Evolution of Social Impact Management
Transcript of Evolution of Social Impact Management
Ken Ito
Executive Director,
Social Value Japan
Evolution of Social Impact Management
- Introduction of SDGs Impact Standard
ASEAN-Japan Centre
ASEAN Update Seminar SDGs Series Vol.4
2021 10.18
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• Ken Ito is a founder and Executive Director of Social Value Japan, a Japanese member network of
Social Value International
• He has a bachelor degree in economics and MBA in International Management from The American
Graduate School of International Management (Thunderbird) in the United States. Ken spent ten
years in the private sector, with his last position at GE Capital. He subsequently joined the Institute
for Strategic Leadership (ISL) to launch the Center for Social Innovation, to promote social
innovation through its leadership training programs
• He is visiting senior researcher at SFC Research Institute at Keio University since 2007. Ken
teaches at Graduate School of Media and Governance as Lecturer and conduct research
programs as Project Assistant Professor from April 2016.
• Ken works for AVPN as East Asia Director
• Contact [email protected]
Ken Ito
Executive Director, Social Value Japan,
Project Assistant Professor, Graduate School of Media and Governance
Keio University
East Asia Director, Asian Venture Philanthropy Network(AVPN)
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Contents
1. Social Impact in Business Management
2. How to Assess Social Impact?
3. Methodological Development of
Social Impact Assessment and Management
4. The Emergence of SDGs Impact Standard
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The Expanding Social Impact Investment
1. Growth of Social investment globally and in Japan
• Social investment is rapidly expanding globally and has become a major
interest for institutional investors, with $30 trillion in so called ESG
investment as of 2018, and 230 trillion yen, or over 18.3% of outstanding
in Japan
• As social investment becomes more mainstream, ESG management is
becoming more widespread, with corporates incorporating ESG indicators
into their management
2.Implications of the expansion of the impact investment market
• Social impact investment is estimated to be $715 billion globally as of the
end of FY2020 (GIIN 2020), and 5.6 billion in Japan as of 2019 (GSG Domestic
Advisory Committee 2021), 6.7 billion in ASEAN (2017-2019, Accumulative)
• Increasingly, the targets of corporate accelerator programs and Corporate
Venture Capital investments are also pursuing social impact
• In the area of social impact assessment, which is necessary for social
impact investment, there is a global trend toward the establishment of
standards and the integration to the market standards
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Increasing "social value" in the corporate value
- rising ratio of intangible assets
• Intangible assets account for 90% of S&P 500
companies by 2020, compared to 32% in
1985
• It is said that a large proportion of this is due
to the recording of goodwill from corporate
acquisitions, etc., and although it is not
possible to make a simple comparison with
Japan, intangible assets already account for
the majority of the criteria used to evaluate
corporate value.
• Brand value and added value represented by
intangible assets go beyond the direct benefits
they provide to customers, and the market is
now evaluating their "social value" in terms of
the impact they have on society as a whole.
Source:" The Soaring Value of Intangible Assets in the S&P 500", Visualcapitalist.com,
November 12, 2020"
https://www.visualcapitalist.com/the-soaring-value-of-intangible-assets-in-the-sp-500/
Increase in the ratio of intangible assets in S&P 500 companies
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Discussion on Social Value Creation
The creation of social impact in corporate management is being discussed and practiced in
three areas: (1) visualization and measurement on value creation processes, (2) needs for
ESG reporting, and (3) creation of social value by venture companies based on social
missions.
(1) Need for visualization of "value creation" as a leading indicator to manage with financial indicators
• Awareness of the limitations of using financial indicators, such as sales and profits for
management
• Need for establish a measurement of "social impact" as a management indicator that
precedes financial indicators
(3) Needs among venture companies to pursue social impact
• Some of the socially oriented ventures pursue “Social IPO”, in formulating strategies and
building business models for venture companies whose mission is to solve social issues.
(2) Needs for reporting of social indicators to respond to ESG investors
• As ESG investment market grow, demand from investors to evaluate the social impact of
companies that are issuers of stocks and bonds, such as sustainability indicatorses
increased
• Need for social impact indicators that go beyond conventional ESG reporting
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Areas of Social Impact
What is social impact?
