Category: Blog

The business of impact measurement and management

There is no doubting the positive impact investing and investors can have on a particular community or country. This is why leaders will usually go to great lengths and travel to distant lands to seek out investment. The adverse impact investors can have on a community, though, is not sold as much as the positive is. It is, therefore, essential to measure the impact of social entrepreneurs, check out the inferences and measure the effects appropriately.

What investors seek to-do

Social entrepreneurs that choose to serve a particular community go there with the best of intentions, at least most of them do. Ideally, they seek to leave a lasting impact that revolutionizes the community they are serving. Impact investing is not to be confused with charity. Social entrepreneurs also have an eye for their bottom line as they seek to make the changes they want to see in the community. Having the best intentions though does not mean that a few negatives do not come out as a result of the involvement of the enterprise in a community.

Need to measure the impact of investments in a community

Measuring the impact of social investments is not only beneficial for entrepreneurs, but also the community at large. Measuring helps to ensure that investors are making the impact they want in the places they have set up shop. Communities also benefit because there is an accurate analysis of where they stand at the other end of the impact investing agenda. It involves having an in-depth look and considering the negative and positive effects a company has on an environment. Measuring impact is done by certain metrics that the organization has to agree to. The standard metrics for analyzing impact are set up by research institutes.

A standard metric would be the IRIS system, which is very common among many investors. The system helps organizations increase data comparability and clarity, making it easier to measure impact. For this metric to help assess impact accurately, clearly defined investment objectives have to be presented. The IRIS metric is popular because of its alignment with the Global Reporting Initiative (GRI) Standards. Investors that go with this metric can do underwriting, screen deals, assess performance, compare investment strategies and do due diligence.

An alternative metric to use would be the Global Impact Investment Rating System (GIIRS). This metric helps determine an investment’s rating score on social and environmental impact. It builds on the IRIS metric by providing additional criteria to determine an investor’s fund score.

Measuring impact is a must for every entity that considers itself an impact investor or social enterprise. It is the only way to ascertain whether positive changes are being made and felt or not.

Managing impact

Managing the impact of an investor’s intervention in a community is important because it gives feedback on the effects of investments on people and the environment. It entails setting social and financial goals, as well as defining intentions and articulating challenges as well as constraints. Impact management being the serious process that it has to be, requires a consensus among different organizations. Just like impact measurement is assessed by certain metrics, management is done through a consensus among many organizations. Organizations, therefore, came up with consensus standards under the banner of the Impact Management Project (IMP). Under the IMP, management is looked at in five dimensions. These are;

1. The materials that are going to be affected due to works done by an investor. Having a look at what will be affected by an investor’s intervention and the effect that will have on the investor.
2. The extent of the effects brought about by an organization’s intervention and the significance of the effects.
3. Stakeholders involved as an investor closes in on a certain community. The stakeholders have to be well defined as well as how the investor’s activities will affect them.
4. A look at the status quo to see what exists without the intervention of an investor is an important dimension. An in-depth look at the state of affairs pre-investment will help assess impact after the investor steps in.
5. Understanding the risks involved and putting in place measures to mitigate them. Dealing with the risks early helps an investor cushion against waste and ruin.

These dimensions of looking at impact investment provide a clear framework for dealing with effects of impact investing.

Social enterprises hold the power to fast track economies, while supporting our communities. In a COVID-19 world, addressing both economic and social concerns at the same time is more critical than ever. Social enterprises operate at the intersection of the business and creating good in the community (or environment). The goal is to achieve a sweet medium between profit-making and social change in the communities they work in.

But, how do Social Enterprises create this change, why is the hybrid of both business and charity, better?

Help reduce reliance on charity

Social enterprises differ from charitable organizations in the way that they are funded, and the people they report to. Charitable organizations rely on outside funding to make any moves, while social enterprises source their funds from their profits. The former can be quite helpful to an acutely under-served community, but the latter is more impactful and sustainable. In the eventuality that a charity is crippled by such a move, a local business can pick up the slack since it’s beholden to nobody but the people in the community.

Main drivers of sustainable development

In April of 2019, the government of Ghana decided to embark on an ambitious journey that will see the country end reliance on aid within a generation or two. The stance was laid out in a document known as the ‘Ghana beyond Aid Charter and Strategy Document’. The entire idea is centered on re-orienting donors and well-wishers to stop seeing the country as a charity case but rather a place that needs injections of investment capital. They want to encourage the setting up of social enterprises instead of having a bunch of aid money thrown at the problem.

Sustainable revenue that is generated by such companies will bring a world of difference to communities that need investment. An investment in farming equipment and subsidization of seeds is infinitely better than the provision of food every now and then to the same community through aid.

