Organizations should look to report the full story, including any negative impacts, if they are to provide a comprehensive impact statement. Those that are inexperienced in the area frameworks like the Developing Value Framework provide a good foundation for reporting. Organizations should look to incorporate key principles, including transparency and authenticity. Finally, ensuring that the purpose is not forgotten when reporting is important. Examples of impact reports are provided along with an analysis of how they stack up against the best practices. Finally, several insights around good impact reporting are included for completeness.
The Good, The Bad, and The Ugly
- Impact reports should tell the whole story, not just the bits that the organization wants to tell. This includes any negative impacts or outcomes that have occurred as a result of the organizations' actions. Consumers are looking to organizations with an expectation they are honest and transparent in their processes. Part of this approach means that organizations need to front up and be honest regarding their activities. If there have been negative aspects to their operations, then organizations need to acknowledge them.
- Not only is this best practice in relation to impact reports, but honesty and transparency are essential across all aspects of an organization's business if they are to gain the trust of the consumer. A social impact report is a commitment to measure and report all impacts, not just the positive. The report will lose credibility, as will the company if it is not an accurate reflection of all aspects of an organization's social impact.
- Green Resources is an example of a company that has embraced this concept into its social impact reporting. It discusses not only the actual negative impacts but the areas where there is potential for negative impacts and the steps the company has taken to ensure they are minimized. This information is not hidden in the contents of the report but acknowledged in the introductory passages and addressed more comprehensively throughout the report.
- The following passage shows how negative impacts can be incorporated into a social impact report but presented in a way that emphasizes the organization is living up to its responsibilities and addressing these issues. Green Resources 2015 social impact report said, "One of the main environmental impacts that GR has is the carbon sequestration that is achieved through the growing of large expanses of forests. GR does have negative environmental impacts, such as the removal of species during land preparation, chemical usage, waste production, and impacts associated with the establishment and use of roads in rural areas. However, the company actively manages these risks, mitigating them where possible and minimizing them where prevention is not possible."
Demonstrating Value Framework
- For small and medium businesses, especially, there are benefits to following a well-known framework when completing impact reporting, especially when it is something new for the organization, and they are not overly familiar with the process. The Demonstrating Value Framework is internationally recognized and provides a good basis for reporting. It is considered best practice by those in the industry to adopt this or a similar framework to assist in impact reporting.
- Organizations tend to focus on financial information, but this is not a good indicator of the organizations' impact on effecting social change. The Demonstrating Value Framework helps to overcome some of these issues and should be seen as a means to ensure the organization and investors are on the same page. It is effectively a snapshot of where the organization is currently.
- The framework essentially identifies the pressures or drivers that are responsible for causing an impact. Organizations then consider the conditions or state they are operating under in response to each of the pressures or drivers. This step gives the report a context. Finally, the report considers the organizations' response to each of the drivers or pressures, taking into account the context in which they occurred.
- Although it is a simple framework, it is considered the best practice, especially for those new to impact reporting, as it ensures all of the necessary information is included and considered without becoming overly focused on the financial aspects of the business. While metrics are important, this framework ensures that organizations do not get caught up in the numbers alone, but address issues in a broad manner.
- Canary Wharf Group incorporates its social impact reporting into its annual reports. By adopting a value-driven approach to this aspect of their reporting, the company has ensured that they maintain focus and are able to prioritize better. It also means that it has created a greater degree of transparency in their impact reporting.
The IMPACT Principles
- Several companies have developed a set of principles that override the impact reporting process. As the impact reporting is being compiled, it is best practice for the organization to ensure that the report encompasses each of these principles. The reason that it is considered the best practice to consider each of these principles and ensure that any report demonstrates them is it ensures that the report remains on point and focused on reporting the relevant information. The principles, when overlaid against the data collected, ensure that the correct weight is given to the different aspects.
- The six principles that should be considered when preparing an impact report are intergratability, materiality, pragmatism, authenticity, commitment, and transparency. These are the principles that the stakeholders are looking to the impact report to reflect.
- Integration sees the organization reflect on the financial and social impact at each stage of the investment process. Materiality screens content for relevance and ensure the right information makes the final report. Pragmatism ensures the processes are appropriate to meet the needs of all of the stakeholders. To address the issues relating to credibility, the report must be authentic and present the complete picture, not just the aspects that are favorable to the organization. One key area that should be highlighted in impact reporting is the organization's commitment to the process. Finally, transparency goes hand in hand with authenticity and relates directly to the credibility of the report in the eyes of the stakeholders.
- The importance of ensuring that each of these principles is incorporated into impact reporting has been taken up by the industry, and they have developed a range of different tools to assist companies in ensuring that reports embody these principles. The Impact Risk Classification developed by New Philanthropy Capital and KL Felicitas Foundation is an example of one of these tools. GIIN's Navigating Impact Projects tool is another example of a tool developed to ensure these principles are considered when reporting.
Focus on Purpose
- It is essential that every person in the organization and all of the stakeholders remain focused on the purpose or the difference that the organization exists to make. Once the organization is clear regarding its purpose, it should create a clear road map or plan as to how it is to achieve the purpose. This incorporates the impacts that they wish to have. The road map, in effect, does the hard work because it includes how the organization is going to achieve the purpose, the methods of assessing it, and ultimately it informs the review process.
