2nd International Symposium on Social Investment

ARUN’s Social Impact Measurement Framework
and Result from the JICA Rese...
ARUN’s Social Impact Measurement Framework
Q: Why social impact measurement is the key component for ARUN’s social
investm...
Social Impact Measurement and Evaluation
■Evaluation

Steps

Dialogue with investees

Step1 : Setting on the field/area of...
Basic approach to the financial evaluation
•
•
•

Social Enterprises which ARUN makes investment in have not fully establi...
ARUN’s Social Impact Evaluation Scheme
ARUN selects investee enterprises in conformity with both social and business/manag...
ARUN’s social impact performance evaluation
■Focus and basis of the evaluation:
Relationship between the mission and purpo...
REFERENCE ONLY

Monitoring and Evaluating the Social Impact of Investment
① Monitoring components for social entrepreneurs...
REFERENCE ONLY

Monitoring and Evaluating the Social Impact of Investment
① Monitoring components for social entrepreneurs...
REFERENCE ONLY

Monitoring and Evaluating the Social Impact of Investment
②Monitoring components for employees
Item

Key Q...
REFERENCE ONLY

Monitoring and Evaluating the Social Impact of Investment
③Monitoring components for investors
Item

Consc...
Uniqueness of ARUN’s Social Impact Evaluation & Measurement
■Team Structure and Collaboration:
- Investment Committee
- So...
Global Study on Evaluation Frameworks
Components

#

Development effectiveness
assessment framework

1

Impact Reporting a...
Research Findings: Summary

1

Balance between social/developmental
criteria and financial/management criteria

Business/
...
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2013symposium_arun2

