits the measurements in a year.
This is the most ambiguous perspective and relies on general sentiment or gut feeling. The impact is likely to be more measured through qualitative instinct than strict quantitative measurements, so the application of the measurement can also be informal. For this result, perspective isn’t an exact science but can still be a useful measure.
These perspectives are essential to consider when we think about what we want to measure and why it is impactful.
- You put workout bikes in employees’ home offices to increase productivity levels. Employees may state they feel more productive, but it might not be possible to prove the correlation. You may add bikes to the primary office or authorize the payment of gym memberships for other employees.
Step 4: Decide on Specific Actions
With the framework in place and data sorted and analyzed, the most overlooked step is the most important step. It is determining what to do with these results. The result may fall into one of the four categories mentioned above, or it may fall across a few categories. The result is the same – make a change.
- If the result is negative, changes may be necessary or re-testing.
Maybe the results expose a crucial flaw or failure. In that case, it may be important to make wide-sweeping changes that can be done immediately or broken up into stages to avoid further issues that stem from it.
- If the results are positive, it may mean expanding on an action or conducting something similar in another department or branch.
Decisions need to be weighed considering multiple factors.
What Type of Action is Necessary?
For example, if a tech start-up decided to slash 50% of its marketing budget and reallocate the funds to research and development. The reallocation of funds might lead to new technology that gives them a competitive advantage or a new growth strategy.
It could also lead to decreased sales or a loss of jobs for employees in the impacted departments.
When Should the Action Be Taken?
Your focus area would have been defined before measuring and may have included:
- Pollution concerns
- Social justice
- Wage gap
- Job creation
Depending on the focus area, you may have to wait to apply the results depending on the seasonality. Timing is almost as important as choosing the right action for the outcome.
Education, for instance, might be something to apply for between September and June. In contrast, you may best address pollution concerns and discrimination immediately to give the change more time to take shape.
Step 5: Use the Data Analysis on Multiple Platforms
Collecting impact measurements and metrics takes time and effort. After being summarized, organized, and assigned to issues, you can use the data that results from it in multiple scenarios.
For Funding Applications
Use data that shows the business is making a difference, no matter how small, to impress funders as part of the condition of receiving funding. Even if the data indicates that a change is needed, the data shows the first step is making that change.
This may be at the start to obtain funding or at the end of one grant for further financing in the future.
For Company Education
Staff meetings and company retreats are a perfect time to talk together and go over the success or failings of the company when it comes to environmental, social, and economic issues. Annual meetings and reports are a great time to outline the data and possible actions the business may be taking.
For Ownership and Stakeholders
Stakeholders will appreciate knowing where the business is, and management can share important causes while taking the information back to the people they support.
Any time you can share that information is a time to show where the business can improve. Data and statistics often speak louder than words.
Marketing and Social Media
Social media is more important now than ever, and disclosing what a business is doing to improve its impact on the environment can be part of a successful marketing or communications plan.
Applying social impact measurement and impact metrics can be a two-fold operation with practical applications such as fundraising campaigns or lowering carbon emissions, and publishing information in company newsletters and social media to show the starting point and progress points along the campaign trail.
Turn impact data and statistics into infographics, short company videos, or podcasts that can be shared all over social media networks and get other businesses involved.
Also, with millennials and Gen Zs being frequent users of social media platforms, publishing the data can show support for causes that are important to them.
Remember, just because the data is used to make changes doesn’t mean that the business can’t use it multiple times.
Step 6: Troubleshoot Problems Through an Impact Assessment
Many challenges complicate implementing social impact measurement, making it challenging to align metrics or use them to verify results.
Some of these challenges include:
Impact measurement can be very costly and take a lot of financial resources. It is even possible that implementing the resulting data could wind up diverting resources from other projects that may ultimately yield more significant benefits.
A poorly designed study may wind up being a waste of resources that could negatively impact future investments.
That’s why it’s essential to work in stages, verifying the information as steps are completed and continually retesting data.
