The Editor's Post: Should we pay the ‘impact measurement tax’?
Measuring impact is expensive and can be seen as an unnecessary burden for impact investors and enterprises – but it may be the only antidote to impact-washing. This week's view from the Pioneers Post newsroom.
Measuring impact is a complex process that involves looking at a variety of metrics, quantitative and qualitative, set almost on a case-by-case basis – and as a result, it’s expensive. Potentially unreasonably so. Jesse Clain, founder of The Takeoff Fund, writing in our latest Awkward Questions column, calls this the “impact measurement tax”.
Is it justified? In other words, how much money is it reasonable to spend measuring your impact, when it could be used to create further impact instead? It’s a tricky question, because as always, it’s not black and white – and it’s a delicate subject that we need to handle with tweezers.
Clain looks at two arguments often put forward to justify impact measurement: that it’s necessary to optimise your impact, and that it’s needed to show you’re not impact-washing. He’s actually looking at two aspects of impact measurement – impact management and impact verification.
On the first point, the idea is that if you’re a company or a fund trying to maximise the impact you’re creating with a finite amount of resources, you’re going to have to quantify your impact to fine-tune your strategy (that’s why impact measurement and management usually come as a pair).
Clain argues that impact funds may well be doing impact measurement to please their funders, but after all that work they don’t effectively use the information they collect. Impact fund managers out there, how do you respond to that?
The second argument attacked by Clain is that impact measurement is needed because you can’t believe what people tell you at face-value: anyone can tell you their fund invests in impactful solutions for people and the planet to attract more money from well-minded investors; that doesn’t mean it’s true. It’s not unreasonable to request some evidence of that impact. We’ve seen the backlash that sustainable investing has faced following rafts of greenwashing scandals; we’re at risk of facing a similar impact-washing phenomenon.
Clain says impact verification consultancies are guilty of overblowing the risk of impact-washing to make their services indispensable. But they do have a point: the principle of independent verification applies when it comes to money – auditors come to verify accounts, and the cost of doing that is accepted by companies or investment managers. Why would this not apply to impact?
In other words, is it ok to accept that impact investing is a wild west just because it’s too expensive to measure your impact? (Oops, I’ve dropped my tweezers). Provocation aside, the solution to this conundrum might come more easily than we think – we are witnessing unprecedented innovation in impact measurement, in particular in the field of artificial intelligence, which could hopefully make this awkward question redundant.
Practical tools
As it happens, impact measurement is also the topic of our next Social Business Coffee Break webinar: how do you make impact reporting work for your social business in practice? Impact measurement experts and award-winning social enterprises will share their knowledge and experiences, with practical advice on what a brilliant impact report looks like and how you can produce one… without spending a fortune. Join us on 18 September at 10:30am.
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Top image: Patricia Serna via Unsplash.
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