  1. 1. 2nd International Symposium on Social Investment ARUN’s Social Impact Measurement Framework and Result from the JICA Research Project October 13, 2013 Takara Tsuzaki, Partner URL : http://www.arunllc.jp
  2. 2. ARUN’s Social Impact Measurement Framework Q: Why social impact measurement is the key component for ARUN’s social investment activities? Objectives for Social Impact Measurement: a.To share ARUN partners (investors) the up-to-date information and monitoring/ evaluation results of current state of the investment business b.To highlight the improvements on both social and business/management aspects and encourage investees further development by giving feedbacks on monitoring and evaluation results. c.To provide information to external parties (incl. potential investors) and making ARUN’s social investment activities accountable for the wider public. 2
  3. 3. Social Impact Measurement and Evaluation ■Evaluation Steps Dialogue with investees Step1 : Setting on the field/area of evaluation (overall scope) Survey to ARUN partners Discussions among ARUN partners (investment committee, Dialogue with investees Step2 : Deciding on evaluation criteria social performance assessment/ evaluation team) ・ Acquisition of relevant data ・ Monitoring system Data submitted by investees Step3 : Social impact evaluation Evaluation of investment (midterm, progress, result) Step4 : Feedback Improving business Report to ARUN partners 3
  4. 4. Basic approach to the financial evaluation • • • Social Enterprises which ARUN makes investment in have not fully established their financial base in most of the cases. Funding sources are scarce at this very initial stage, and financial institutions do not open their doors to them. With respect to business operations, entrepreneurs are conscious of the social mission, and it is generally the period of trial and error for their new business. In light of these circumstances, ARUN decided to take the following approach in social impact evaluation and assessment. Profitability Merkmal - Entrepreneur/social enterprise is generating profit while paying a decent wage to employees, and making repayment of principal and interest on borrowings, and assessment focuses on profits that occur after applying financial expense. Stability Merkmal – Ability to secure the operating cash flow to perform scheduled repayment of principal and interest of loans and making sure that debt of loss compensation is not built up. Assessment mainly focuses on "operating cash flow" and "debt ratio“. Growth potential The most important criteria for business operation is the growth of sales; therefore the social impact assessment focus on the "sales growth". Social enterprises generally extends their impact into social aspects, producers, employees, the community through business activities. Therefore, expansion of business scale is an important factor to determine the scale of social impact. Reliability Evaluation is made on the basis of how much ability the enterprise/entrepreneur has to create financial statements at the level that ARUN requests, and assess whether they can provide reliable data. 4
  5. 5. ARUN’s Social Impact Evaluation Scheme ARUN selects investee enterprises in conformity with both social and business/management criteria. ARUN developed its own social impact evaluation scheme and utilizing it for DD, reviewing and reporting of investment activities. Social /Developmental Effectiveness Criteria Business/Management Criteria Commitment by the entrepreneurs to bring about social changes for the cause Business Model Financials Degree in which social value is created Governance Employment Leadership Impact on Community ■Social Monitoring: Stakeholder analysis Return on Investment Local ■Evaluation of Social Impact   (applied to our investees) Leadership Customers Environment Innovativeness Suppliers ARUN Entrepreneurs Workers Family Contribution to local communities Employment 5
  6. 6. ARUN’s social impact performance evaluation ■Focus and basis of the evaluation: Relationship between the mission and purpose of the business is crucial. Discussions with investees focus on how they related to each other to enhance the business potentials. ※Achievement of mission is the priority, and business is the means to achieve the mission. Social performance is assessed accordingly. ■Comprehensive approach in different phase: To evaluate impact of the business, comprehensive approach is taken; whether the business is producing tangible outcomes for the ”purpose” that was set forth , what kind of results came out of the business (outputs) and how they lead to the overall impact of the business in the given area/field. Social Performance Mission and purpose of the business Input Invest ment Output Outcome Impact Resour ces Main focus for assessment and evaluation 6
  7. 7. REFERENCE ONLY Monitoring and Evaluating the Social Impact of Investment ① Monitoring components for social entrepreneurs and social enterprises Item Key Questions Metrics/Index Social entrepreneurship a. As a social entrepreneur, commitment and enthusiasm to resolving social issues is strong and has not been declined. ・ Clear awareness of social problem and its solution Willingness and commitment to the society a. Awareness of the social purpose of the organization is listed clearly and unchanged, and outlook and anticipation of the future is stated. ・ Clear awareness of the social purpose of the organization, stated and reflected in business plan b. Spirit of innovation / creativity in the business. ・ Ratio on economic /social Comparative reference with other cases a. Impact of job creation is maintained in a stable manner, and the scale is greater. ・ Total # of people employed, changes of # over time b. Is the business successful in creating the employment of vulnerable groups? ・ Women / elderly / disabled, changes over times Wage a. Impact of income generation is maintained in a stable manner, and the scale is greater. ・ Income, Percentage of sales, Income of the socially vulnerable people, changes over time Networks and business expansion a. In order to achieve the social purpose of the business, is network of customers and suppliers are expanding? ・ Communication with suppliers / customers Level of mutual understanding , satisfaction Contribution to the community a. Does the business actively utilize as much local resources as possible? ・ Use of local resources in equipment and raw materials b. Does the business actively engage in the re-investment in the area? ・ Relationship improvement in the regional, details of the relevant activities c. Does the business contribute to the vitalization of local economy? ・ Relationship improvement in the regional, details of the relevant activities d. Does the business contribute to regional revitalization efforts? (Movement creation through interaction) ・ Relationship improvement in the regional, details of the relevant activities e. Ripple effect on society and other stakeholders. ・ Presence or absence of effect, details of the relevant activities Employment 7