Countries like Ghana are increasingly moving to support private sector, or market led, approaches to development. Reducing their reliance on traditional donors, and at the same time, building and strengthening their economy.

Allows other organizations to focus on their core functions

One of the greatest benefits of social enterprises is that the release funds for other organisations to focus on what they need to do.

For donors focused on supporting health activities, there is a wide range of interventions needed. Many of which don’t have commercial incentives or solutions, but are hamstrung by aspects that do. If Social Enterprises are a part of the equation, funds form the donor are able to be focused on the aspects needed most (non-commercial values), while knowing that the commercial aspects are being delivered as well.

One example would be rural eye care, where it can be difficult for a charitable organization focused on eye conditions in a rural community to focus solely on saving people’s eyesight, but the community might lack the ability to travel long distances and access the treatment. Setting up a treatment camp in such a community is great, but if the community can’t get there, it won’t have an impact. Instead, the NGO ends up allocating already stretched resources to bring the weak and elderly to the camp. However, the transport is something that a social enterprise could provide, providing a service to the community, charging for their service, while allowing the charity to focus on what it does best, eye care. Situations like this where social enterprises invest in a community’s infrastructure, make it easier for NGOs and other charities to provide essential services.

---

Social enterprises may not be the panacea for all of society’s ills, but they sure can be a major driver for any communities’ success.

If your organisation is looking to implement Social Enterprise models, or you are looking for support in building your social enterprise. Keprah is able to provide a range of services, guidance, and networks to support you in your endeavor. Send us an email and we would love to chat.

Should we push Impact Enterprises to scale, or does that actually reduce their impact?

It’s been fantastic to see the growing engagement and support for impact focused business globally. My social feeds are full of people building incredible impact focused businesses, Donors are funnelling millions of dollars into Social Entrepreneurship projects, and NGO’s are building venture arms to engage in this growing ideas. It’s fantastic to see.

But, there’s a part of this drive that I’ve always wrestled with. Many times when we look at programs to support Impact entrepreneurs, we get stuck into ideas of start-up and tech approaches. Investment, Scalability, Incubators, Lean Methodology, etc.

And the reasons for this are clear, with billions of dollars needed to achieve the SDG’s, small scale solutions aren’t enough. Lean Methods (of which I do prescribe too) help us build solutions that are tailored to the problem, and not invest in incorrect models. Incubators help support multiple enterprises at once, and investors bring in much needed capital.

But, I can’t help but think that in many ways, this growth mentality doesn’t sit completely well with the idea of social enterprises as a vehicle for long term development. And I think my concern rest on this need to grow. Start-up culture is about finding the idea that can be scaled quickly, to build value. It’s the technology platform that will become a unicorn. And while that would be great in the SocEnt space, the social side of the equation doesn’t balance.

For a number of enterprises that genuinely solve social issues, its local social issues that they solve. And this localisation is critical to their success as a sustainable approach to development. They understand their communities, they are deeply connected to both the problem and the people involved. Not just that, but the solution also impacts them as well. It is this connection that makes them so powerful, and successful in what they do.

When the support ecosystem drives these localised enterprises to scale, they may lose the key part that made them successful. An investor isn’t as interested in an enterprise that doesn’t want to grow outside their community. But once away from their community, the social aspect of their business becomes more difficult. It can lead to building a business, which only tangentially has a social impact that may not scale, instead of the impact business with social impact at its core.

So how do we support these businesses? Are traditional SME approaches better? Franchise models? Is it about supporting Business Networks, rather than scaling individual businesses? Is it sharing knowledge? Is it building value chains?

While all of these are pursued at different levels, the current focus on Social Entrepreneurship leaves many other models in the background. Personally, I’d love to see thousands of small social enterprises creating genuine impact in their communities, than a few unicorns solving some issues. We do need a few doing it perfectly, but many doing it imperfectly.

In reality though, to achieve Sustainable Development and the SDG’s, we need a mix.

We need to support organisations that are doing good to continue. For some, thats through support to deepen impact in their community and remain sustainable. Others its to scale and engage with millions of people.  It’s about providing support and not pushing them with single approaches. Providing access to opportunities and pathways where appropriate. For donors and ecosystem builders then, it’s critical to have a suite of approaches, and not just accelerators and investors.

Keprah approaches business support through a focus on the outcomes, what is the business (or industry, Government of NGO) trying to achieve, and what’s the best model. When we start with this outcome, which tool gets used will also change and adapt. If you are looking at engaging in development, wanting support as your develop your organisations or are transitioning a program away from grants, we would love to chat and figure out what the best model is for you.

