Social Impact

What is social impact?

Social impact refers to the effect an organization’s activities, decisions, and general operations have on society and the well-being of individuals. Beyond revenue and profit metrics, social impact considers a business' broader influence on its community, the environment, and key stakeholder groups.

Companies use corporate social responsibility (CSR) software to monitor the effectiveness of their CSR programs and social impact. Examples of programs that companies might track using CSR software include sustainability management, community giving, and corporate volunteer programs. 

Categories of social impact

While social impact can manifest in many ways depending on the cause and focus, businesses should be aware of four broad categories. 

• Direct: Organizations may produce products or services that directly affect a social cause. For example, a company that develops a product to help people reduce their carbon footprint has a direct environmental impact. Direct impacts are quantifiable and measurable business results. 

• Indirect: Companies can also have an indirect social impact when they partner with other community members or organizations to create change. Indirect impacts are challenging to measure because it’s not always clearly distinguishable when an organization can realistically attribute its activities to an indirect result. Reporting indirect impact without quantifiable metrics and data points can also be tougher than sharing direct impact. 

• Positive: Businesses ought to strive for positive social effects, including improving gender equality through fair wages. Any beneficial improvement an organization makes toward a social cause is a form of positive impact.
• Negative: Changes that harm the community, environment, or other key stakeholders are negative impacts. For instance, an organization that increases its carbon footprint year over year has a negative environmental impact.

Benefits of social impact

Businesses that engage in social impact initiatives and report progress often experience numerous benefits beyond doing good and making a difference in the world. The key benefits associated with incorporating social impact into business operations include the following.

• Increased brand awareness and enhanced reputation: Social impact initiatives set businesses apart and strengthen their brand. Companies can also use their commitment to social responsibility as part of their brand, making it more likely to build positive reputations in the community. 

• More customer loyalty: Many customers want to support businesses that line up with their values and priorities. Socially responsible organizations can build strong, long-lasting relationships with their audience when everyone’s values align. 

• Better employee engagement: Social impact work can lift employee morale and satisfaction. When companies prioritize social impact initiatives, employees feel connected to a greater purpose. 

• Greater access to investments and capital: Organizations may receive more interest and investments from socially conscious investors if they prioritize social impact initiatives. When considering investments, many stakeholders think about corporate social responsibility and environmental, social, and governance (ESG) factors. 

• Competitive advantage: When comparing companies with similar product or service offerings, publicly prioritizing social impact can put an organization ahead of its competitors. For individuals looking for companies with a positive impact, an organization that reports on social impact is likely to beat out one that doesn’t.  

How to create a social impact program 

Businesses build social impact through various strategies that align with their mission, values, industry, and community. Programs differ to meet the organization's needs, but most teams can follow the steps below to get started.

• Research and determine what social challenge(s) align with the business. Some examples include poverty, healthcare access, gender wage gaps, food insecurity, and climate change. As a first step, organizations must involve key stakeholders and determine what matters most to the business and how it fits into the overall company strategy.

• Define a clear purpose and mission statement. Clearly articulate a vision to guide the development of the program. Outline the reasons it’s crucial to the business and its core values.

• Set goals and objectives. Establish specific and measurable goals for the social impact program using a goal-setting framework. Include how the efforts are expected to have a significant positive effect and how the organization will measure its progress. 

• Integrate social impact into business operations. Align the social impact goals with the company’s vision and operational strategy. Make sure employees and other stakeholders understand how their activities affect the social impact goals.
• Measure and monitor the impact. Regularly monitor and evaluate the progress of social impact initiatives and key metrics associated with the outlined goals. Keep stakeholders informed by sharing successes and roadblocks. Then, use the data to make improvements and refine strategies over time.

Social impact best practices

Measuring social impact is challenging without a proper framework and strategy. Below are some general best practices businesses can follow to increase the likelihood of their success.

• Engage key stakeholders for alignment: Social impact is a group effort and commitment. It’s best to bring in the necessary internal and external stakeholders to ensure that the team buys into the effort and desired outcomes of its social impact goals.

• Identify data sources and prioritize clean data collection: Organizations can’t effectively report on their social impact without solid data sources to support their progress. Teams should discuss measurements as part of their overall strategy and goals. They should gather accurate data to monitor and make certain they consider data governance for the best results.
• Calculate attribution realistically: Organizations need to be realistic about their attribution to avoid under or over-reporting their impact. Consider the degree to which the organization’s actions have contributed within the context of particular social issues. 

Understand how organizations use ESG reporting to communicate their environmental, social, and governance efforts and progress.