IMM means business

Impact measurement and management (IMM) allows investors striving to solve social and environmental problems know “what works and what does not.” The corporate context, however, adds a distinct new layer to this approach. The relationship between corporate social investors (CSIs, i.e., corporate foundations, impact funds, CSR and Corporate Citizenship teams) and their parent company is a nuanced dynamic, with compelling effects on the ‘management’ aspect of IMM and untapped opportunities to consider.  

Both corporate social investors and other investors for impact share a common goal: foster positive social and environmental change. This shared objective leads them to adopt IMM as a powerful tool to determine the effects of their activities on beneficiaries, supported organisations and even the broader ecosystem. IMM also allows stakeholders to make more informed decisions based on the impact data collected. However, the intrinsic connection CSIs have with the corporate world can introduce subtle but significant variations in their approach to IMM.

EVPA conducted a survey involving 24 CSIs to better understand how CSIs can leverage IMM in a corporate context. These are some of our learnings:

1. Improved strategic positioning of CSIs within the company: The IMM framework can be a powerful tool to shape the relationship with the company. 92% of CSIs stated that IMM helps them demonstrate the impact they achieve to senior management and other corporate stakeholders. In such instances, IMM helps CSIs communicate impact, shaping how they are internally perceived and valued. That's significant when there’s added pressure on CSIs. Some companies expect their CSIs to position themselves as value drivers by demonstrating tangible business value or at minimum indirect business benefits. 

In a reflection of these pressures and expectations, 29% of those surveyed reported an increasing interest inside the company in knowing how to monetise impact.   

Another way of demonstrating business value is to measure the impact of a CSI’s employee engagement program, which can include the impact on the employees themselves (see SAP). Half of those surveyed reported that they measured the impact of their employee engagement.

2. Enhanced resources allocation: CSIs typically leverage financial and non-financial resources (e.g., expertise, products, networks, etc.) from the related company. In the past few years, there has been a trend towards closer alignment with the company (see here and here), providing the opportunity for greater access to non-financial resources that CSIs can offer to their portfolio organisations. 

Additionally, 63% of CSIs leverage their impact results to convince their senior management and other corporate stakeholders of their relevance for the company – a key tool for communication with senior management. One might expect that the company makes more financial and non-financial resources available due to the CSI’s demonstrable contribution to its success in certain areas. However, only 29% reported that IMM helps them mobilise more resources from the related company, implying that demonstrating relevance does not necessarily lead to an increase in resources.

3. Shaping the corporate impact journey: As companies face mounting pressure from investors and regulators to embrace responsibility towards the environment and society, they are increasingly embarking on their own journey toward inclusivity and sustainability. In this evolving landscape, CSIs see an opportunity to influence and contribute to this impact journey, as stated by 58% of the respondents to our survey.

Beyond the insights gathered, the IMM approach can serve as a model, influencing practices company-wide. 67% of CSIs were consulted by corporate colleagues (e.g., from sustainability) who wanted to learn more about their IMM approach (see IKEA Social Entrepreneurship).

While the adoption of IMM in these ways is still in its infancy, certain factors can accelerate its advancement. Alignment with ESG objectives and other KPI frameworks is essential to ensure that what is being measured can inform and impact the company. 54% stated that their IMM approach will be increasingly relevant in the context of regulatory changes (e.g., the Corporate Social Responsibility Directive (CSRD)); this finding suggests that the alignment will accelerate soon.

Establishing credibility among corporate stakeholders involves measuring not just social and environmental impact, but also business value for the related company. Therefore, finding the right balance between measuring long-term positive impacts and demonstrating quick results can help to keep corporate colleagues engaged while still measuring what matters most: the long-term positive change.

IMM is poised to go beyond compliance and ripe for use on a strategic level. Its vast potential has yet to be fully acknowledged and realised by the wider corporate – and mainstream financial – ecosystem. Still, some progressive practitioners have already achieved successes that can lead the way towards more positive impact. Let’s hear it from them.

