Social Enterprises (SEs) can now tap an independent assessment tool that will enable them to convey to other market participants if they are creating positive social impact, allowing them to raise their profiles and draw more investment capital.
The Impact Mark was launched at the recent Impact Forum in Singapore by Shujog, as a component of its mission to enable SEs to grow and scale more effectively. Magnus Young, a manager on Shujog’s Research team, told the audience that the tool was the fruit of four years of research, advocacy and action.
“There is increasing demand from SEs to have assistance in measuring or communicating their impact,” he said, explaining that investors require higher standards of due diligence before they invest money into these enterprises. This is where the Impact Mark comes in. The certification of certain SEs as “high impact” is “a seal of approval for other stakeholders”, he said.
Weina Li, who leads Shujog’s Research team, said that the Impact Mark was aimed at growth stage and mature SEs that are looking to strengthen their internal processes for impact measurement, as well as their external reporting. She said: “Certification increases accountability and transparency.” The mark provides SEs with a simple yet robust way to summarize a complex amount of detail.
To encourage the adoption of a more standardized approach to assessing SEs’ impact, Shujog is imparting its assessment methodologies to those who want to become accredited impact assessors. The certification process consists of three steps, with the impact assessor first identifying a high potential SE. “Perhaps there is anecdotal evidence that it is viable and making good impact,” said Magnus Young.
The next step involves developing the impact framework, which structures the collection and reporting of data that measures the SE’s purported impact. Weina Li noted that impact assessments must articulate not only an SE’s outputs, but also its outcomes.
She said: “The first is the directly measurable result of an activity, such as the number of youths receiving training and getting a job. The outcome is the so-what. It is the benefit or change that is the direct result of the output, such as increased income or health.”
The final step in the process is the submission of the SE’s impact assessment for verification. While Shujog will withhold certification if it finds that the candidate is insufficiently high-impact, it will provide suggestions for the SE to work towards successful certification.
“This (verification) is required or it will just be like an unaudited financial report where an enterprise reports on its own bottom line,” said Mr. Young. One question from the audience was the degree to which the impact assessment was subjective.
In response, Magnus Young said: “If you are a professional accountant, we don’t call your opinion subjective. We call it a professional judgment. That’s what we want too.”
By: Joo Teh (Intern) and Pooja Sinha (Counsel), O’Melveny & Myers, Singapore
Pooja Sinha is a Counsel in the Singapore office of O’Melveny & Myers LLP where she practices in the Capital Markets area. Joo Lin Teh is an intern in the Singapore office of O’Melveny & Myers LLP. The opinions expressed in this article do not necessarily reflect the views of O’Melveny or its clients, and should not be relied upon as legal advice.