What Is Theory Of Change And How Can It Help Me Further My Organization’s Mission?
Written by: Raphael Renno Rangel
Companies, investment managers, and nonprofits are under increasing pressure to improve their social & environmental impact. Doing so also means getting better at measuring and reporting their performance in a defensible, rigorous way.
These impact-related ‘pain points’ are strikingly similar across the public and private sectors and civil society but are sometimes expressed in different ways:
- Foundations and NGOs: How do we know if our programs are actually helping our communities? How then do we communicate this to donors, community leaders, and other stakeholders?
- Impact investors: How can we tell the difference between effective and under performing initiatives and investments? How much are we helping our portfolio companies achieve and exceed their environmental, social and corporate governance (ESG) goals?
- Corporate Social Responsibility (CSR) Leaders: How can we know if we are making progress towards our company’s social & sustainability-related goals? How do we ensure that our existing and new initiatives have measurable outcomes and will generate long-lasting impact?
The answers quite naturally converge towards effective impact management and robust impact measurement tools. With hundreds of billions of dollars of consumer spending, investor allocations, philanthropic giving, and regulatory fees and taxes on the line, it’s critical for organizations to understand what good impact management looks like and how to easily and rigorously measure impact. We’ll also discuss what the UN Sustainable Development Goals (SDGs) are, and why they’re referenced so widely in impact management.
What Is Impact Management?
Impact management can be defined as the process of continually evaluating the impacts of an organization--both qualitatively and quantitatively.
The Impact Management Project provides five key dimensions to analyze impact:
- What: the outcomes and the degree of importance to its stakeholders;
- Who: the beneficiaries of the projects and how under served the stakeholders are versus the outcome;
- How much: number of beneficiaries (scale), the degree of change they experience (depth) and expected duration of impact;
- Contribution: the result of intervening compared to not doing anything; and
- Risk: the likelihood that the impact will be different from expected.
The ‘Risk’ dimension is often top-of-mind for managers and leaders at socially-responsible companies and other impact-focused organizations. We recommend that organizations carefully explore their exposure to the nine main types of risk and focus on the 2-3 greatest threats to their impact performance.
For example, if a large corporation wants to measure how well their COVID-19 mitigation efforts are working across 10 factories and facilities, we could break down the impact into the 5 key dimensions:
- What: the ideal outcome is to flatten the curve of new infections and increase well-being, related to the SDG #3: “Ensure healthy lives and promote well being for all at all ages.”
- Who: the beneficiaries of the program should mainly be employees, especially those considered essential workers, given that they are likely to have a higher risk of exposure.
- How much: If the company has 10 workers per facility, the scale will be 100 people. For depth, assuming infections have been held at 20% of the expected level, depth would be 80% (degree of change); and the duration could be a rolling 10-day period.
- Contribution: The goal is to minimize time of interaction among workers, decreasing the time of recovery and increasing safety. This will be accomplished by completely isolating people, providing PPE (personal protective equipment) and test access, as well as training, while maintaining throughput (matching demand).
- Risk: With this approach, the company wishes to curb both the number of infected as well as the number of deaths; accordingly, the main risks they should account for would be execution risk, efficiency risk and external risks.
What Is Impact Measurement?
To effectively manage impact, organizations must be able to measure their outcomes and monitor progress closely over time with clearly defined metrics. Impact measurement is the practice of connecting resources (inputs) and results (outputs) to evaluate the performance of impact initiatives and investments (outcomes).This practice has been increasingly adopted by mission-driven organizations and other key stakeholders.
Rather than creating their own metrics (a time-consuming and often expensive process), organizations often choose to rely on sector-specific and thematic standards. In 2019, the United Nations Development Programme (UNDP) launched the SDG Impact initiative to provide investment managers and investors with clear, SDG-linked impact metrics and tools. We discuss the SDGs in greater detail below.
What Are The UN Sustainable Development Goals (SDGs)?
Crafted through numerous UN Sustainable Development Summits since 1992, the SDGs are a set of 17 goals to guide global human development and environmental responsibility through 2030. The SDGs are shaped by four main areas (People; Prosperity; Peace; and Partnership), and represent ambitious endeavors (e.g. “end poverty in all its forms everywhere” and “achieve gender equality”).
Each SDG includes several detailed targets, which in turn have at least one indicator. For instance, the goal “Ensure availability and sustainable management of water and sanitation for all” has 8 targets, including “achieve universal and equitable access to safe and affordable drinking water for all.” This target is measured by the indicator “Proportion of population using safely managed drinking water services.”
By setting indicators for specific targets and goals, the UN hoped to provide the basis of effective impact management strategies: achieve major goals with well-funded initiatives and investments, with progress measured in a consistent, rigorous manner over time
As your organization develops and refines its impact management strategy (which should include standardized metrics), it’s important to ensure that you have the tools to actually manage projects, gather & analyze data, and report outcomes.
At Corecentra, we help organizations easily manage a broad range of initiatives & investments, aggregate data in real-time, and generate reportable insights into their social impact & sustainability performance. Corecentra is a mission-oriented and minority-owned software company with a vision to transform the way that changemaking organizations leverage data to do more good in our communities. Learn more here.
Checkout our previous article recapping the 2020 Data for Impact Conference: Recap: Data for Impact Conference 2020
If you’re interested in learning more about best practices in data standardization for organizations in your sector, please feel free to reach out to Anish Nagar (email: anishnagar [at] corecentra.com). Anish is the CEO of Corecentra Solutions, a software company providing purpose-built digital solutions for socially conscious and outcomes-focused companies, foundations, nonprofits, and frontline government agencies.
Corecentra provides advanced digital tools for organizations to manage, monitor, and report their social performance and impact. We help socially-conscious companies, impact investors, foundations, nonprofits, and frontline government agencies manage portfolios and programs, aggregate and analyze data, and easily report outcomes to key stakeholders. By seamlessly integrating program management, budgeting & finance, stakeholder engagement, predictive analytics, and impact assessment, our products empower organizations to increase their social impact and deliver a quantified view of social performance to investors, donors, beneficiaries, employees, and communities.