It is also possible an organization does not have the financial resources to conduct impact measurements adequately. Either you should undertake a smaller campaign or money earmarked for a time in the future.
Along similar lines, even if an impact measurement isn’t financially draining, it can be incredibly slow-paced and time-consuming. Depending on the output and the aligned metrics, it could sometimes take years to get any measurable insight.
Many organizations may not have the resources or patience to see a project through when it is not providing any results in the short term.
It’s also possible that as time goes on, the impact you are measuring becomes obsolete, rendering the entire process irrelevant. This can impact measurement dispiriting to some organizations and make applying the results more challenging. Seeing a result from all the hard work may seem to be a long way away.
However, successful implementation takes patience, and often the results from that patience are not only rewarding from a social perspective but also financially and economically rewarding.
All staff members should have some stake in the process, from upper management having an organizational commitment across the boards and down to the part-time staff.
Often an organization may go through the different stages of crafting an area of study, determining what they aim to measure, and adequately aligning metrics, only to get unclear or conflicting results that they then can’t apply.
For example, an organization invests in sustainable energy by installing solar panels only to see emission rates increase.
Sometimes unforeseen external factors can derail the results of a study and throw off impact measurements. This can lead to confusing results that do not yield very much guidance or actionable insight.
However, those confusing results can refocus efforts or bring in a specialist to help. If the drawn-up results are confusing when applied, bring others together for a fresh set of eyes. Often the most obvious answer is the easiest one overlooked.
A Lack of Technology
While large-scale corporations may have access to droves of data and top-of-the-line technology, this may not be the case for a smaller company or a non-profit. Impact measurements can range from simple to very complex.
The more complicated, the more advanced tools are likely needed to align metrics and gauge impact. This may not be possible for every organization, and they may have to simplify the process.
The results from a simplified process may also be easier to apply and offer a more precise opportunity to improve the community or workers’ lives.
As previously discussed, there is a bit of a gray area when it comes to certain types of qualitative data. While there is sometimes room for inferences and drawing correlations, it isn’t always clear-cut. It isn’t possible to measure every result in insightful terms.
It is also possible that when it comes time to apply metrics, they don’t align with what you previously anticipated. Metrics may need to be adjusted or scrapped altogether.
It is crucial to account for these potential obstacles to ensure they do not derail your evaluation. Keep an open mind when deciding how to use the measurements and statistics given to you.
As with a lack of technology, strange or confusing results can be an opportunity to have others come onto the project and offer a new set of eyes.
Maybe installing solar panels doesn’t result in a sudden drop in the electrical bill, but can it result in an annual decrease or the opportunity to sell electricity back to a power company instead?
Even if the results don’t point to a straightforward application or are different than expected, you can use them to talk about the issue that was being measured. Even without a substantial change or clear-cut results, an opportunity to identify problems and address them in the future can be an improvement.
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Kyle Kroeger, esteemed Purdue University alum and accomplished finance professional, brings a decade of invaluable experience from diverse finance roles in both small and large firms. An astute investor himself, Kyle adeptly navigates the spheres of corporate and client-side finance, always guiding with a principal investor’s sharp acumen.
Hailing from a lineage of industrious Midwestern entrepreneurs and creatives, his business instincts are deeply ingrained. This background fuels his entrepreneurial spirit and underpins his commitment to responsible investment. As the Founder and Owner of The Impact Investor, Kyle fervently advocates for increased awareness of ethically invested funds, empowering individuals to make judicious investment decisions.
Striving to marry financial prudence with positive societal impact, Kyle imparts practical strategies for saving and investing, underlined by a robust ethos of conscientious capitalism. His ambition transcends personal gain, aiming instead to spark transformative global change through the power of responsible investment.
When not immersed in the world of finance, he’s continually captivated by the cultural richness of new cities, relishing the opportunity to learn from diverse societies. This passion for travel is eloquently documented on his site, ViaTravelers.com, where you can delve into his unique experiences via his author profile.