• Outcomes (short-, medium-, and long-term),
including social and environmental "changes" and
"benefits" resulting from the project or activity,
including short-term and long-term changes.
• This refers not only to economic value but also to
the total value that a business has brought to
society over the medium to long term.
personal
society
economic
value
social
value
well-being
QoL
Connection to society
Education and Skills
Development
social capital
Community Value
social system
Culture & Arts
economic growth
infrastructure construction
Improving family finances
Different Segments of social impact
Social Impact
Social
ValueEconomic
Value
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Trends of Social Impact over a decade
2006 2013 2016 2018 20192015
Domestic and International Trends Domestic and International Trends
• Launch of the G8 Task Force on
Social Impact Investing (led by
Prime Minister David Cameron of
the United Kingdom)
• Social Value Act passed in the
UK
• IMP (Impact Management Project)
was established.
• Japan Social Impact Evaluation
Initiative established
• Social Impact Evaluation Study WG
established by the Cabinet OfficePRI (Principles for
Responsible
Investment)
launched.
GPIF (Government Pension
Investment Fund) signed the PRI
ESG investment in Japan
increased to 18.3% (AUM)
SDG Impact launched
UNDP, the United Nations
development agency, in
partnership with IMP,
established the SDG
Impact Standard for social
impact management.
Changes in stakeholder interests Changes in stakeholder interests
The "social impact" debate is limited
to foundations, nonprofits, and some
social enterprises.
Increasingly, companies are addressing
"social value" as an important
management indicator, and the number
of CSR assessments is increasing
Discussion on the reporting of "social
impact" in companies' core business
and its use as a management indicator
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■ The Kumon Institute of Education's learning therapy program, which targets approximately 16,000
people at more than 300 facilities nationwide, was introduced in both Tenri City and Okawa City in
fiscal 2015 as a results-linked contract and as a measure to prevent dementia and realize nursing
care prevention.
• The Kumon Institute of Education, in collaboration with Tohoku University, has developed a
nursing care prevention program using "learning therapy" since 2001 to prevent dementia.
• A print learning program developed by Kumon, in which 30 minutes of group study once a week
and 30 minutes of self-learning per day, has been proven to maintain and improve cognitive
function
• Following its adoption for the Ministry of Economy, Trade and Industry's "Healthy Life Extension
Industry Creation Project" in 2015, the project was implemented in Tenri City in 2017-18 and in
Tenri City and Okawa City from 2019 as a three-year project through debt-financing.
Case Study : Utilization of Social Impact Assessment in
Pay for Performance Contract(A project of a nursing care prevention using "learning therapy" by the Kumon)
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• In a dementia-improvement program using "learning therapy" for people certified as needing nursing care, the impact of
30 minutes of learning activities per day on the elderly was found to be a difference of about "1" in the level of need for
nursing care compared to the target group, based on the difference in the time required to determine the need for
nursing care (Funaki 2017).
One year after program
implementation, the
The difference between the
learning therapy group and
the target group
difference of about "1" in
the level of care required
(Significant difference)
(Source: Katsura Funaki, Mitsuhiro Sado, Akira Ninomiya, Ken Ito, Senka Ochiai, Joichiro Shirahase, Osamu Mimura
(2017), "Research on the effects of learning therapy on dementia", The 32nd Japanese Society of Geriatric Psychiatry)
Case Study : Utilization of Social Impact Assessment in
Pay for Performance Contract(A project of a nursing care prevention using "learning therapy" by the Kumon)
Level of
Nursing
Care
Baseline 5 month later 1 year later
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Increasing public interest in Social ImpactInterest from business, government and non-profit organizations
Business
Government
Not-forProfit
• Demand of a "social indicators" and the
need for non-financial information
disclosure based on the SDGs
• Growing interest in ESG management,
which views social indicators as leading
indicators against economic indicators
• Social productivity needs of government
• Responding to the budget crunch
expected in the near future in a society
with a declining population
• Needs for visualization and quantitative
evaluation of the social impact of
business
• Needs for fundraising and business
improvement
• The rapid expansion of the social
investment market triggered by the
GPIF's signing of the PRI Principles
• Request for response as an operating
company as an issuer
• Policies for EBPM and utilization of
private sector partnership
• PFS/SIBs and other policy responses
• Request by funders (Foundations and
Corporate CSR)
• Implementation of Social Impact
Assessment by Dormant Deposit Fund
Stakeholders Interest Background
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General Process of Social Impact Assessment
Step 1
Step2
Step 3
Step4
Step 5
Step6
Step7
Logic Model Development
Identification of Outcomes
Identification of Outcomes Indicators
Evaluation design
Data collection
Data analysis
Business Improvement and Reporting
Plan Plan
Do Execution
Assess Analysis
Report & Utilize Report & Utilize
Organize the logic (cause-and-effect relationship) of inputs, activities, outputs, and outcomes of the business to realize the business goals.
