Measuring social impact: a key step towards promoting Social Enterprises
Why "measuring social impact" is important for a bank? What are the goals? What are the financial stakes?... Maha Keramane, Social Entrepreneurship and Microfinance Europe Manager in the Group’s Corporate Social responsibility (CSR) team, answers to all our questions.
In today’s environment, we operate under a constant imperative: boost our effectiveness (ability to reach goals) and our efficiency (optimizing the resources needed to achieve results). For those active in the social and solidarity economy, this trend carries a growing need to measure social impact—defined as how these players affect their beneficiaries and society as a whole. However, establishing a standard of operation in the field remains a challenge, as putting this approach in place can prove complex. Many different methods are currently out there, but no guideline has emerged for assessing the impact of social enterprises. To this end, BNP Paribas has rolled out a comprehensive approach to impact assessment (social, environmental), enabling its customers to showcase their efforts in concrete figures.
BNP Paribas has rolled out a comprehensive approach to impact assessment (social, environmental), enabling its customers to showcase their efforts in concrete figures
“this measurement tool aims to enrich and expand the relationship between banks and their customers.”
Social Entrepreneurship and Microfinance Europe Manager in the Group’s Corporate Social responsibility (CSR) team
Could you please explain what you do within the Group CSR Function?
Spanning France and other European countries with a strong Group presence—as well as Morocco—my mission comprises two areas:
- Microfinance: I carry out prospecting and due diligence on site, by meeting with microfinance institutions to assess their financial performance and their social performance (protecting end customers, accessibility of products and rates, etc.), in order to issue recommendations about lending to this institution;
- Social Entrepreneurship: I coordinate the project, aiming to set up the Group’s system dedicated to Social Entrepreneurship—elaborating specific methodologies for analysis, impact assessment projects, studying the needs of social enterprises, conceiving adapted financial products, etc.
What role do social entrepreneurs play in the economy?Social entrepreneurs—who use classic economic tools to combine profitability and maximum social impact—come from every background. Whether young or old, recent graduates or “converts” from the traditional economy, they are people who want to bring a new sense of meaning to their work.
They are active in every sector, often creating new solutions for personal needs. For example, a young mother created an enterprise offering day care services for children with unusual schedules or from single-parent households. Another mother created educational tools to foster the cognitive development of autistic children. Still another entrepreneur designed solutions to recover heat emitted by data centers for use in heating systems at hospitals, schools, public housing and offices.
Why is it important for a bank like BNP Paribas to measure the impact of social entrepreneurship?
Social enterprises have unique and innovative business models. That’s why we have to be just as creative in the way we analyze their activity, by measuring their social impact as well as their financial performance.
BNP Paribas has pioneered a tool for measuring the social impact of a business, focusing on several objectives:
- Achieving a better understanding of the specific nature of social entrepreneurship improving internal expertise and enriching the customer-banker relationship;
- Carrying out differentiated analysis of financial elements in light of a social or environmental objective;
- Promoting the actions of social enterprises, whose impact serves as the major justification;
- Enabling interested businesses to assess the progress of their impact from one year to the next and to see where they stand in terms of practices in their sector.
How do you measure these impacts?We rely on both internal and external expertise to establish a qualitative and quantitative method that includes monetized indicators, whenever possible.
To encompass the variety of target audiences and diversity of actions undertaken, we chose to divide the Social Entrepreneurship sector into 7 Social Action Domains, based on a need/service covered by Social Entrepreneurship:
- Access to employment
- Microfinance & Aid for Entrepreneurs
- Access to Housing
- Access to Education and Equal Opportunity
- Access to Healthcare and Maintaining Autonomy
- Protecting the Environment
- Ending Poverty
In all, we have outlined 370 indicators, organized around three key questions:
What are the financial stakes of measuring social impact?
By promoting its social impact, a business can show how it has optimized its social objectives with the resources at its disposal, and that it has created social value. That facilitates its dialogue with public and private backers.
For this reason, measuring social impact plays a key role in Social Impact Contracts (Contrats à Impact Social in French), a new finance product available in France. These contracts seek funding from private investors for social innovation programs, which are then repaid by a government body based on the success of its social impact model.
The tool relies on the simple fact that a majority of social entrepreneurs have developed an efficient model that will generate savings for the wider community.
For example: when the unemployed return to work, that means less unemployment benefits paid out and more sales tax generated through increased spending. Seniors who use connected objects to remain in their homes are both happier and less costly for tax payers.
So the system underlines the direct connection between creating social value and creating economic and monetary value!
Finally, measuring social impact helps cast social enterprise in a new light. Integrating new elements that account for the creation of social value helps change financial analysis and “acceptable” standards. Social enterprise profits that appear limited at first glance may be augmented through the business’s impact:
- For example, social enterprise profits may sell goods and services under market value to disadvantaged groups, such as the food network ANDES (representing solidarity-based supermarkets in France that set prices 20% below market);
- For integration enterprises, the production process includes higher spending on staff (the cost of assisting long-term unemployed or ex-convicts is considerable).
measuring social impact underlines the direct connection between creating social value and creating economic and monetary value and helps cast social enterprise in a new light
How do you aid your social business clients in measuring the social impact of their actions?
By developing this tool for measuring social impact, we will make it possible to foster a dialogue between the entrepreneurs and their business managers at BNP Paribas, to improve communications for the enterprise while talking about it in a new way, and to understand the enterprise in every aspect.
In addition, many of our Social Entrepreneur customers lack the resources needed to measure their impact. Our goal is to offer tools so they can:
- Promote their action and measure their progress;
- Gauge the adequacy of their social mission and their actions in order to coordinate their activity;
- Showcase their creation of social value in order to access new sources of funding.