Social Impact: "I know it’s there but I just can’t seem to see it."

As a society we are still at kindergarten in understanding social impact. But the good news is the practice of social impact is gaining speed… fast, according to experienced social return on investment (SROI) practitioner, Ross Wyatt.

The elephant in the room

What the heck is going on? How can it be that 600,000 community sector organisations generating around $80 billion a year in income (6% of GDP) cannot solve the problems of inequity and disadvantage in a wonderfully “lucky” country like Australia?

Are we really that bad at delivering this much-talked-about “social impact”? Even the so-called greedy corporate sector is chipping in about $4 billion a year of their hard-earned dollars (about 0.3% of income – roughly the same rate as individual giving in Australia if you are interested in such factoids).

Before we roll out the usual mantra about “inefficient” or “unprofessional” community sector organisations – let’s take a very deep breath and examine what is really going on.

The heart of the matter

I’m going to start with a supposition about the reason-for-being that exists at the very heart of each sector. For the corporate sector, well, that’s easy. They are rewarded, applauded, mandated and legislated to do one thing well. Make money. Lots of it.

For the community sector it’s a lot more complicated. But lets dare to simplify it by saying the community sector exists to do one thing well. Make change. As much as they can. (We often like to express “making change” in the much-loved expression, “making a difference”). This notion of making change is the foundation of social impact. After all, if you are not making change, then you are not making an impact.

For a little over 300 years the corporate sector has been defining and refining ways to measure and understand its effectiveness at making money. Those hard-working accounting practitioners have diligently provided thousands of ratios to understand the minutiae of effectiveness – profitability ratios, liquidity ratios, activity ratios, market ratios, debt ratios, efficiency ratios working capital ratios – the list goes on. I dare you to look up “financial ratios” in Wikipedia.

For only a few decades, social impact practitioners have been working on something similar – defining ways to measure and understand our effectiveness at making change. We’ve got just one ratio that is in any kind of general usage: Social Return on Investment (SROI). Yes, as a society we are still at kindergarten in understanding social impact. Now look up “social impact” in Wikipedia. (It will only take a moment to read the two whole lines given to the topic.)

But the good news is, the practice of social impact is gaining speed fast. If you are a community organisation that is not yet effectively articulating how much change you create then you risk losing the support of funders who want to know. And if you are an investor in community and are not supporting your partner organisations in their effort to better articulate their impact, then you may be missing an opportunity to help them broaden their supporter base and improve their effectiveness.

What is social impact?

I’m not going to give you a treatise on the various definitions but they all have the notion of change at their core. I like to think about social impact as:

Change (as defined by those who experience it) that arises from a deliberate investment in the Social Economy.

Where:

Change is the difference experienced by the intended beneficiaries and others as a direct or indirect result of your programs or investment.

Deliberate investment encompasses any effort to create social value ahead of economic value. This might be a not-for-profit organisation delivering programs, or a large corporation making a community investment or changing a corporate business model to create more social value. Or it might be a private individual or family trust seeking to create a better future. The investment can come in the form of money, effort, resources, or know-how.

The Social Economy is the combined sum of all efforts designed primarily to create social value. These efforts can come from any source:

• Not-for-profit organisations delivering programs in support of their cause,

• For-profit organisations investing as donations or community investment.

• Social enterprises, either on their own or within larger organisations.

• Government through policy, funding and programs

In short, social impact is the change that results from what you do (whether you meant to or not).

Tools to understand social impact

There are far too many tools out there to properly address here, so let me introduce just a few of the most common.

Far and away the most popular tool being used to assess and articulate social impact is Social Return on Investment (SROI). Ironically, this tool, developed by new economics foundation (nef) and others in the UK, was not originally intended for this purpose! It was designed to be an adjusted cost-benefit analysis tool and when tested on a few NFPs it became adopted by the sector as a useful way to examine impact.

A word of warning – there are SROIs and SROIs if you know what I mean. If you go down that path, seek an experienced, specialist provider and/or trainer. As the methodology is available under a creative commons license from the SROI Network there are many practitioners out there who may provide only limited value.

Social Impact Assessment (SIA) is a principles-based approach usually used to predict and manage the social effects of large infrastructure projects. It grew from environmental impact assessment in the 1980s. In my view it has limited application for community organisations and companies investing in them.

The Most Significant Change Technique (MSC) is an evaluation technique developed in the 1990s that helps evaluate complex change. While not technically a social impact assessment tool it provides some useful approaches.

Social Accounting and Audit (SAA) originated in the 1970s to enable organisations to include stakeholder input and communities of interest into their accounting statements. SROI drew on SAA in an effort to find a less complex and more accessible approach. I understand there are only a handful of organisations using SAA in Australia.

Program Logic (or Logic Frameworks) developed by the Kellogg Foundation in the US often sits at the foundation of many of these approaches (including SROI). The linear and reductionist nature of the framework (Inputs-Activities-Outputs-Outcomes-Impact) has tended to restrict efforts to create comprehensive theories of change.

On the horizon

There is no question that we are on the brink of a revolution in this area. Funders (private, government and corporate) are demanding a better understanding of the connection between their contributions, and the changes that result.

Organisations delivering programs are similarly seeking to modify their programs for maximum effectiveness. These both depend on better understanding, measurement, articulation, and communication of social impact.

Our organisation and others are beginning to draw together the best of the above approaches together with infographics, data visualization video infographics, storytelling and even documentary filmmaking. Our hope is that we can build the “impact literacy” of the sector and help them make more change for the better.

5 Simple questions you should be asking about social impact

Even if you don’t embark on any sort of sophisticated effort to understand the social impact make sure you at least ask yourself these 5 key questions (and a few sub-questions). They will help guide you on the start of your journey to better understanding the social impact of your work, or the work you invest in. They will also help you assess the level of your impact literacy.

• What difference am I trying to make? What is my “theory of change”? How does what I am doing connect with the changes arising from it?

• How much difference am I making? Does any real change arise as a result of my inputs, and if so, how much? How do I know for sure?

• Is it the “right” difference? Is the difference I am making the one that is most needed? Is it the change sought by the intended beneficiaries and others?

• Can we see the difference we are making? Can I rigorously demonstrate to others and myself how we create change and how much? Do I have the right tools and resources to communicate the difference we are making?

• How can I make more difference? Can I encourage supporters to help more? Can I encourage others with similar goals to help, and involve them constructively? Can I refine what I am doing to make change more effectively? Can I influence the policy environment to help make more change?

About the author: Ross Wyatt is a director of a new organisation, Think Films. Its mission is to make social impact visible, measured and understood by combining social impact analysis, documentary filmmaking and video infographics. Wyatt is an experienced SROI practitioner and for the last 5 years has led the social sustainability group at consulting firm, Net Balance. He has worked with numerous companies, government departments and community sector organisations on social impact and is a frequent chair or contributor to forums on the topic. He can be reached at ross@thinkfilms.com.au