Out of the outcomes organized in the logic model, select the outcomes to be evaluated
Determine the indicators and measurement methods for the outcomes to be evaluated
Determine the design of how the assessment will be conducted
Collect data on the indicators decided
Analyze the data collected to determine if the expected results are being achievedAnalyze challenges and alienating factors
Conduct improvement of the project/business based on the results of the analysis, cpresults inside and outside the organizationConduct reporting to the stakeholder
Source: G8 Domestic Advisory Committee on Social Impact Investing, Working Group on Social Impact Evaluation (2016) "Social Impact Evaluation Toolset: A Practical Manual" Prepared by Social Value Japan, a non-profit organization
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Logic Model : Depict the Causal Relations
To be able to analyze the social impact of a project within the framework of a logic model, i.e., what resources are invested (inputs), what results are produced (outputs), and what social outcomes are ultimately achieved (outcomes).
Based on the purpose and operation of the social value assessment described above, it is necessary to make appropriate judgments about how and at what level to measure social value.
In many social activities, activities are planned at the level of activities and outputs, but there are no assumptions about outcomes
Resources
input
Production Output Outcome-Impact
Activities Target Initial Interim Final
Resources to invest
ActivitiesConducted
Subject of project/busine
ss
Initialoutcomes
FinalOutcomes
Staff(Staff)time
estimatetechnology
partner
PlanSurvey
Business implementati
on
ClientsParticipantBeneficiaryInhabitants
Social acceptance
RecognitionProductService
Behavior Change
SocietyEconomy
Livingenvironment
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(Case Study) Social Impact Assessment in Financial Literacy Education
Input Output Outcome< Initial> < Intermediate> < Final>
Budget.and teaching
materials
Provide program implementation
channels
Partici-ants
schoolsEffective Financial
Educationprogram identification
Introduction to School Education
Educational Impact
financial institutio
ns
society
programparticipation
Corporate imageimprovement
Improvement of quality of service
Expand customer base Improved Business Sustainability
Improved EconomySustainability
Decreaseof multiple debts
Improving personal financial assets
Financial Literacy.improvement
Acquisition and utilization of financial
knowledge
Quality Improvement of economic activities
Increased self-efficacy
recognitionof risk behavior
Risk avoidingbehaviors
Decrease in financial troubles
programimplementation
A logic model showing the social impact of financial and economic education as assumed from previous studies and program materials
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Steps in Building a Logic Model
For the linkage between inputs, outputs, and outcomes, we don‘t necessarily think in
the order from input to outcome – verification could be done in the reverse order -
from outcome to output and input
Identification of stakeholders relevant to the business
Identification of inputs to the business
Identification of outputs (business contents) from the project
Identification of project outcomes (initial, intermediate and final)
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How to Capture Outcomes
Considering the logic model from the business goals, the "intended" and "positive"
It is easy to focus only on outcomes, but in reality, "unintended" or "negative" outcomes
should also be broadly considered
Intended
Outcomes
Unintended
Outcomes
Positive
outcome
Negative
outcome
Recognized
business goalConsider positioning
in the program
Examine the business
design to minimize
risks
Examine the business
design to avoid
negative outcomes
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Different levels of Impact Assessment
Less
costly
But less
Rigorous
Rigorous
But
Costly
However, in the case of social interventions, it is often
costly or ethically difficult to set up a comparison group,
and it is also a challenge to prepare a sample size which
is statistically significant
Baseline to End-
line comparison
Comparison with
the average
(non-RCT)
Comparison with control
group
Randomized
Control Trial
(RCT)
A Meta-Study of
RCTs
The simplest method is to look at the change of the
indicator before and after the intervention, but this
method is less rigorous as we need to eliminate the
external factors other than the impact by intervention
To improve the level of rigor, case-control studies with a
control group or randomized controlled trials (RCTs) with
a control group can be considered
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Difference in Difference
In DinD approach, the baseline (current values) and the target (target values) is set before the program
starts. The benchmarks (reference values) will serve as the basis for evaluation will be identified, and
targets will be set at a level that is reasonable and consistent with the impact targets.
