Measuring Social Impact

Nerissa ClarkeGuest Lecture

P11.0020- Introduction to Social ImpactNew York UniversityFebruary 19, 2013

Research Methodology

• Looked at the various ways that companies are currently measuring their social impact

– Identified 178 different lists for scoring Social Impact• Rankings, Ratings, Awards, Checklists, Frameworks • Within these lists, there are of millions of detailed indicators

– Focused on a cross-section of 23 Social Impact Measurement Systems• As described within SustainAbility’s Rate the Rater Series

(2011)

• Indexed 471 indicators

Sampled Social Impact Rating Systems

ASSET 4 v Bloomberg ESG Disclosure Series v Carbon Disclosure Project v Global 500 Project v 21st Century Corporation: The CERES Roadmap to Sustainability (CERES) v Climate Counts Company Scorecard v CR Magazine 100 Best Corporate Citizens v CSR Hub v Dow Jones Sustainability World Index v EIRIS Sustainability Ratings v Ethisphere World's Most Ethical Companies v Fortune's Most Admired Companies v FTSE4Good Index Series v Global 100 Most sustainable corporations v Global Impact Investing Rating System (GIIRS) v GoodGuide Company Ratings v GS Sustain Focus List v Climate Innovation Indexes (CIIs) v Newsweek's Green Rankings v Oekom Corporate Ratings v Sustainalytics Global Platform v Trucost Environmental Impact Assessment v Vigeo ratings v Walmart Sustainability Index

Social Impact Category (N=471)

Count of indicators collected

Environment 157

Governance 108

Civic 84

Social 77

Financial 45

Environment33%

Governance23%

Civic18%

Social16%

Financial10%

How Are Companies Today Measuring their Social Impact?

(As measured by the number of indicators found in each category)

How are Companies Measuring their Environmental Impact?

Top 5 Key Environmental Indicators

Count

CO2 Emissions 35

Existence of Environmental Policy/ Management plan

26

Resource Use, Waste, Recycling 17

Sustainable Supply Chain 10

Climate Change Risk Mitigation Strategy (leadership, support)

9

How are Companies Measuring Impact through its Governance Structures?

Top 5 Key Governance Indicators Count

Board Effectiveness 13

Transparency 11

Lack of Corruption 10

Compliance with laws 9

Engaged Management (ethical/ESG driven)

9

How are Companies Measuring their Civic Impact?

Top 5 Key Civic Indicators Count

Human Rights 15

Labor Standards 13

Local Community Engagement (Volunteerism, sponsorships)

12

Corporate Philanthropy 7

Fair Dealings in Public Policy (lobbying, campaign finance)

6

How are Companies Measuring their Social Impact?

Top 5 Key Social Indicators Count

Employee Relations 26

Health & Safety (workplace) 11

Diversity 10

Employee Training and Development

8

Employee Compensation 5

Emissions

Envirn. P

olicy/

Plan

Employee Relati

ons

Resource

Use/W

aste

Product

(Safety/

Labelin

g)

Human Righ

ts

Board Effecti

veness

Labor S

tandard

s

Community Enga

gement

Transp

arency

0

5

10

15

20

25

30

35

40

Indicator Count (N=471)

Top Social Impact Metrics for Business

(Based on number of indicators found within each subcategory)

Most Commonly Agreed upon Social Impact Metrics for Business

Emissions

Employee Relati

ons

Susta

inable Su

pply Chain

Community Enga

gement

Health an

d Safety

(Workp

lace)

Human Righ

ts

Product

Board Effecti

veness

Compliance

Diversi

ty

Transp

arency

0

2

4

6

8

10

12

14Subcategories Most Frequently Cited Across Rating Systems

Frequency of Appearance Count (N=23)

Research Takeaways

• Good combination of proactive (i.e. employee relations)and reactive indicators (i.e. lack of corruption)– Bias towards proactive measures

• Potential for SROI varies widely by industry– Oil company vs. Restaurant vs. Bank

• SROI Metrics reward effort as much as results– Management vs. Performance vs. Disclosure

SROI Metrics Currently Reward Effort as much as Results

Inputs

• Engaged Management• Existence of Company Environmental Policy/Plan• Sustainable Supply Chain

Activities

• Community Engagement (Volunteering, Sponsorships)• Compliance with Labor Standards• Employee Training and Development

Outputs

• CO2 Emissions• Waste• Product (safe, accurate labeling)

Social

Impact

Outcomes

• Health & Safety (Workplace)• Workplace Diversity• Transparency• Human Rights

Ultimately Business Decisions are made to Fulfill Core Business Drivers

Inputs

• Engaged Management• Existence of Company Environmental Policy/Plan• Sustainable Supply Chain

Activities

• Community Engagement (Volunteering, Sponsorships)• Compliance with Labor Standards• Employee Training and Development

Outputs

• Social Impact Outcomes• CO2 Emissions• Waste• Product (safe, accurate labeling)

Outcome (Business Drive

rs)

• Profit• Talent• Risk and Crisis Management• Long Term Growth• Reputation

Core Business Drivers1. Profit

– Return on Investment– Sales– Upfront Cost– Cost Recovery Period– Cost Savings– Stock Valuation– Market share

2. Talent– Retention– Recruitment– Employee Morale

3. Risk and Crisis Management– Compliance/Regulation

– Changing Market Conditions– Stock Volatility

4. Long-Term Growth– Strategy– New Market Penetration– Research and Development– Innovation– Evolving Consumer Demands

5. Reputation– Company Values– Brand Equity– Customer Satisfaction– Community Goodwill– Client Relationships

Link Social Impact to Business DriversProfit Talent Risk/Crisis

MgmtLong-Term Growth

Reputation

Emissions - Cost Savings

- Regulation/ Compliance

- Changing Market Conditions

- Long-term Strategy

Employee Relations

- Sales - Retention- Morale- Productivity

- Innovation- R&D

Sustainable Supply Chain

- Changing Market Conditions

- Long-term strategy

- Innovation

- Client Relationships

Community Engagement

- New Market Penetration

- Brand Equity- Community

Goodwill

Health & Safety - Retention- Morale- Productivity

- Regulation/ Compliance

Link Social Impact to Business DriversProfit Talent Risk/Crisis

MgmtLong-Term Growth

Reputation

Human Rights

- Regulation/ Compliance

- Stock Volatility

Board Effectiveness

- Profit- Stock

Valuation

- Morale - Long-term Strategy

- Innovation

- Company Values

Compliance - Regulation/ Compliance

Diversity - Recruitment- Retention

- Innovation- Evolving

Consumer Demands

Transparency - Morale - Regulation/ Compliance

- Stock Volatility

- Client Relationships

We Need to Build Logic Chains that Connect Socially-Oriented Results to Core Business Drivers

Health & Safety of Employees

(SOCIAL IMPACT OUTCOME/BUSINESS

INPUT)

Employee Productivity(ACTIVITY)

Increased Sales (OUTPUT)

Increased Profit (BUSINESS OUTCOME)

In many cases, the effort/intent to be a socially responsible company is enough for businesses to achieve business objectives, regardless of its actual effect on social impact.

If we truly want to get businesses on board with MAXIMIZING social impact outcomes (not simply making attempts), we need to demonstrate that getting socially-oriented RESULTS really matters for enhancing core business drivers. Until then, businesses will continue to measure its SROI management and disclosure efforts with the same weight as actual performance.

Know what your audience cares about.

Resources

• Tools and Resources for Assessing Social Impact– http://trasi.foundationcenter.org/

• GIIRS– http://www.giirs.org/

• CSR Hub– http://www.csrhub.com