- The reason it is considered the best practice is it takes the ultimate goal of the organization and reverse engineers it so that a road map is developed so the organization can achieve the purpose. In terms of impact reporting, it creates a blueprint for the impact report that can be used each time an impact report is required. Because the organization has developed its whole internal infrastructure around the purpose, this means that when it is time to report the means of assessing the impacts and ultimately reviewing their effectiveness is already defined and in place.
- The purpose is often the core differentiator between companies operating in the same space. It can serve to create a competitive advantage for one company over other similar organizations if the groundwork on how the purpose is to be achieved is appropriately developed.
- Examples of companies that have focused on purpose and let it lead all aspects of its impact reporting include Prosperity, who creates impact through encouraging the success of others, and Tesla, who aim to create impact through inspiring greater possibilities.
EXAMPLES OF GOOD IMPACT REPORTS
- Charity Water incorporates its impact reporting into its annual report. An analysis of their 2018 shows the benefit of presenting the information in a simple, clear, and concise manner that ensures that all of the relevant information is included and that it is not made overly complicated by irrelevant data or information.
- The purpose of the organization is clearly the focus, with the purpose stated clearly on one of the first pages, that is, bringing clean and safe drinking water to those in developing countries. They then adopt a framework similar to the demonstrating value framework to highlight the impact that they have had in working towards this purpose. The information is presented simply and accurately along the lines of — by doing this, the result was this. There is no confusion, and it is clear where the organization stands in achieving its overall purpose, as well as the impact it is having in working toward this purpose.
- Metrics are used to support the findings but do not overwhelm the message itself. An analysis of the report did not disclose any negative aspects to its work, and it is unlikely that they have not had some challenges or issues that needed to be overcome. If this is the case, it is disappointing that it is not included in the reporting. In fairness, some of this information could be included in the financial reporting part of the report, which we did not review in detail.
- The six principles identified as best practices are exemplified throughout the report and have contributed to its clarity. The report concludes with an acknowledgment of the hard work of the stakeholders, and an overarching summary of the impact of the organization is the context of its overall purpose, commenting the organization was able to raise more money and save more lives than it had done in previous years.
Fight Colorectal Cancer
- Fight Colorectal Cancer is clearly an organization focused on its purpose; even the name of the organization encompasses it. The impact report is tailored so that it meets the needs of all the stakeholders. It is of note that the report has been presented in a manner that makes it easy to view through a web browser. Its 2019 report is presented as a series of achievements, accompanied by the metrics and data to support the achievement.
- In some areas, it falls a little short in discussing the impact of their actions, instead focusing on the outcome. For example, one of the achievements listed is "Fight CRC aired a public service announcement (PSA) about the importance of colorectal cancer screening on CBS, NBC, ABC, and FOX stations in cities across the United States, including New York, Los Angeles, San Francisco, and Boston." It would have been better practice to expand upon this statement and identify what the actual impact of achieving this was. Although the achievement was listed under the heading, "We increased public awareness," it comes across as vague because of the way it has been reported.
- The failure to report the impact over the outcome on a couple of occasions makes it less likely a framework similar to the Developing Value Framework has been adopted as it tends to focus an organization on the overall impact rather than the outcomes.
- Reading the report, the six principles identified as being the best practice are evident to varying degrees suggesting at least an awareness of their importance by the organization.
- Dreams impact report is visually a masterpiece. It uses a combination of data, analysis, photographs, and metrics to illustrate each outcome. Photographs are cleverly placed throughout the publication, creating a link between the cold, hard data, and the work that the organization is doing in the community. It gives the work a face for the stakeholders. Dream has used individual success stories to good effect, as they give the reader an invaluable insight into the impact of the work, beyond the numbers, which lack personality.
- Each impact is clearly set out and supported by evidence. On this basis, it appears that a framework similar to the Developing Value Framework has been used in the reporting process. While the report has a future section, detailing the direction of Dream in the future, it does not address any negative outcome. It may be that there are none, but that seems unlikely.
- The report at face value seems to have incorporated the six principles discussed previously. However, without being privy to the process that Dream undertook when compiling the data and preparing the report, it is difficult to know if this was a conscious decision.
- 350.org is geared toward fighting fossil fuel infrastructure and keeping the fuels in the ground. Clearly, the organization was focused on this purpose as it completed its impact reporting. It is clearly stated at the head of the report, which creates not only a visual illustration of the overriding purpose of the organization, it also serves as a mental note as the report is read, enabling the reader to check the impacts against that purpose.
- The report is cleverly structured, providing the key outcomes as metrics and visual illustrations, and then discussing the impact of those outcomes in the text below with the option, at least for the online version, to access additional information if necessary. This has the effect of creating a highlights and extended version of the report. In doing this, the report can be focused toward several different audiences.
- The structure of the report, detailing process, action, and impact is suggestive of a framework such as the Developing Value Framework having being used. However, this is supposition rather than fact. The same is true in respect of the six principles, while elements of each are present, it is unclear if this was a conscious effort by the organization.
