August 23, 2017

What does social impact mean? Who benefits?

Depends on your interpretation, says CSI Philanthropy Fellow Gina Anderson

Social impact investment seeks to generate social impact alongside financial return.”

NSW Office of Social Impact Investment


The term ‘social impact investment’ is currently in fashion as a way to solve the world’s wicked problems. However, as so often happens between the NFP sector and those outside it, we seem to use the same words but define them differently so there is often a mismatch in understanding.

At CSI, the definition of Social Impact Investment is in line with that of Government’s: an investment which seeks to generate social impact alongside financial return. However, for philanthropists, and business people ‘social impact investment’ has a wider ambit and is used as a way to describe ‘social and economic impact’. Confusingly, ‘social impact investment’ is the explicit description that is often used interchangeably in a shortened form ‘social impact’. As a result, many in the NFP sector misunderstand what funders mean by ‘social impact’. Rather than it being a term which defines their mission, funders use it as a catch-all to describe their economic and social impact.

For example for a NFP like Women’s Community Shelters (WCS) talking to government about their ‘social impact’ highlighted this problem. At WCS the direct social impact derives from providing homeless women with crisis and temporary accommodation and from the local community engagement. WCS knows the work they do is important. Anecdotally it is important and valued, but it is hard to put a dollar figure on it. However, for those outside the NFP sector, this defines the WCS ‘social impact’ too narrowly.

It wasn’t until WCS began to complete the NSW Office of Social Impact Investment application form that they really began to understand this distinction and tackle this problem. They realised they needed to really think outside the direct mission to examine:

  • Who else (besides homeless women) benefits from the work WCS does?
  • Who would miss WCS if it didn't exist?
  • What would it cost them?

To do this, WCS needed to collect data, to understand who uses the services, who WCS provide services to, the outcomes, and who else benefits. It is only then could WCS start to quantify our wider ‘social impact’ and the ‘social impact investment’ opportunity. 

For WCS this meant examining which government departments were referring women to its shelters and cost them at the NSW Government’s Temporary Accommodation rate of $130/night. The big discovery for WCS was that 25% of referrals came from hospitals where the average cost per day stay for an inpatient is approximately $1,000/day. With that data WCS could forecast the bed nights per annum they could provide for the next 3 years, together with the costs or dollar value of the service WCS delivered to government. Suddenly WCS could quantify its service as a big cost saving for government.

WCS then listed other benefits to the NSW Government. While the data to apportion financial cost was not available, these tangible benefits included police time. A recent survey of Police Superintendents in districts in which we operate revealed that officers spend approximately 18 person hours per police station per shift responding to domestic violence incidents and attempting to locate a safe place for a victim and their family. Imagine the savings if over time we can reduce time police spend on this issue.

While this exercise was undertaken at a relatively general level, it was nonetheless very useful. It helped WCS focus on the data. It gave WCS a greater understanding of the type and purpose of their services, from an external perspective, while helping them quantify their‘social impact’ for a possible ‘social impact investment’!

Gina Anderson

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