Why Impact Management Matters
The article below was originally published in the online magazine, Impact Entrepreneur, and has been reproduced here with permission.
Authors: Melanie Audette, MIE; Sarah Gelfand, BlueMark; Brian Komar, Salesforce.org; Jane Reisman, ORS Impact; John Sherman, pfc Social Impact Advisors.
Impact management (IM), the term of art for the practices used by impact investors, social enterprises, and others to measure and manage their intended impact, matters. Why? Because any hope of achieving the global goals articulated in the SDGs, any hope of quenching the fire of the burning house declared by Greta Thunberg, and any hope of halting the ever-widening racial and wealth gap worldwide demands that we attend to our investments both to avoid repeating our mistakes, and to enhance our successes. Attending to our investments requires a firm grasp on data and insights about impact goals and a deep commitment to act on these data and insights by managing negative AND positive results. Making a transformative difference requires us to focus on active, engaged management of our investments and business practices.
Yet, impact management practices are far from mainstream in the impact investing ecosystem. While some early pioneers and diligent newcomers in impact investing have embraced the value of IM, there is still a chasm separating early adopters from the majority. Until the divide is bridged, i.e., investors take IM as a requirement of their work, the integrity of impact investing and, more importantly, those it seeks to benefit, is at risk.
About the Terminology
“…impact measurement and management has shifted from a reporting exercise to a management exercise that drives the integration of impact data and management decisions. Thus IM is becoming the shorthand from impact measurement and management to simply impact management.”
This article is the first in a series that makes the case for mainstream adoption of IM. This thought leadership and call to action is motivated by an initiative of Impacting Together, a network of practitioners furthering the development of building blocks and levers to facilitate and ensure that impact-oriented investors and businesses are making deep, durable and lasting impact.
The State of Play for Adoption of IM
IM is core to the fast-growing field of impact investing. The Global Impact Investors Network’s (GIIN) definition of the core characteristics of impact investing illustrate the centrality of IM: (1) intentionality, (2) use evidence and impact data in investment design, (3) manage impact performance, and (4) contribute to the growth of the industry.
An initial effort to encourage the regular practice of impact measurement and management originated in 2008 with the development of IRIS, a common metric system that provided a credible set of impact performance measures. Field builders such as The Rockefeller Foundation, Acumen and B Lab drove the development of IRIS, and the GIIN is managing and continues to evolve IRIS as a fundamental resource for the impact investing field.
While adoption of IRIS has been widespread, barriers that impede IM became evident in impact-oriented investing organizations. One of the most profound barriers relates to the lack of change management in governance and management systems (including incentive systems and budget development). Without the integration of data and insights into organizational practices, decisions and actions related to impact objectives cannot be met.
Over the past five years, thought leaders and solution providers have been working diligently on a concerted effort to align on a more harmonized and systematic approach to IM. For instance, the Impact Management Project convened over 2,000 stakeholders in the impact investing ecosystem to develop consensus about the five dimensions of impact and a classification system for the types of impact investing. The International Finance Corporation of the World Bank (IFC) collaborated with numerous stakeholders in developing a set of principles for embedding impact considerations across the investment lifecycle. The GIIN replaced their catalog of metrics with IRIS+, an end-to-end system for IM. The United Nations Development Program (UNDP), with input from stakeholders, identified specific indicators of performance to guide adoption of IM within structures and practices of governance, management, strategies, and transparency. They released tailored versions of the SDG Impact Standards for impact investors, enterprises, and bond issuers. BlueMark has made great strides in developing an independent verification system for assessing progress in IM practice and impact performance. And each of these groups have coordinated to ensure compatibility of the systems that they are developing.
Similarly, product and service providers that support IM have deliberately integrated these common approaches in their services and products. A few highly adopted examples include: 60 Decibels lean data collection method, SoPact’s platform for managing and reporting impact, and Toniic’s Tracer that longitudinally tracks financial and impact performance data for their investor network.
Throughout all of these efforts, impact measurement and management has shifted from a reporting exercise to a management exercise that drives the integration of impact data and management decisions. Thus IM is becoming the shorthand from impact measurement and management to simply impact management.
Progress is Palpable
The GIIN’s most recent report from their annual survey of impact investors overwhelmingly points to the recognition of the importance of IM. Nearly 100 % of respondents agreed that IM is important and can be used to improve impact performance. In addition, investors reported concrete benefits to their business:
capturing business value (93%)
marketing or fundraising (92%), and
transparent reporting about impact claims (80%)
Given IM’s importance, the field also recognized that there is more work to be done on transparent IM practices and integration of IM with financial management decisions.
So progress is clear. Much of the hard work of laying the groundwork has been done. The field is more ready than ever for the next set of actors to adopt IM and prioritize the use of data and insights for managing impact performance. The next generation of field support is growing, including those both new and established, Andorra and Ecotone Analytics, and others that share a deep commitment to IM.
Given the reality that even the most innovative early adopters have challenges with integration of data and insights into IM and financial decisions, what about the investors who have not yet even bought into the value of IM? What will it take to cross the chasm and make IM the norm?
Since the principles, frameworks, and tools for managing impact now have been developed, our next challenge is to broaden adoption of IM. Investors and companies — and most importantly, communities — stand to benefit through IM, by increasing business value, attracting capital and transparently and inclusively developing, testing and sharing impact claims.
Stay tuned for the series of articles to appear over the next few months as our colleagues and networks in Impacting Together share approaches, tools, experiences and guidance about ‘Why IM Matters.’ We look forward to crossing the chasm together.