What it means
Where a set of financial statements reports profit and cash, a social impact statement reports outcomes for people. It typically describes the problem being addressed, the activities carried out, the results achieved and the evidence behind them.
Some organisations also set out the costs and risks involved. The document serves different readers.
Donors and grant-makers want to see that their money produced results, impact investors want proof that the social return justifies the capital, and communities want to know whether a development will help or harm them. In some places a statement is required before large projects are approved.
A good statement distinguishes between outputs and outcomes. An output is what the organisation did, such as running 40 training sessions, while an outcome is what changed for people, such as how many found jobs afterwards.
Readers should be wary of statements that list activity but never show a result. Evidence is the hard part.
Organisations gather survey data, administrative records, interviews and costs, then compare results with what would probably have happened without the programme. That comparison, known as the counterfactual, stops the organisation from claiming credit for changes that would have occurred anyway.
Credibility depends on honesty. A trustworthy statement states its assumptions, admits where results fell short and says who reviewed the figures.
Independent verification adds weight, and many organisations publish the statement alongside their annual accounts so that the social and financial pictures are read together. Finance teams can help by applying the same discipline to impact data that they apply to financial data.
That means agreed definitions, a clear audit trail from raw records to published numbers, and a review before anything is released, so that two people calculating the same figure would arrive at the same answer.
In practice
Real-world examples.
Example
A housing association publishes a social impact statement showing that 320 families moved from temporary accommodation into permanent homes during the year. It reports the cost per family and the number who remained housed after twelve months. Its lenders use the document when deciding whether to offer a new loan.
Example
A property developer must submit a social impact statement before building a large residential scheme. The statement estimates the effect on local schools, traffic and jobs and proposes measures to reduce harm. The planning authority uses it to decide which conditions to attach to the approval.
Example
A company that sells solar lamps to rural households reports how many families have replaced kerosene lighting, and the household savings each year. It surveys a sample of customers to check the figures. An impact investor reads the report before committing a further $1,500,000.
Formula
Calculation
Cost per outcome = Total programme cost / Number of outcomes achieved
Suppose a charity spends $240,000 on a year of mentoring for young people, and 600 participants complete the programme and gain a qualification. Cost per outcome = 240,000 / 600 = $400 per participant. If a similar programme in the same area costs $550 per outcome, the charity can show funders that its results are achieved at a lower cost. The comparison only holds if both programmes measure outcomes in the same way.Case study
Seen in the real world.
Harbour Skills Trust is an illustrative, fictional charity that runs vocational courses. For years it told donors how many people attended, but several large funders began asking what difference the courses made.
The finance manager designed a simple social impact statement. It reported 450 enrolments, 360 completions and 270 participants in work six months later, along with the cost of $1,350 per person placed in a job. It also noted that a comparison group from the same area had a job rate of 40%, against 75% for the trust's graduates.
The statement helped the trust win a three-year grant. The illustrative lesson is that funders value outcomes with evidence much more than headcounts of activity. The trust now publishes the statement each year and uses the lower-performing areas to decide where to improve its courses.
Watch out
Common mistakes.
- Reporting activity such as sessions delivered, when readers want to see what changed for people as a result.
- Claiming all of a change as the programme's work, when some of it would have happened anyway.
- Hiding disappointing results, which damages trust once readers find out.
Questions
People also ask.
What should a social impact statement include?
The problem addressed, activities, outcomes, evidence, costs, risks and the assumptions used.
Is a social impact statement required by law?
Sometimes, for example for certain large developments, but in many cases it is voluntary and driven by funders.
Does it need to be audited?
Not always, although independent review makes it more credible to funders and investors.
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