Social Impact Indicators
(Wages per day)
time
Social impact realized by
the beneficiaries as the
project progresses
Impacts assumed to
have been realized even
without project
At the start of business At the end of the project
baseline
target Impact of the project
(Pure social impact)
The impact of Income improvement through job training
9,600 yen
13,200 yen
10,800 yen
benchmark
National average income
level of beneficiaries in
the same condition
11,400 yen
At the start of the project, the benchmark was 9,600 yen per day for a group with the same conditions as the beneficiaries in terms of age, place of
residence, occupation, etc.
A meaningful level of target where the beneficiary's wage exceeds the benchmark at exit and also compares to the level that would have grown
without the investment
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Reporting of social impact evaluations
(Example) Employee well-being compared over time by
different employment promotion programs
1 year ago2 years ago3 years ago Present
Project
Participants
Full-time
RegularContractors Temps
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Reflecting social impact assessment in
program/business management
Findings from the evaluation analysis Reflections on program guidelines
Further Improving Program Impact
Examples of Impact Management in
Corporate CSR Programs
• Reflect findings from the evaluation in
guidelines for program management
improvement
• Program impact can be improved by
implementing the revised guidelines into the
program
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Impact Management for Creating Social Impact
Share lessons learned and lessons learned from the project with various stakeholders, and conduct ongoing social impact assessments to ensure that the project creates a sustainable social impact.
Program
Design
Program
Improvem
ent
Program
Implemen-
tation
Assess
and
Report
SocialImpact
Management
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technique origin featureMain
Usersimplementation status
SROI
Developed by REDF in
the US in the 1990s.
Popularized in Europe in
the 2000s.
Return on
investment
evaluation by
converting
outcomes into
monetary
values
Nonprofit
Organizations,
Foundations,
and Corporations
About 1,000 organizations in more than 20 countries are
using it, and the UK Cabinet Office provided
standardization support in 2009-11. Efforts are underway
to standardize proxies and implementation processes,
and to ensure the quality of analysis.
IRIS
Developed in 2008 by the
Rockefeller Foundation,
Acumen Fund, and B Lab.
Currently managed by
GIIN
Set of KPIs
which users
can use as
reference
International
development
agencies and
corporate
Developed primarily to standardize valuation metrics by
domain, IRIS+ will be released in 2019. Used by 2,400
investment institutions worldwide, primarily in
microfinance
GIIRs
(B Corp
Certificatio
n)
Developed and started
operation by B Lab in
2010
Social
recognition
system by
scoring
Social
investment funds,
social
enterprises
In its early years, it was supported by 20 foundations and
investment banks and 43 funds, and is used to evaluate
companies and funds. Self-assessment is possible, but
paid certification can also be requested.
SDGs
Enacted as the 2030
Agenda for Sustainable
Development, adopted at
the UN Summit in
September 2015.
17 categories
and 169
targets as
international
goals
Governments,
Business and
non-profit
For the 169 targets, a total of 244 (232 if duplicates are
excluded) global indicators were established by the UN
General Assembly in July 2017, following discussions at
the UN Statistical Commission and related meetings, and
are being assessed by Member States on an annual
basis
Different Approaches in Social Impact Assessment
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Different Layers on Evaluation Methods
❖ IFC Operating Principles
❖ Principles for Responsible Investment (PRI)
❖ Operating Principles for Impact Management
❖ B Impact Assessment (B Lab)
❖ logic model
❖ Theory of Change
❖ Impact Management Guidelines (SIM I)
❖ Maximizing Social Value (SVI)
❖ SDGs Impact
❖ IRIS / IRIS+ (GIIN)
❖ GRI Standards
❖ SASB Standard
❖ Impact Weighted Accounts (IWA, Harvard Univ.)
