How many social enterprises, impact investors and corporate social responsibility (CSR) initiatives today can confidently measure and articulate their social impact?
Recent studies indicate that approximately 65% of social enterprises engage in some form of social impact measurement. However, the depth and rigor of these measurements can vary significantly. For instance, a Kiva survey of over 200 of its partnering microfinance institutions, social enterprises and new applicants showed that while over 70% of these organizations conduct impact studies, fewer perform comprehensive assessments like customer needs evaluations or formal quantitative outcome surveys.
This suggests that while a majority of social enterprises are aware of the importance of impact measurement, there remains room for improvement in implementing more thorough and standardized evaluation methods. It also highlights the fact that measuring social impact is not only a pressing need but also a challenge for many organizations operating in the impact economy.
Impactso is a technology company committed to simplifying and automating the process of social impact measurement. We recognize that the complexity of current impact measurement approaches often creates barriers for businesses and investors seeking to optimize their social impact. This article discusses the challenges of measuring impact, and explores how innovative technologies can be leveraged to revolutionize the process for organizations across the sector.
Why Measuring Social Impact Matters
Social impact measurement is essential for social enterprises, impact investors and other businesses seeking to align profitability with positive change. Addressing global challenges such as poverty, climate change and inequality requires intentional actions backed by measurable results. Additionally, for businesses and impact investors, demonstrating social impact has become a critical component of their work, since many of these companies must comply with growing regulations around environmental, social and governance (ESG) reporting. And on a more fundamental level, social enterprises, CSR initiatives and investors influence communities, so it is crucial for them to showcase the positive impact they generate. Failing to do so can lead to a loss of reputation and negative public perception, ultimately harming their credibility and stakeholder trust.
By leveraging technology and data-driven methodologies, impact-focused organizations can achieve measurable social outcomes that align with both their strategic and financial objectives, while maintaining transparency and accountability. In conducting these measurements, collaboration between stakeholders can ensure that resources are used effectively, driving real change. For instance, social enterprises can amplify their collective impact by leveraging measurable impact strategies that allow them to track how financial contributions from impact investors translate into social progress. Whether through sustainable business practices or investment in effective initiatives, measurement empowers all stakeholders across the impact sector to make informed decisions that contribute to a more equitable and resilient society.
The Challenges of Measuring Social Impact
But while the importance of measuring social impact is widely recognized, the process is fraught with challenges. Many organizations struggle with these issues in their day-to-day operations, affecting their ability to scale and attract investment. These challenges include:
Difficulties in quantifying qualitative outcomes: Many social enterprises struggle to measure improvements in areas like employment quality or financial resilience, as these are not easily quantifiable. For example, a social enterprise supporting women as solo parents may track the number of women who receive financial assistance or participate in job training programs. However, assessing the long-term impact of these initiatives — such as whether these women achieve financial independence or stable employment — can be difficult. Without standardized metrics for long-term data collection, it becomes challenging for social enterprises to communicate their true impact to investors and other stakeholders in a clear and consistent manner.
Resource constraints: Many small social enterprises or nonprofit organizations face challenges in tracking their impact due to limited financial and technological resources. For example, consider an agricultural cooperative that works to address hunger by providing training and logistical support to farmers, helping them improve food distribution and minimize waste. Without automated tools or dedicated personnel, measuring the direct impact of these interventions — such as a reduction in food waste or an increase in food accessibility in underserved areas — can be difficult. With measurement practices based on manual surveys and anecdotal evidence, it becomes challenging for this sort of organization to present compelling impact data to investors and other stakeholders, limiting its access to further investment and support.
Inconsistent standards: Without universal metrics, comparing impact across social enterprises is challenging, leading to potential misrepresentation. This inconsistency extends not only to how data is compared but also to how it is reported. For instance, a social enterprise may need to structure its impact data differently for an annual sustainability report, a funding proposal or an impact report to a current investor. Each of these audiences requires varying levels of detail and focuses on different aspects of impact, making standardization and consistency difficult to achieve.
However, if data is collected in a structured, predefined manner for impact measurement, it becomes easier to access, and easier to use this data to demonstrate how specific inputs contribute to predefined social change goals. This approach ensures that social enterprises can efficiently retrieve and present their impact data whenever it’s needed, strengthening their transparency and credibility in interactions with investors, funders and other stakeholders.
How Impactso is Innovating in Impact Measurement
Impactso addresses the above challenges by leveraging technology to make social impact measurement accessible and actionable. Unlike traditional approaches, we collect structured, real-time data directly from various stakeholders, including activity implementers, beneficiaries and partners. Our approach is built on our theory of change, which emphasizes monitoring planned activities and linking them to desired goals. By integrating real-time data collection within a tailored software framework, we ensure that data is gathered from the ground up — i.e., directly from those who are implementing social change. Here are three core ways Impactso responds to the challenges of social impact measurement:
Directly Measuring Impact on Target Groups: Impactso employs the results staircase model, which breaks down social change into progressive stages — from direct activities to long-term effects. After we collect structured data from those who are directly making social impact, we systematically categorize this data and align it with predefined social change goals, making it easier to measure progress and report results consistently. By utilizing a Likert scale, we’re able to convert qualitative improvements into measurable indicators, providing clear insights into the success of interventions. This structured approach enables real-time adaptation, allowing social enterprises to refine their strategies based on actual impact data and make data-driven decisions throughout the process.
Simplifying Impact Strategies Through an AI-Powered Impact Chain: Impactso aims to simplify the entire impact measurement process using artificial intelligence. AI plays a crucial role in two key areas of our work: designing the impact strategy and interpreting collected data. We help social enterprises create a structured impact chain with measurable goals, leveraging AI to bring insights from similar projects and refine measurement strategies. Once impact data is gathered — whether through automated collection or stakeholder input — Impactso’s AI assists in analyzing any qualitative insights and structuring the information into tailored reports. For example, a small fair trade coffee cooperative may struggle to track how its practices benefit farmers. With Impactso’s software, they can automate data collection from farmers, assess farmers’ income improvements, and measure social impact (i.e., how this initiative changes their lives) to enhance supply chain transparency. Since the data is collected in a structured and predefined manner, organizations can quickly access and present it in customized reports, demonstrating their contribution to predefined social change goals more efficiently.
Conducting Adaptive and Standards-Compliant Reporting: Impactso’s impact strategy is directly linked to societal challenges defined by the SDGs. By systematically collecting data in a unified manner, our reporting process provides long-term insights into how specific inputs contribute to measurable social change. For example, if we’re working with a skill development program focused on women, this structured approach might allow us to demonstrate how flexible home-based work opportunities improve women’s economic empowerment over time, among other potential uses. This data-driven process ensures that reporting can be adapted to various requirements and standards, making it easier for companies operating in multiple regions to maintain consistency in their impact measurement.
Call to Action
At Impactso, we currently offer tailored support for social enterprises, nonprofits and businesses in setting up impact strategies and measurement frameworks. Whether for fundraising or ESG reporting, we help organizations define their impact goals and implement structured measurement systems.
While our methodology is being tested in a prototype, our software-as-a-service is not yet available, as we need to validate market demand. We are actively seeking investors to develop a robust solution that can be widely used across various organizations. Expressing interest in our software via our landing page will help us move forward toward creating a minimum viable product that meets the needs of social impact-driven organizations. Join us in this mission by visiting impactso.com. Your support will help shape the future of impact measurement, making it more efficient and accessible.
Hana Stelzerova is a sociologist and founder of Impactso.
Photo courtesy of ILRI.
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