  8. 8. REFERENCE ONLY Monitoring and Evaluating the Social Impact of Investment ① Monitoring components for social entrepreneurs and social enterprises Item Key Questions Metrics/Index Consideration on Environmental a. Active efforts on eco-friendly/environmentally sustainable actions. ・ Achievements Consideration on working environment a. Active efforts on improving working environments. ・ Achievements Consideration on customers and consumers a. Does the business strive to maintain and improve safety · QC of products and services as consideration for consumers and customers. ・ Achievements b. Do you strive to disseminate information about safety · QC of products and services as consideration for consumers and customers? ・ Achievements 8
  9. 9. REFERENCE ONLY Monitoring and Evaluating the Social Impact of Investment ②Monitoring components for employees Item Key Questions Metrics/Index Understanding of the social purpose of the organization ①Employees understand the social purpose of the organization? ・ Changes of understanding, shared value among employees ②Spirit of innovation / creativity in the business? · Understanding of social issues to be solved by the company · Degree of the influence that their services has solved (%) · Aware of the companies and organizations with same business model Awareness of environmental considerations ①Among employees, are needs and social significance of the organization/company’s efforts of eco-friendly activities being shared and understood? ・ Changes in the understanding of the need for consideration in eco-friendly activities, Changes in social trends Awareness of working environment ①Among employees, are needs and social significance of the organization/company’s efforts of improve working environment being shared and understood? ・ Changes in the understanding of the need for consideration in working environment, Changes in social trends Considerations on customers and consumers ①Among employees, are needs and social significance of the organization/company’s efforts on maintaining and improving the safety and quality control being shared and understood? ・ Changes in the understanding of employee Changes in social trends ②Among employees, are needs and social significance of the organization/company’s efforts on disseminating information on safety and quality control being shared and understood? ・ Changes in the understanding of the need for information dissemination of employee, Changes in social trends Skills ①Skills originally held by employees improved? Have they been acquiring new skills? Are motivated to work? ・ improvement of skills, details of new skills, process of acquiring. Confidence and selfesteem ①Are employees gaining confidence and self-esteem by working in the organization? ・ changes in confidence and self-esteem Contribution to the society ①Through the work in the organization, do employees actively contribute to the region and society? ・ Changes in the regional contribution awareness / political awareness / sense of entitlement of employees Status of family ①What changes happened to quality of life of the family? ・ mental strength, voice of women, education of 9
  10. 10. REFERENCE ONLY Monitoring and Evaluating the Social Impact of Investment ③Monitoring components for investors Item Consciousness of investors Key Questions Any changes occurred in the consciousness of investors by participating in the project? Metrics/Index ・ Information and number of feedbacks received from ARUN (investors) ・ Changes in motivation or interests caused by dissemination of information on the progress of the project ・ Number of people (investors) participated in the study tour to see the actual investment sites. ・ Changes in motivation or interests caused by having participated in the study tour/visited investment site/interacted directly with entrepreneurs/employees. 10
  11. 11. Uniqueness of ARUN’s Social Impact Evaluation & Measurement ■Team Structure and Collaboration: - Investment Committee - Social Impact Measurement Team - Research Team (+ ARUN Lab) ■Geared towards “goal setting” for producing high impact, rather than driven by evaluation/assessment tool - local office in Cambodia working together with entrepreneurs/social enterprise on a regular basis - ARUN directors/partners (investors) and ARUN lab members frequently interact with entrepreneurs and employees - workshop/facilitation style evaluation/assessment to highlight the positive aspects of the business    - constantly revising and improving the questions and index by reflecting the needs and feedbacks from the entrepreneurs, and applying the global trend and analysis on social and impact investment Going forward… - Developing and improving ARUN’s Social Impact Evaluation and Measurement in accordance with our investment area/region (South East Asia, South Asia etc.) and sectors . - Strengthening research arm - Advisory service to Japanese corporations operating abroad (BOP business) 11
  12. 12. Global Study on Evaluation Frameworks Components # Development effectiveness assessment framework 1 Impact Reporting and Investment Standards (IRIS) 2 Steps Business/ manageme nt outputs Global Impact Investing Network (GIIN) ○ ○ ○ ○ ◎ Global Reporting Initiative Guideline Global Reporting Initiative (GRI) ○ ○ ○ ○ 3 Global Impact Investing Rating System (GIIRS) GIIRS members ○ ○ ○ △ ○ 4 Measuring Value of BCtA Initiative, A Result Reporting Framework Business Call to Action (BCtA) ○ ○ ○ △ △ 5 Development Outcome Tracking Systems (DOTS) International Financial Corporation (IFC) ○ ○ ○ ○ △ 6 Measuring Impact Framework World Business Council on Sustainable Development (WBCSD) - - ○ ○ ○ △ 7 Poverty Footprint Framework Oxfam - - ○ ○ ○ × 8 Baseline Form for new projects DFID Business Innovation Facility (BIF) - - ○ ○ △ 9 Social Return on Investment (SROI) Roberts Enterprise Development Foundation (REDF), New Economic Foundation (NEF) - - ○ ○ △ 10 Progress out of Poverty Index (PPI) Grameen Foundation ○ ○ ○ impact ○ Metrics/ index ○ Process Reco gniti on Social Developed by outco me framework △ 12
  13. 13. Research Findings: Summary 1 Balance between social/developmental criteria and financial/management criteria Business/ Mgmt criteria Social criteria Impact 2 Importance on output while considering the outcome 3 Importance on both the measurement metrics/index and the process of how the impact is achieved and assessed Outcome Output Index/me trics oriented Process Oriented Global Recognition and application 4 Recognized globally and aligned with targeted mission and social impact IRIS Mix Develop own measurement scheme 13

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