❖ SROI (SVI)
❖ Value Balancing Alliance (VBA)
❖ B Analytics/GIIRS (B Lab)
❖ GRI Standards
❖ CDFI Ratings and Performance Data (AERIS)
❖ IMP (5D, ABC)
❖ World Benchmark Alliance (WBA)
❖ Value Calculator (ASVB)
❖ SDG indicators & Dashbords
Goals
Norms
Principles
Frameworks
Guidelines
Indictor Sets
Monetary
Equivalent
Reporting
Standards
❖ SDGs
❖ Paris Agreement (1938)
❖ Positive Impact Financial Principles (UNEP FI)
Source: SVJ, based on SIMI data
Different approaches to evaluating social impact have been developed, and these
components of the methodologies are conversed to into initiatives such as IMP or SDG
Impact Standard
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Since the latter half of the 2010s, international organizations and private foundations have been
working together to build consensus on principles, approaches, and indicator sets to ensure
mutual compatibility of social impact assessment and management
• An international initiative
on impact management
involving organizations
involved in setting global
social impact standards,
such as UNDP, IFC,
OECD, PRI, SVI, etc.
• 5 Dimensions and other
impact assessment
norms since the 2018
launch, with over 2,000
investors participating
• The Rockefeller
Foundation, UNDP, and
Acumen Fund were
involved in the creation
of this impact investing
intermediary.
• IRIS, a database of
social impact indicators
released in 2008, was
renewed in 2018 and
released as IRIS+.
• IFC to present nine
principles for impact
investing at 2019 World
Bank meeting
• Defined nine items that
impact investing should
apply in five areas:
strategic intent,
origination and
structuring, portfolio
management, impact
on exit strategy, and
independent verification
• UNDP, the United
Nations development
agency, in partnership
with IMP, established
the SDG Impact
Standard for social
impact management.
• Announced social
impact criteria for three
different targets: private
equity investments,
fixed income, and
corporations
Development of Social Impact Management Methods
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Impact Management Project
Facilitation
Incubation
More than 2,000 organizations from a wide range of fields will bring their
knowledge and business experience to build consensus and norms in technical
areas and share best practices in implementation measures.
Knowledge sharing among practitioners
The IMP Structured Network
Role in developing standards for impact measurement/management
Improved consistency and completeness of standards
Impact FrontiersWork with key investors to optimize their portfolios and
Quantitatively integrate specific social and environmental goals
with financial goals
The role of developing and communicating the framework
Integrating Impact and Financial Management
The IMP Practitioner Community
Source: Prepared by SVJ based on the IMP website
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Development of IRIS+ by GIIN (1)
The Rockefeller Foundation, The United Nations Development Programme (UNDP), and
Acumen Fund are the founding partners of Global Impact Investing Network, an impact
investing intermediary. GIIN was established to build a global network of social investors and
to standardize social and environmental impact evaluation indicators.
IRIS, a database of impact indicators for evaluating social impact released in 2008, was
renewed and released as IRIS+ in 2019
The following organisations have joined as lead supporters of GIIN
1. U.S. Agency for International Development (USAID)
2. Australian Government, Department of Foreign Affairs and Trade (DFAT)
3. UK Aid
4. Ford Foundation
5. Omidyar Network
6. Prudential Financial
7. Rockefeller Foundation
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Development of IRIS+ by GIIN (2)
“IRIS+ is an integrated assessment
guidelines with indicator database
developed under the GIIN initiative that
assesses social, environmental and
financial performance.
The GIIN developed IRIS (now IRIS+)
based on the belief that the development of
transparent and reliable indicators to
measure social impact is essential to the
growth of the impact investing market.
"IRIS+ enables different stakeholders in social investment to communicate
about performance in the same language, and to make consistent
assessments and comparisons.
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IFC Principles for Social Investment
• The International Finance Corporation (IFC), a member of the World Bank Group, has announced
nine principles for impact investing, which have been signed by 135 institutional investors as of
August 2021 including three Japanese investors
• A report was issued on the impact investing market as of 2020, with $2.3 billion invested with the
intent of social impact, of which $636 million was with measurable impact
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Impact Weighted Accounting Research
• A collaborative project of the Harvard Business
School, the Global Steering Group (GSG), and the
Impact Management Project (IMP) that aims to
promote financial accounting that reflects the
financial, social, and environmental performance of
companies.
