Impact measurement is anti-competitive, warns report

Impact measurement is anti-competitive, warns report
Civil Society, by Vibeka Mair

Without an industry standard model for impact measurement, the social enterprise sector risks becoming anti-competitive, warns new report Does social finance understand social need?

The report, which is authored by Robbie Davison, chief executive of social enterprise Can Cook, says in the absence of any consistent train of thought as to how impact measurement is viewed by social investors, the process risks being too costly and anti-competitive.

“The introduction of social value into the competition/delivery environment may in the distant future settle in, making costly measurement processes worthwhile,” says Davison. “In the meantime, it’s worth considering how anti-competitive this process, of gathering the associated data for these metrics, actually is.

“Imagine for example, being a private sector company watching its social enterprise competitor become bogged down with measuring whilst they get on with earning/growth”

Social enterprise measurement, he says, at both entry and exit, requires a purpose and competitive fit.
Davison says social investors should develop an industry standard model for impact measurement and should place a value on it that applicants for funding can refer to.

There has been movement within the social investment sector to develop a common approach to impact measurement.
Big Society Capital has recently launched a social impact framework, seeking to build common ground in the social investment sector on impact strategies, including impact reporting and monitoring. But it is not prescriptive about the models used.

Social investors not meeting need

Elsewhere in the report, Davison warns that the social investors do not match the needs of social enterprises, which require expertise, riskier money, and cheaper finance.

“What is becoming apparent is that rather than working harder or working in a different way to shape the market to fit true social enterprise, the favoured adjustments are to encourage and possibly disjoint the social lending environment by inviting private sector into the social lending space.”

Big Society Capital, and other social investors such as UnLtd and Nesta, invest into for-profit organisations which meet prescribed standards.

Davison continues: “We have a social finance market that is not yet able to service its intended market place, but seemingly prepared to channel vital funds out of a sector into businesses with no previous experience of tackling need.

“It appears that those who are charged with creating this new financial supply chain are already choosing to re-arrange how social enterprise is defined and, more importantly, how it is delivered.”

Ending his report, Davison suggest the creation of a Compact between social enterprises and social investors to encourage discourse shaping the delivery and future of social finance.