Keprah is dedicated to utilising enterprise and market systems as a catalyst for development and sees these as critical components to reaching the Sustainable Development Goals (SDGs). In this short blog, we will start to cover some of the key thoughts on why we support Social Enterprise, and how we can use the power for entrepreneurship to reach the SDGs.

The idea of entrepreneurs and businesses using market-driven strategies to tackle social issues isn’t new, nor is it without an already sizeable ecosystem. However, the enormity of the SDGs, the critical lack in funding globally, and the changing political landscapes provide an impetus to continue to build innovative solutions that solve social issues but are able to operate beyond the support of donors. Businesses that have impact embedded within their core purpose provide a sustainable way to engage with social or environmental issues, which doesn’t require external funding, bureaucracy or reliance on the goodwill of donors.
Essentially Social Enterprises are market-based enterprises which have a social impact at their core. While the exact definition is often still for debate, the motivation behind the business, to solve social issues rather than the creation of wealth, is often central. In development, this can mean businesses that employ underserved communities, marketplaces for artisan products to reach global markets or environmental businesses that protect the environment.

While acknowledging that not all social or environmental issue can be solved through a business approach, it’s prudent to ensure that where it is possible for these market-based approaches to work we should explore. The more programs that are able to wean themselves off donor funding, the more of the limited funds available can be spent on the wicked problems that need large scale engagement.
Beyond freeing resources, entrepreneurs are often more adaptive to the needs of the market and able to pivot and change their approach to fit. Rather than large programs from Governments or NGO’s that take time, enterprises can quickly pivot to market opportunities. This flexibility, combined with in-depth local knowledge and ability to innovate provide a fertile opportunity to develop tailored impacts that solve real social issues, in ways not tried, or possible, through traditional development.

A great quote that sums up this approach, and why we love social enterprise, was written by Suzanne Skees from the Skees Family Foundation (SFF), who wrote on the next billion blog : ‘We’ve found that smaller, scrappier enterprises (often led by younger entrepreneurs) tend to do more with a smaller budget than larger NGOs or businesses. They often listen more deeply to local needs and solutions, and innovate both products and processes that build jobs in places with a dearth of employment.’

This local engagement is the key ingredient for success, but also, the greatest challenge for scaling. And this remains one of the key roadblocks in utilising social enterprise on a large scale. The ability for entrepreneurs to develop solutions to social issues is often connected to their own engagement in those communities. For these enterprises to scale, the tailoring of the business needs to adapt. Through targets solutions organisations like Keprah can provide support, but national or international scaling is a challenge.
But, these restrictions also provide an opportunity. And while that sounds strange when no answer is obvious, we are firm believers that restrictions build innovation. When you are left with a blank state it is easy to stay with the familiar. But, as we add restrictions, whether financial, social or challenges of scale, we need to find new ways to solve these. If we place social impact as a requirement for every business, the ingenuity of entrepreneurs would provide a wide array of solutions and very many new opportunities.

This isn’t to say that all social enterprises are solving amazing challenges, or are succeeding as businesses. Many struggle to shake the Non-profit approaches that have been core to impact-focused programs and are essentially charities with a different tag. As we look at social issues, it’s easy to try and remove the restrictions of being a successful business and focus on the social issue. But to be successful in the long run we need to stay in the tension of both sides. To ensure that Social enterprises are effective in solving their nominated social issue/s AND are able to be profitable. Without both, then a social enterprise is not achieving its goals.

If your business, International Development Org or Social Enterprise would like support in developing a strategy to transition to market systems, support in winning new projects or monitoring your impact, contact Keprah at [email protected]

We are excited for Keprah founder, Joel Bird, to be quoted in this article for The University of Queensland’s ‘Contact’ magazine.

Joel discusses with his colleague at UQ, the opportunities for social enterprise in International Development, and the role governments play in support it.

https://stories.uq.edu.au/contact-magazine/2019/making-connections-for-tomorrow/index.html

We are excited to finally launch Keprah into the world.

Keprah is a boutique advisory and program management service, dedicated to supporting communities and organisations through specialist Business Development, Strategy and Measurement services across the community and international development sectors, with a particular focus on supporting and growing social enterprises.

At the moment, Keprah is fairly ambiguous on purpose. The reason for this is that it is designed to be a vehicle enabling us to explore what is happening in the Social Enterprise/International Development space. Through Keprah, we will be able to support current ID focused organisations in their business development needs, engage with small social entrepreneurs and build products that fill market needs. It’s exciting to see the possibilities and I look forward to connecting with others as we explore these areas.

If you’re interested in collaborating or engaging our services, please get in touch.

Here’s to the future, and seeing where Keprah leads!