Best Practice In Measuring Social Impact And Return On Investment Of CSI
In the social development field, one of the most cited questions from investors and participatory stakeholders regarding social/community development and investment projects is: “How will you measure your social impact /outcome / change of the development programme?” In the business field, what still really matters most is: “What is the return on investment of your community/social development programme?” The dilemma is to determine the relationship between community/social impact and business value (or return on investment).
Many public, private and community stakeholders have over the past few decades become disillusioned about the potential social impact and value of CSI programmes. While examples of truly successful social and community development programmes exist throughout Africa and South Africa, these are dwarfed by failed projects. Such projects sounded fantastic at the outset and promised financial sustainability, social upliftment, better education, more jobs, improved working conditions and environmental protection, but ended up as “white elephants”. They not only failed to deliver on the promises of sustainable community development, but also resulted in negative, unintended or even no impact, tarnished reputations and soured stakeholder relationships.
CSI programmes may be conceived by companies or donor organisations with the best intentions in the world, with a real commitment to sustainable change that addresses regulatory and statutory compliance, shareholder expectations and community needs all at the same time. But if funders and programme developers do not clearly understand the value and application of social impact assessment (i.e. the actual change resulting from the programme) or how to utilise the information generated from the monitoring and evaluation process, ineffective and failed CSI programmes will continue to dominate the development sector. Without a rigorous process to govern CSI programmes from inception to completion, these programmes will remain unsustainable.
What is social impact assessment?
From a CSI perspective, social impact assessment is a tool that can be used to qualify and quantify to public, private and community stakeholders the social, economic and environmental changes and outcomes that have occurred over a period of time, within a geographical area and within the development context, as the result of social/community investment and development interventions/programmes.
Historically, proving the success of programmes related to CSI was achieved through measuring and monitoring outputs and outcomes of projects. An impact assessment goes beyond traditional methods of measuring, monitoring and evaluation of project outcomes, e.g. on-time, within budget and meeting objectives – and makes it abundantly clear if a programme has real benefits.
It does not eliminate or replace monitoring and evaluation, but rather complements these, as shown below:
- Monitoring keeps track of inputs, activities and outputs
- Evaluation assesses the actual vs. planned performance on key project indicators (short-term)
- Impact assessment articulates the change that has occurred, the impact it has on beneficiaries’ lives and circumstances over time (long-term)
A good social impact assessment is one that:
- Is multi-dimensional and multi-faceted
- Generates specific performance data
- Utilises better and specific indicators that provides evidence of change
- Informs and considers a wider range of stakeholder groups impacted by the interventions
- Explains in more detail the drivers of change
- Provides more comprehensive responses to social, economic, socio-economic and environmental challenges.
An impact assessment therefore requires both technical and analytical skill, both of which are currently critically lacking in the development sector.
The Investment Impact IndexTM
In order to address the converging objectives of funders, development organisations and beneficiaries, as well as to help address the lack of rigorous impact assessment frameworks in the development sector, Next Generation has developed the Investment Impact IndexTM (III). The III provides a conceptual framework and assessment methodology which was developed from analysing over 500 different programmes, measuring 15 different dimensions of impact as well as 25 dimensions of return. The outcome is a library of more than 5 000 indicators.
Some of the key features of the III are that:
- It provides a holistic approach to social impact assessment that reduces duplication and effort of collecting data while providing improved data quality and evidence of performance to all relevant stakeholders.
- It provides a range of indicators which are relevant to a range of stakeholder groups, e.g. business, community, service providers, government and beneficiaries.
- It includes qualitative and qualitative metrics for short-, medium- and long-term impacts as well as investment and development focus areas.
- It provides a single learning and sharing platform that is transparent, comparable, and flexible and encapsulates the complexities, relationships and fundamental development principles of Africa’s specific development context.
- It provides a comparative performance system that involves asking participants to report on the same questions and indicators, e.g. how much was spent, in which focus areas was it spent and on which programmes and interventions.
- It provides different stakeholders – whether investors, development organisations or intermediaries – with the tools to measure and compare the effectiveness of their investment spend with other investment portfolios, programmes, focus areas and impact dimensions.
- It enables and provides detailed feedback of which programmes deliver the highest value from investment across social, economic and environmental benchmarks.
- It provides community, public and private sector stakeholders the assurance that the intended consequences, outcomes and outputs of a programme have been maximised and the unintended consequences and risks have been minimised and managed, and that the resources were invested well.
- It provides management information for funding decisions and sets cross-functional benchmarks for all relevant stakeholder groups across investment and development portfolios.
- It assists donor organisations to reduce costs and risks.
- It improves the accountability for the resources invested.
- It helps donor organisations to identify other, additional development opportunities by helping them understand the performance of their social, community and enterprise development investment.
- It provides international development organisations such as bilateral government agencies and intermediary organisations with information that can improve development effectiveness and lessen dependency on grant and development aid.
- It empowers communities and funders with the right information that illustrates the contribution to sustainable development.
- It provides a scalable and replicable best practice model to determine the real impact and benefits of social, socio-economic, community or environmental investment and development programmes for beneficiaries, as well as the value generated for investors through illustrating return on investment.
It must be noted that the aim of the III is not to create a unified metric that can be utilised across sectors – there is no sense in creating one benchmark against which health, education or community development can be measured. Each social and community programme will be different and so different dimensions or indicators that are not yet encapsulated in the III may be required. The III is therefore an open learning platform with opportunities to expand depending on the particular impact assessment needs of investors or the development needs of communities.
