Why We Need Impact Performance Data

Last week, I published an article in Stanford Social Innovation Review (SSIR) together with Tom, Lindsay and Devin from the 60 Decibels team.

Here it is: This is Not an Impact Performance Report.

The article explains why we think it’s so important to listen to customers, beneficiaries and producers if we aim to create and understand social impact. And it argues that we must have a performance mindset when it comes to social impact – differentiating between best and worst performers, and always looking to learn and improve.

It’s hard to overstate the accelerated focus and energy around social impact and ESG investing these days. A investor friend of mine just sent me the special report that Pensions and Investments Magazine did on impact investing. This report profiles everything from what “impact investing” means to how to measure impact. This work is going mainstream in a big way.

While the issue of what and how to measure might seem esoteric or even complex, it needn’t be. Indeed, what we argue for is blindingly simple: if the well-being of human beings is part of your social impact thesis, you can’t know if you’re having social impact without hearing directly from those human beings.

That may seem obvious, but it is far from standard practice.

In fact, most impact investors rely on “triangulation” of their social impact: find a study of a business or intervention that looks similar to your business / investment. Then assume that its impact can be applied to your business / investment. This approach often misstates the impact created and it, by definition, makes it impossible to distinguish impact performance of different businesses.

Here’s the opening of our SSIR article. I hope you jump over to their site and read the whole thing.

In a world of increasing transparency, we expect that what’s on the label will reflect what’s inside the package. This is as true for an “organic, cage-free” label on a carton of eggs as it is for a B Corporation Certification or a fund categorized as “ESG.” These terms communicate something specific to the buyer. Their credibility rests on whether what’s on the label is consistent with the product itself.

(Keep reading)

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