“Metrics must be understandable, inexpensive, and most importantly, useful.” – Acumen Fund
Frequently Asked Questions about Social Impact Assessment (SIA)
- What is considered social impact?
- Why do we need SIA?
- What is IRIS?
- Why is GSVC recommending the use of IRIS indicators in the social impact assessment?
- Is the use of IRIS indicators in the social impact assessment required?
- My venture only affects a local community. Does that still count?
- How is SIA being judged?
- How long should the SIA section be in my Business Plan?
A: Social impact is any non-financial benefits that a venture will create for society that would otherwise not be created. Social impact can encompass a broad spectrum of focus areas, from human rights to environment to health and wellness to gender equality.
“It is important to note that companies can create social impact both internally and externally. Internal impact includes the impact on the employees’ health and economic security, the environmental effects of the company’s supply chain and operations, and impact on issues of access, fairness and trust in company policy and management practices. External impact includes the health, economic, environmental, and other effects on parties outside the company such as customers and communities. While it is easy to overlook internal impact in early stage ventures, this is the time to bake practices into the company’s DNA that will shape the larger internal impacts as the company matures.” (From Impact Investor Perspectives, Rockefeller Foundation)
A: By including social impact assessment, the GSVC seeks to help early-stage social ventures define and quantify their desired social benefits in order to fully illustrate their value proposition to investors and manage their performance relative to their social mission.
Traditional businesses track their performance based on certain economic and accounting metrics. Similarly, in order for social ventures to chart their progress and continually improve their desired impact, they must define and collect data that allows them to quantify their outputs and outcomes – consider this a form of “social accounting.” Measuring social impact using discrete metrics allows for rich knowledge sharing in the social venture community.
Furthermore, in the past decade, a new breed of investors has emerged – a group that is concerned not only about the bottom-line, but also the social impact of their investments. Investors are beginning to realize the social and environmental consequences of the “business as usual” mindset, and this is clearing the way for a new social capital market.
A: The Impact Reporting & Investment Standards, or IRIS, was initiated in 2008 by The Rockefeller Foundation, Acumen Fund and B Lab to create a common framework for describing the social and environmental performance of an organization. Since 2008, the IRIS founders have been joined by other stakeholders in the impact investing industry in developing a library of indicators with standard definitions that enable comparison and communication across the breadth of organizations that have social or environmental impact as a primary driver. IRIS indicators span an array of performance objectives and include specialized metrics for a range of sectors including financial services, agriculture, and energy. To learn more about IRIS please go to http://iris.thegiin.org/about-iris.
A: Although current measures of impact vary from funder to funder, investor to investor, and organization to organization, the impact industry is coalescing around a common set of metrics (IRIS). GSVC believes that IRIS has enough support in the industry to become the common set of standards moving forward. GSVC also believes that adoption of the IRIS indicators provides the following benefits to entrants and judges:
- IRIS provides entrants with a library of performance metrics that have been accepted by the impact investing industry.
- IRIS clarifies how to measure performance indicators.
- IRIS helps entrants create ventures that are attractive to investors who are using the IRIS framework to evaluate impact.
- IRIS enables judges to compare the same indicators across sectors.
A: For the 2011-2012 GSVC, we are suggesting that entrants select three IRIS indicators as their social indicators. Entrants will continue to have the option of selecting their own (non-IRIS) social indicators. However, we are encouraging adaption of the IRIS metrics because entrants will be asked to use IRIS indicators next year.
A: The social impact movement is underway. In nearly every conversation regarding social ventures and investments, stakeholders emphasize the urgency of evaluating social impact. The principles of social impact assessment are currently developing but there are not yet standard practices among social ventures and social investors. The field has yet to establish a common understanding of “social impact” – what it is or how to measure it. Current measures of impact vary from funder to funder, investor to investor, organization to organization. However, GSVC seeks to form a community that will further define what it means for social ventures to have an impact.
A: Yes! While GSVC is a global competition with entrants from around the world, social impact can happen at any scale – the level of the employee, the community, the region, or the world.
A: See the 2012 SIA Guidelines.
A: The entire Business Plan, including SIA section, must be limited to 20 pages (typed and double-spaced, #12 font, and 1-inch margins) of text, charts, and diagrams. This includes financials or other appendices which are limited to 5 pages. Previous examples of SIA winners show a full range of SIA section lengths, all of which have won specifically for their SIA.