Tyrone Burke, November 28, 2019
Photo credit: Luther Caverly
Carleton’s Kate Ruff is creating a common platform to evaluate the impact of social purpose organizations
One organization is a for-profit company that distributes environmentally friendly cook stoves in east Africa as carbon offsets sold to environmentally conscious air travelers. A second organization is a charity that works with local companies to integrate cognitively impaired people into the workforce – and strengthens the community where they live.
Which of these two organizations has the greatest impact? It seems like an apples and oranges comparison, but Dr. Kate Ruff is working on ways to evaluate the impact of social purpose organizations through the Common Approach Project.
“I like to say that humans are actually really good at comparing apples and oranges…because we understand food,” says Ruff, co-director of the Carleton Centre for Community Innovation and an associate professor of accounting at the Sprott School of Business.
“You can go to the grocery store, and choose apples and oranges. There is no mechanical answer to which one is better. It will take an analyst to say that one organization is really strong on reducing its environmental footprint, but might not be paying people a living wage. Or another organization has created jobs for people with cognitive disabilities, but their gender diversity is weak. Then, it will come down to an investor or grant maker to figure out how it fits with their own values, and what the trade-off is with those differences.”
A two-year Common Approach Project is funded by Employment and will create a Canada-wide standard for impact measurement, and Ruff is also discussing its possible use with a number of international bodies.
The research grew out of the Government of Ontario’s Social Enterprise Task Force, which identified the need for a common framework for evaluating social purpose organizations – a catch-all term for any organization that aims to make a positive difference in the world. This type of organization be a charity, business, or cooperative, and it can serve a social or environmental purpose. Their common thread is their intent to effect change.
The task force’s consultations found that social purpose organizations were spending too much time cataloguing and quantifying their impact – and correspondingly less time actually working toward their social or environmental goals. But there was an even bigger challenge in play — measuring impact across a diverse set of organizations.
“I like to say that measuring an organization’s social impact is easy in the same way that running a marathon is easy. That is to say that it’s hard, but a lot of people can do it, many people have done it, and some people do it very well,” says Ruff.
“What we don’t know how to do yet is bring those accounts in to dialogue with each other in ways that they can be compared and aggregated. For that, we need to have some kind of standard, and one of the most successful standards out is accounting. It tells us how we might be able to do this.”
The challenge is to create a standard that is flexible enough to accommodate the differences between organizations – without rendering the measurement irrelevant.
“Uniformity kills a standard. It limits the number of people who will find it useful and want to participate. Most importantly, it limits the standard’s meaning,” Ruff says.
“Businesses that are making a difference in the world would say, ‘hey, you’re measuring this and I don’t dispute that number…but our real impact is over here. Let me tell you this story about what we’re doing. I call this the ‘yeah, but’ moment.”
In establishing a standard, Ruff looks to the history of accounting. In the early 19th century, some business people argued that businesses were too different from one another for their financial statements to be compared. Today, we take these comparisons between balance sheets for granted.
“Many people are surprised to learn that the accounting standards we have today are very flexible. There are different ways of measuring inventory — not every company measures it identically,” Ruff says.
“But once it gets on the balance sheet, we consider it to be same enough. Accounting maintains that information so that somebody like me can look at a financial statement, check the notes and find out whether a company is doing better than before. That happens for all sorts of things in accounting, and we’re trying to use what we know about how accounting works as a successful, flexible global standard to create a similar standard for impact measurement.”
And the project is developing digital tools to help social purpose organizations deploy a shared standard without having to change the tools that they’re already using. Working with data engineers at the Centre for Social Services Engineering at the University of Toronto, they’re developing a cloud-based interface that’s capable of communicating with existing impact measurement software, such as Sametrica and ImpactDashboard.
“That way, we don’t need to ask every social purpose organization to become an expert in the standard we develop. That would be really unfeasible,” Ruff says.
“We are creating a middle ground of user interfaces. They will be able ‘talk’ to each other because they have a common data standard that’s interoperable. This type of project would not have been possible 10 years ago, without the availability of cloud-based applications.”
It will make it simpler for social purpose organizations to share information about the difference they’re making with their funders, investors or lenders, and for those investors to compare the impact that each organization is having.
“It helps make sense of it all,” Ruff says.
“If we think of the impact investor — somebody with money to invest — they want to know the impact of their portfolio. They want to know what their financial return was, and what kind of impact they achieved. Right now, the impact side of that analysis is completely opaque. The hope is that we can help make the world a better place by illuminating the impacts of portfolios.”
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