- In its analysis of the different outcomes and the consequent impacts, the organization has addressed areas where there is further work to do or where they have fallen short. This is an excellent example of a company telling the whole story and recognizing their shortcomings or areas they could do better.
INSIGHTS INTO IMPACT REPORTS
Reasons for Measuring Social Impact
- It is important to measure social impact so that the full picture of an organization's actions are understood. Measuring outcomes is only part of the story; an impact report must go beyond that and measure how the outcomes have impacted on the stakeholders. Take, for example, an organization building wells, the number of wells is only part of the story. What is important is to understand the impact of those wells on the local population, specifically who is using them and what the benefits are.
- An organization is more likely to stay true to its mission. It is easy to get caught up in a range of different aspects of operations. Social impact reporting provides organizations the opportunity to evaluate their activities regularly. This, by default, gives them the opportunity to recalibrate their operations if, through this process, they find that their direction has changed inadvertently.
- Like any market, there is a need for capital investment. Impact reporting creates integrity and accountability, which is vital for investors. Many investors now require transparent processes for the measurement of outcomes to be in place before they consider investing in an organization. The process ensures that all the stakeholders remain invested in the impacts.
- The evidence produced in a social impact report could be described as a tangible measure of value. This is essential in obtaining ongoing investment and funding from external sources. The value illustrated in social impact reports gives investors a point of distinction from their competitors.
Why Social Impact Reporting is Important
- Investors have been among the stakeholders that have embraced social impact reporting seeing the value it brings to the relationship. For organizations wishing to expand their operations, impact reporting provides the foundations for a business case for this expansion. From an investor's viewpoint, an impact report gives them confidence in their investment and any continued investment.
- Skepticism in the industry regarding the relevance of impact reports remains in some quarters, with some claiming the cost and time involved in creating meaningful measures of outcomes rendering them an ineffectual measure of a complex subject matter. Regardless, the popularity of these reports is rising, and they are increasingly becoming an essential part of any organization's operations.
- Impact reporting needs to be embedded in the business, with a genuine focus toward improving performance. It needs to be more than just a means for sales and marketing to gather data to inform their ongoing activities. This is particularly important in organizations that rely on funding from public organizations, where there is a strong expectation of accountability.
- Standardization of the information included in impact reports is an ongoing issue but is secondary to the process itself. At a minimum, there is an increasing expectation from all stakeholders that organizations make a commitment to recording relevant social data.
Adding Value Through Impact Reporting
- The size of an organization's impact report should be proportionate to not only the size of the organization but the complexity of its purpose and aims. Gathering information and data for a social impact report should not be a process distinct to the other processes of the organization. Rather, it should be part of the day to day operation of the organization. It is the information that the organization should be using to inform their strategic and management decisions.
- The feasibility of gathering the data must be leveraged against the importance of the data itself. If the data appears overly complicated to collect, then organizations should consider alternative collection methods or whether other measures can convey the same information.
- External reporting allows the organization to develop relationships with the stakeholders, creating trust and confidence for both parties. From an internal viewpoint, there are benefits in impact reporting, specifically the boost in staff morale that comes from having hard efforts acknowledged publicly.
- The real value of impact reports is the transparency that they create. It provides all stakeholders with the necessary information to make ongoing decisions about their roles. A report that is both credible and humble is an invitation to the stakeholders to collaborate with the organization to maximize growth opportunities.
- Once the results have been determined, they need to be communicated appropriately through the impact report. Several elements must be considered when deciding the best way to communicate the results to a target audience. Several mechanisms of communication could be considered to complement an impact report. They include presentations, executive summaries of reports, community forums, policy briefings, and media articles.
- The impact report itself should be concise but interesting. It must give the impression that the organization understands the audience and has written the report with them in mind. The recommendations and conclusions it makes need to be useful to the target audience, or the report becomes redundant. Finally, first impressions do count, so the report must be both professional and attractive in its presentation.
- Multiple perspectives add value to the report. By circulating a draft report to relevant parties, feedback can be incorporated into the final product, which means it is not only more comprehensive but more persuasive in its engagement of the key stakeholders.
Features of Impact Reports
- One of the hardest aspects of impact reports, for those that are new to the process, is understanding what is important and what should be left out of the final report. A good impact report has five key features. Firstly, it makes the needs, purpose, and vision of the organization clear from the start, so the reader has this as a context as they read the report.
- It will then detail the activities that the organization has undertaken in relation to the organizations' needs, purpose, and vision. Once it is clear what activities are occurring, the current impact and the evidence in support of those findings should be presented in a concise way that communicates in a simplified, uncomplicated manner.
- The evidence is a key aspect of the report and should be sufficient to support all the findings but not overly detailed in a way that detracts from the findings themselves. Finally, the report should conclude with an eye to the future. This section should evaluate where the organization sits currently relative to its needs, purpose, and vision, and the areas that need future attention. It answers any negative aspects of the report by addressing what the organization has learned and what it will change in the future.
To determine the best practices around impact reports, we reviewed a range of industry publications and expert commentaries. We determined something to be a best practice if it was discussed in multiple different sources and referred to as such by industry experts.