Written by Janet Ervin

“It’s the wild, wild west” – this is the phrase we most often hear when it comes to describing how companies measure the ‘S’ in their ESG strategy. It’s a common sentiment among the private sector companies we work with. They want to make a meaningful, measurable impact, but without a consistent set of standards or consistent data partners, it’s easy to feel lost in the process.

It’s a challenge that is unique to the ‘S’ – or ‘Social’ – part of ESG. That’s not to say that measuring any part of ESG is easy – it’s not. But the standards for Environmental and Governance are much more clearly defined. Carbon footprint, energy usage, waste output, executive compensation, ethics policies and supply chain sustainability are some of the most well-known. While these measurements come with their own challenges, the metrics themselves are clearly defined with specific outcomes.

What makes the ‘S’ so hard to measure? 

Social metrics are more challenging to measure, especially as it relates to a company’s external expression of social responsibility, mainly due to the diversity of social expressions. If you’ve seen one company’s social impact strategy…you’ve seen one company’s social impact strategy. Unlike carbon footprint or ethics policies, the outcomes that measure effectiveness will vary from strategy to strategy.

The only sets of commonly recognized standards that currently exist are the UN’s Sustainable Development Goals (SDGs) and the set of global report standards by the Global Reporting Initiative. Both of these standards are important and offer a common language and clear goals that help create a more sustainable world. SDGs in particular were created to assess systemic, population-level change and while they make great guides, they are hard to implement as social measurements for the average nonprofit or company funding a specific social program – especially on a local level.

In addition to this high-level challenge, there are other obstacles specific to impact stakeholders.

For nonprofits, corporate reporting is often time-consuming – and different for every grant or partnership, making the task hard to maintain. And while nonprofits are often rich in both data and stories, they typically lack the resources to assess long-term or systemic impact.

For companies, it is hard to know what data is most meaningful and what activities are most effective. In a landscape that is rapidly shifting from a sponsorship mentality to one more aligned with ‘social investing’ the ‘returns’ are more important than ever.

For consumers, younger buyers, in particular, are looking for authentic expressions of impact and are more skeptical of ‘causewashing’ than ever.

Great. So what do we do about this? 

The challenges are numerous and the mixed efforts to find solutions are contributing to the ‘Wild West’ feeling noted above. For the busy CSR professional or nonprofit executive, this makes for an interesting conversation – but how can we begin to practically address this?

The most important thing to know is that while no one knows exactly how to do this yet, efforts to measure the ‘External S’ are gaining traction. Projects like the Impact Genome Project are working to verify social programs and the cost impact of those programs while multiple universities are supporting long-term efforts to measure change.

If you are an impact professional looking for practical next steps, consider the following as you look at your own efforts:

  • Collaborate with your partners – For too long, nonprofits have been seen simply as the beneficiary of impact dollars, rather than community experts with deep knowledge and rich data. When companies offer resources (both financial and expertise) to help analyze and work through the data challenge, magic can happen.
  • Orient around a specific, respected outcome – The majority of companies and nonprofits desire to create long-term, systemic change. Rather than focusing on outputs (such as dollars spent, number of programs, clients served, etc), select a metric that speaks to the longer-term effect. For example, if you’re funding literacy efforts, what are the long-term success rates of those students? If you desire to impact entrepreneurship, how many of the business owners you fund are in business five years later?

    These outcomes aren’t the quickest to measure – but investing in that tracking can become invaluable.

  • Find a data partner. Local universities or other data partners are one of the most overlooked resources in this conversation. They can offer expertise on measurement, survey and tracking support and expert data analysis – and usually for a very reasonable budget!

In one successful measurement collaboration, a CSR professional we work with convened both the nonprofits they were funding, alongside support from a local university. Together, the group identified metrics that resonated with each nonprofit, that were simple to report on and that the researchers determined would help measure the long-term impact of the project. Rather than short-term funding, the company provided 3-year grants that would enable the group to gauge the effectiveness of their programming as students aged into college and achieved goals.

The Wild West can be, well….wild. For many people, not knowing the rules can feel overwhelming. We want to know that our programs are successfully supporting impact and that we’re a good steward of both resources and community trust. But this same wildness is ripe with opportunity – to develop standards and methods that will measure impact for years to come.