By Shailesh Tyagi
Corporate social responsibility (CSR) programs in India primarily focus on education, healthcare, social welfare and environment. In the wake of the pandemic, a large amount of funds are being channelled to COVID-related programs focusing on promotion of preventive healthcare, sanitation and disaster management.
Companies understand the importance of giving back to society and are spending more than the prescribed amount in CSR activities in these times.
But the looming questions are: Despite so much spending, are businesses really making an impact on the beneficiaries?
How do companies define impact? How can companies better measure and evaluate the impact of CSR?
What does this mean for corporate strategy?
Over the past few years, companies have been engaging third-party agencies or in-house teams to conduct impact assessment of development initiatives and CSR projects. They want to know the tangible and intangible changes the projects have brought to the lives of the beneficiary communities.
This helps the companies understand the overall outcome of the project, and also how the beneficiaries perceive these programs. The assessments vary depending on the organization’s understanding. For certain organizations, impact is the actual change — social and environmental. An insight-driven method of evaluating social impact could involve mapping behaviour changes among the beneficiaries, to capture data on the lives impacted.
This can be done using quantitative surveys to identify key changes and the underlying reasons, complemented by qualitative interviews to bring social impact stories to the fore. Impact assessment has become a medium through which organizations can communicate to their key stakeholders — the implementation partners, shareholders and the board of directors — the effects of the initiatives. However, the concept is still in its infancy in India, the first country to impose a statutory obligation on CSR spending and reporting.
However, Indian companies need to change their point of view on impact assessment and valuation. Though the companies see this as a communication and marketing tool that can reach multiple stakeholders, the real value of impact valuation will be seen when the organizations start seeing it as a decision-making tool, and use it to choose between interventions that can offer the maximum return on investment.
A powerful tool that captures the real value of impact is the Social Return on Investment (SROI) framework — which measures the value created in social, human or environmental terms, and represents it in a monetary value. Calculated in the form of a cost-benefit ratio, it communicates the value generated for every rupee invested in development sector initiatives. The framework can be used to understand the impact in ex-ante or ex-post situations.
SROI can help businesses to enhance transparency about the value created. Similar to Life Cycle Assessment, which started as a simple tool for assessing footprint but later became a tool for policy implementation, SROI can also aid in setting goals and help in strategic planning and decision-making. While SROI is a great tool to assign value to intangible outcomes, it is important to understand what it is measuring, the context of assessment and how the assessment is being used to get the big picture.
As more and more companies wake up to the realities of conducting business in the pandemic, the requirement for a consistent and accessible approach to social impact assessment and evaluation will only grow stronger. Impact valuation goes one step ahead of the traditional disclosure and reporting framework and attempts to integrate external factors into the business model of an organization.
For example, climate change could be measured in tonnes of CO2 emitted, impact on human health could be measured on the number of people who have been affected and so on. This results in a multidimensional reporting framework. Impact valuation attempts at normalising and assigning a single score to these multidimensional factors by giving a value of them. While the disclosure and reporting framework acts as a means of improving transparency, impact valuation acts as a tool to identify, measure and manage the most material risk factors that are often externalised, undetected or unmeasured.
Impact valuation, apart from being a change management system or status information system, can also be a tool for prospective analysis of plans. SROIs estimate future benefits in today’s value. It can help in understanding the ground truth about theories of change established during the inception of a project — a very difficult task when using a traditional outcomes-based approach.
Strategic planning and goal-setting are much easier while using the SROI approach as it encompasses all the tangible factors into a single number (return versus investment, in rupees). (ET)
(The author is Partner, Climate Change and Sustainability Services, EY India)