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Realistic IMM in a company context at IKEA SE

Jens Andersson, Monitoring, evaluation and learning specialist, IKEA Social Entrepreneurship

A company’s interest and embrace of their CSIs’ impact measurement and management is a complex topic. It needs to be considered within the broader relationship between the company and the CSI, so will likely vary between organisations. The EVPA survey helps us think about the different links and their potential.

It seems natural that a core task of IMM would be to demonstrate results to attract more resources to the CSI, but as the survey results shows, it may not be so. One reason is that corporate management has limited time to absorb detailed impact data. Instead, the survey results imply that IMM is part of a professional CSI's licence to operate, meaning that, to a degree, it is assumed that it is happening (if not, the CSI may be in trouble!). In practice there are a host of other factors beyond impact that influence resource allocation, such as brand building, company strategies and finances, and strategic partnerships.

The possibility for IMM to show the contribution of the CSI to the business depends on the relative scale and nature of the CSI activities. In most cases CSI activities are likely to be limited when compared to the operations of a large company. Within the company there is likely to be more attention dedicated to the necessary task of integrating core compliance and sustainability topics, such as human rights, decent work and carbon footprint reduction across the value-chain. This is also why, while CSRD and similar legislation indeed presents a huge opportunity for sustainability performance monitoring at large, the implications for CSI IMM are still very unclear.

The most significant contribution of CSI IMM to a company may instead be the demonstration effect. The survey shows that two-thirds of CSIs were consulted by colleagues on IMM. I have personally spent considerable time supporting colleagues with developing theories of change, presenting our monitoring framework, and participating in designing the wider social sustainability performance framework of the company. It thus seems as if it may be useful for a corporation to have access to a CSI that is free to establish an IMM approach according to good practice in the social impact sector, rather than following business processes and KPIs.

But, this role as an IMM frontrunner also comes with responsibility. As IMM professionals we need to show that we do not sit with the silver bullet. We need to be transparent about both opportunities and challenges to our company colleagues. The hype around impact needs to be moderated and a measure of realism maintained. We need to keep explaining that social change is complex and context-specific, making it difficult, if not impossible (and even counter-productive), to quantify our contribution to that change. The “realistic” monitoring question is: “What works, for whom, in what respects, to what extent, in what contexts, and how?” The best way to address this question is to tell a story. What IMM should do is to ensure that the story becomes as relevant, fact-based and analytical as possible, so that both the CSI and the company can continuously learn about and improve their impact.

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Measuring what matters: SAP’s IMM approach to social impact

Maximilian Herrmann, Lead Social Impact Management, SAP

The concept of ESG factors is pivotal in today’s business world, influencing investors' choices through a "negative screening" mechanism and allowing them to avoid companies engaged in harmful practices. However, ESG often receives criticism for its narrow perspective, particularly in quantifying the "Social" component. Traditional impact assessments, focusing on output metrics like the “number of individuals impacted” or “number of jobs generated,” lack depth and fail to represent the true quality of the impact.

At SAP, our CSR team recognises the need to go beyond output measures to understand the real-world social impact of our activities. We have implemented a comprehensive impact measurement approach to monitor the effects of our activities on beneficiaries, supported organisations and even the broader ecosystem. We report and gather output numbers for all initiatives and regions, but we also make sure that every initiative follows a dedicated theory of change, which allows for further analysis of whether the desired outcomes are achieved.

To delve deeper into the social outcomes, we turned to innovative impact measurement methods. For instance, we collaborated with 60 Decibels, an impact measurement company, to apply an approach based on simple, repeatable mobile surveys that yield high-quality, comparable impact data. It’s not just about gathering data for flashy marketing or investor reports. It is about using the data to inform every aspect of our strategy and decision-making for the program, just as businesses and investors use data for their operations.

For over ten years, we run pro bono consulting programs at SAP, such as the SAP Social Sabbatical, which enables SAP employees to share their knowledge, skills, and expertise with non-profits and social enterprises worldwide To evaluate the social impact and business value delivered by the program, we worked with 60 Decibels. The data collected revealed that 74% of employees reported a positive long-term impact on their professional careers. And, most importantly, 96% of supported organisations report positive long-term impact, while 77% of their beneficiaries report improved quality of life.

