Different sectors – academia, government, nonprofit, and for-profit – can learn from each other when it comes to the use of evaluation and data to facilitate positive change. This is a three-part series on evaluation in the for-profit sector (often called “social impact measurement”). In Part I, we explore what is going on in the for-profit sector in terms of social/environmental impact measurement and evaluation. In Parts II and III, we explore what the different sectors can learn from each other.
What is going on in the for-profit sector when it comes to evaluation? More than what may meet the eye at first.
In 2016, a close colleague invited me to attend the Social Capital Markets (SOCAP) conference. SOCAP brings together entrepreneurs, investors, foundations, and other folks interested in how for-profit businesses can contribute to the greater good. SOCAP’s website calls itself “the world’s leading conference on activating the power of capital markets to drive positive social and environmental impact.” My colleague, a successful and thoughtful entrepreneur, said it was “the biggest and best networking event of the year.”
It sounded exciting, but I was not sure how I – or the evaluation profession – fit in. As an evaluator, my experience was mostly within the academic, government, and nonprofit sectors. In these sectors, there is a fairly-established demand for evaluation as a way to measure the outcomes and/or impact of programs and services funded by public funds and/or private grants and donations. The for-profit sector, by contrast, is built upon selling goods/services to customers in a capitalistic market. The money comes not from grants, but from customers – and I did not see a lot of customers asking for a company’s impact evaluations.
Nevertheless, as an evaluator I was intrigued by the potential of for-profit businesses to serve the greater good. Whereas nonprofits must balance “downwards” accountability to intended beneficiaries with “upwards” accountability to donors1, for-profit businesses can have very direct accountability to intended beneficiaries. Those intended beneficiaries are often customers, after all. I had seen this concept in action with my colleague’s company, and he and I had spoken at length about how evaluation could help clarify and verify the impacts of mindful businesses. So while the conference registration fee and the itinerary to San Francisco were a steep price to explore my curiosity, I booked my tickets.
The first two days piqued my interest and some skepticism. On day one I attended an “Impact Accelerator” workshop for early stage social entrepreneurs. I felt inspired by witnessing so many entrepreneurial minds devoted to positive social and environmental impact; I also wondered how many of them were resting on the assumption that their idea that sounded good for the world actually was good for the world. One day two, I listened to a thought-provoking keynote asking why socially- and environmentally-conscious businesses were the exception, rather than the norm, in investment portfolios. The speaker talked about “ESG” investments, which meet certain environmental, social, and governance criteria. While it was encouraging to know that such investment portfolios existed, I wondered what standards – if any – determined whether a company made the ESG cut or not.
This was my evaluator’s mind at work, as well as reflection on my own lessons learned about the pitfalls and unexamined assumptions of good intentions. (“The road to hell…”) While surrounded by exciting people and ideas, my burning question was: “Does anybody here feel like they need an evaluator?”
As it turns out, the answer was yes. Through a session on impact evaluation in food and agricultural enterprise it became clear that there were, in fact, many people contemplating how to measure and evaluate social and environmental impacts of for-profit enterprises. For example, the Rockefeller Foundation had been leading efforts to develop indicator frameworks for food and agriculture enterprises and to harmonize these indicators with the United Nations Sustainable Development Goals.
And Rockefeller is not alone. Through my time consulting with social enterprises, I have become acquainted with many promising developments to help for-profit businesses define, measure, evaluate, and manage their social and environmental impacts. Below is a selection of examples:
- Social Value International, which is establishing principles, standards, and accreditation processes for quantifying and reporting on “social value” (changes that people experience in their lives).
- The Global Impact Investing Network’s (GIIN) IRIS metrics catalogue, from which “impact investors” can select metrics to gauge social and environmental impacts of a particular business or across an investment portfolio.
- B Lab, which certifies for-profit companies on the basis of explicit standards for how they approach their governance, worker well-being, community impact, and environmental impact (analogous to LEED certification for sustainable buildings).
- The Impact Management Project, which has collaboratively developed guidelines on how to “talk about, measure, and manage impact” in the for-profit sector.
A common thread of these initiatives is a commitment to developing a shared language for social and environmental value to complement the language that exists for financial value. These initiatives are encouraging for professional evaluators, certainly. But more broadly speaking, they are encouraging for anyone who has an interest in making the world a better place but who is more accustomed to taking on that challenge from within the academic, government, or nonprofit sectors. Whereas evaluation principles and practices tend to be further developed in these sectors than in the for-profit sector, the for-profit sector offers some thought-provoking insight.
My next two posts will expand upon how evaluation looks similar/different in these different sectors and what these different sectors can learn from each other. Stay tuned!
- Edwards, M., & Hulme, D. (1995). NGO performance and accountability in the post-Cold War world. Journal of International Development, 7, 849-856. https://tinyurl.com/ngoperformance