• Gathering ESG data using a combination of cutting-
edge science, big data and algorithms, assigning a
proven monetary value to that data, and
representing it as an accounting entry that shows
the company's impact on the world
• Although its widespread use remains to be seen, the
project is attracting worldwide interest as a way to
develop a methodology for reporting social impact
and financial impact in an integrated manner.
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What is the SDG Impact Standard?
• SDG Impact is a framework launched by UNDP in 2020 to promote the management of social
impact
• SDG Impact consists of three parts, SDG Impact Management, SDG Impact Intelligence and
SDG Impact Facilitation, which are intended to accelerate the contribution to the SDG Goal in
each country.
• Three guidelines are published at 2020 : Enterprise, Bond and Private Equity
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Source: SDG Impact Standards (2020)
1. Strategy
The business shall, in its purpose and strategy, promote
sustainable development and actively contributing to the
achievement of the SDGs
2. Management Approach
Businesses need integrate impact management to ensure sustainable
actively contribute to development and the achievement of the SDGs
3. Transparency
Operators shall disclose how their active contribution to sustainable development and the
achievement of the SDGs is integrated into the fund's objectives, strategy, operational
approach, governance and decision-making, and report on its performance, at least annually
4. Governance
Businesses' commitment to contribute positively to sustainable development and the
achievement of the SDGs is strengthened through their governance practices
The Structure of SDG Impact Standard
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The position of SDG Impact Standard
• The SDG Impact Standards are not
intended to be used on their own, but
in conjunction with the high level
principles of Impact Management,
Impact Management Tools and
external disclosure standards. The
SDG Impact Standards are not
intended to be used on their own.
• The purpose of this project is to
provide a Decision Making
Framework that has been put to work
to date.
• As evidence of this, it is claimed to be
interchangeable with frameworks
such as the Impact Management
Project (IMP), which claims to
provide Impact Norm
SDG Impact Standard
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The Four Components of SDG Impact Standard
Strategy
Management
Approach
Transparency
Governance
• Embed responsible practices and impact into purpose, strategy, business
models & risk management systems
• Engage with the sustainable development context and involve
stakeholders
• Set realistic and ambitious impact goals in baselines and thresholds
• Design and integrate internal impact management system include
feedback loops
• Allocate resources, align incentives and integrate accountability
• Make evidence-based decisions and take action to optimize impact
• Provide disclosures about how responsible business practices and
impact management are integrated into strategy, management approach,
decision and governance management approach, decision making and
governance
• Publicly report on impact annually including positive and negative impact
• Integrate responsible business practice and impact into governance
practice and oversight
• Hold management accountable for responsible business practice and
impact performance
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SDG Impact Standards for Enterprises
Source: SDG Impact Standards for Enterprises (2020)
Strategy is defined as its three aspects – Purpose and Strategy, Impact
Goals, and Reviewing cycles
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Implication of SDG Impact Standard
A Paradigm Shift from Impact Evaluation to Impact Management
➢ In the previous discussions, the focus of impact discussion has been on how to "measure" and disclose
the social impact of business.
➢ In impact management, the question is how to integrate social impact into management norms, and this
is comprehensively assessed by the certification system.
From Project Level Assessment to the Management Norms
➢ While previous impact evaluations focused on business units, SDG Impact and other certifications
cover companies and funds.
Integration of Management principles, Decision-Making Frameworks, Evaluation
Tools and Disclosure Standards
➢ It vertically and systematically integrates different elements, from high-level concepts to tools for
practice, that have been developed by different organizations.
Certification(Seal) on Social Impact based on Internationally Agreed SDG criteria
➢ The debate on legitimacy of what “Social Impact” means reach to a conclusion and Impact
Management based on the social nature of the SDGs, as agreed internationally, is expected to set a
standard to “optimize” social impact
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Conference : Social Value Matters 2021 (Oct 20th-21st, 2021)
Annual Conference organized by Social Value International
• The world's largest international conference for sharing knowledge in the area of social impact
• Social Value International in association with SV Thailand, online
• Speakers representing the social impact evaluation and management field globally will take the
stage.
• Registration fees start from 3,199 THB (various discounts available)
• For more information and registration
http://www.socialvaluematters.com/