The fact that pro-bono consulting develops our employees professionally made us go one step further. We worked with the Value Balancing Alliance (VBA) to implement a societal impact valuation methodology in our CSR strategy. The core of this methodology is the assumption that employee training generates significant employee outcomes, such as skill and knowledge improvement. Thus, it links company-funded education and skills training to societal outcomes such as increased productivity, purchasing power, and social and civic engagement, while also considering the benefits to society through projected future additional earnings of trained employees. While the 10-year impact assessment study on our pro bono consulting portfolio confirms this, we were able to assign a societal value of approx. $30 million to our CSR efforts.

The strategic positioning of CSR within SAP has now evolved. Employee engagement is now seen as a strategic investment into HR, built into the learning journey of SAP. Surveys are now integrated to measure the social performance of our pro bono consulting programs rather than just outputs. We are finally able to monetise parts of the value that we do. And, lastly, CSR is seen as a strong contributor and domain expert in driving the company's social responsibility impact journey and solution ideation.   

SAP’s social impact measurement goes beyond negative screening and is used on a strategic level. We are shifting our focus from merely counting outputs to understanding the real social outcomes of our initiatives. By leveraging innovative methodologies, like survey-based assessments and VBA engagement, we are making strides toward understanding and improving our social impact. This not only brings considerable business value, such as developing our employees or enhancing our reputation as a socially responsible company, but also contributes to our long-term success by driving improvements in our CSR initiatives.

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A view through the lens of Business for Societal Impact

Clodagh Connolly, Business for Societal Impact (B4SI) Global Director

The Business for Societal Impact (B4SI) Frameworks form a robust measurement standard that any company can apply to understand the difference their contributions make to business and society.

A shared value lens

Events over the past few years have put corporations’ responses to social issues in the investor spotlight. Companies’ responses to challenges as diverse as Covid-19 and Black Lives Matter to grappling with future needs in delivering a just transition underpin the growing importance of their investment in social issues as a response to material risks impacting their businesses. A shared value “investor lens” approach has emerged as companies seek to measure and report new and sustainable ways of driving social impact whilst also delivering significant business returns; these material issues are driving increased interest from C-suite on impact measurement.

From the experience of B4SI, there are numerous factors driving the future of how businesses tackle social issues. Two issues in particular -- social washing (falling under credible, transparent data to investors and mandatory reporting demanded by regulators) and just transition -- are currently at the forefront of discussion as key risks and opportunities.

Social washing occurs when there is a disconnect between perceived commitments to issues and genuine action. Claiming participation in philanthropic or charity-based activities doesn't certify that a company has fulfilled its obligations unless they can be underpinned by metrics.  By publicly stating intent on social/community issues, many businesses risk an accusation that their claims are a public relations instrument for social washing.

From an investor view, not anchoring claims in any common or substantial metrics risks perception of these statements and may mask poor management of social risks, which could create valuation risk for companies or mislead impact-oriented investors who prioritise management of social issues in their investment decisions.

Just transition and environmental justice have moved to the forefront of the climate change conversation. As many businesses transition to low-carbon systems, the process must be as fair and inclusive as possible to all stakeholders, to maximise the social and economic opportunities of climate action.

The EU’s CSRD is moving forward at pace in this space, with the S elements in CSRD related mostly to double materiality, and what a company does to mitigate energy/environmental transition activities and any negative impact on those communities dependent on them.

Many B4SI members affirmed their belief that social impact programmes can play a part in the climate crisis. While businesses were aware and acting on climate related issues across our social practitioners’ network, we have found that just transition priorities can be scattered among many initiatives.

A cutting-edge approach to “S”

Many businesses struggle to ensure they are developing ‘S’ strategies aligned with their business while managing, measuring and communicating their impact. However, those rising to the challenge are those that see beyond legislation and aim for maximum impact.  While legislation can be a positive development allowing for a level playing field, discretionary corporate behaviour beyond legislation becomes more important.  Legislative metrics may encourage a race to the middle – discretionary actions of businesses in our network have shown leadership.