Impact assessment: What to assess
Impact assessment best practice shows that investors, donors and financiers of community/social development programmes need to evaluate and assess the social impact of their programmes through a blend of indicators that are able to prove positive short-, medium- and long-term impacts and balance social, economic, socio-economic and environmental factors.
The following are key elements of a social impact assessment:
- Inputs: While current impact assessments typically only measure fiscal inputs – rands and financial resources – other types of input such as volunteer time, in-kind services, product donations, infrastructure and skills should also be included. Impact should be measured in relation to the total inputs (resources) of a development programme, and should include all forms of input resources, not just cash.
- Outcomes: Outcomes refer to the short-term effects of development programmes. These should be measured to illustrate the effect of the inputs on all aspects of the programme on all stakeholders, for example relationships, applied resources, other initiatives, policy changes, the effect on poverty alleviation and eradication attempts.
- Impact dimensions:Impact needs to be assessed across various impact dimensions, and must include (but not be limited to):
- qualitative and quantitative impacts
- short-, medium- and long-term impacts
- social, economic and environmental impacts
- positive vs. negative impacts
- intended vs. unintended impacts
- direct vs. indirect impacts.
- Indicators: To ensure that the correct indicators are included in an impact assessment, certain guidelines must be considered and should be incorporated in each of the main steps of the impact assessment process. These include:
- Understanding what will change as a result of the investment from funders in communities as beneficiaries and recipients of interventions.
- Understanding who (stakeholders) will be impacted along the impact value chain – including funders, intermediaries and beneficiaries.
- Undertaking a comprehensive analysis that includes and involves all stakeholders to ensure that all aspects of impact and those impacted are evaluated.
- Understanding how results will be reported transparently to investors and clarifying what has been left out, and what the assumptions are (or were made).
- Understanding the context of the impact assessment by providing information about the impact as well as an understanding how much of the problem may exist or remain (after an intervention has been concluded).
- Ensuring integration, thus avoiding unnecessary expense and limited learning, while increasing the ability to assess shared value and collective impact.
- Change: Impact assessments should show the actual changes over time as a result of the programme inputs and outcomes and should include a view of the various dimensions of impact across the entire value chain, including the investor or donor, intermediaries, beneficiaries, partners and other stakeholders reached by the programme.
Impact assessment process
Various structured and unstructured evaluation practices and methodologies are used to engage communities and beneficiaries of social and community development programmes, and to relate the outcomes achieved to shareholders and investors. Limited, well-defined, best practice processes exist to effectively govern measurement of impact and return on investment of social development programmes. The need for rigorous processes is becoming more and more critical as pressure for transparency, responsibility, accountability and good governance from investors, funders, development organisations and communities mounts.
Next Generation uses a stringent process to manage impact assessments. The process includes key steps to perform an impact assessment. These are outlined below:
- Collecting information from various sources, such as strategy documents, project plans, application and due diligence forms, contracts, evaluation reports, site inspections and interviews, to ensure that the initial objectives of the impact assessment are clear and understood.
- Identifying and understanding (analysing) each stakeholder (individuals or groups) involved or impacted by each programme.
- Performing a primary, secondary, tertiary and final assessment to understand the inputs, resources and outcomes of the programme. (A primary assessment is done by the organisation that received the funding, a secondary assessment is done by the beneficiary(ies), a tertiary assessment is done by the practitioner who has designed, managed and overseen the implementation of the programme or intervention, and the final assessment is done by the consultants to ensure that each possible impact is reflected in the impact assessment.)
- Development of data score sheets to identify and calculate the impact and return on investment across development programmes and dimensions of impact within focus areas and investment portfolios.
- Completing a score sheet indicating the qualitative and quantitative impact per stakeholder group as well as the value and return on investment for the investor.
- Developing a matrix indicating the dimensions of impact and return on a scale from low to high.
- Analysing, interpreting and triangulating the data to develop a view of the impact and return per programme, per focus area, per stakeholder group, per investor.
- Developing a cost-benefit analysis indicating the shared value per stakeholder group, per programme, per investment portfolio.
- Developing recommendations for future strategic, operational and programme aspects.
The outcomes of the social impact assessment, after following a stringent impact assessment process, are therefore to establish for each programme and focus area:
- The objectives of the CSI programme
- What has been achieved
- How it was achieved
- The impacts (changes) of the programme, whether positive or negative, intended or unintended
The data further provides a platform for comparing programme portfolios, individual programmes and focus areas to determine which ones were the most effective through a cost benefit analysis.
There are two main challenges to measuring the impact of social and community development programmes. On the one hand, beneficiaries must receive real benefit such as sustainable employment, improved quality of life and improved basic services; and on the other hand shareholders of the company investing the financial resources need to receive the best possible return on investment.
Succeeding in both requires a company to adopt processes and incorporate metrics that equip all stakeholder groups – including public, private and community stakeholders – with the right information, illustrating real and meaningful change and proving that money was well invested. Next Generation’s Investment Impact IndexTM shows that this can be achieved in addition to creating a platform for cross-sectorial shared learning and industry-specific benchmarks. Best practice indicates that social and community development programmes can deliver both value and return on investment and assist companies to comply with governance requirements simultaneously, resulting in a win-win for all stakeholders.
Next Generation has assisted more than 15 companies over the past three years to determine the impact and return on investment of their CSI/SED/ED (social/community/enterprise investment and development) programmes. Over this period, we assessed more than 15 focus areas/investment portfolios and determined the impact and return on investment of over 300 programmes. Detailed evidence of impact and return on investment is available on request. Detailed presentations with the results are also available on our LinkedIn, Slideshare and Facebook pages.