Firms doing good: how do we know ? measurement of social and environmental results

Michael Klein and Sumeet Kaur

No 6773, Policy Research Working Paper Series from The World Bank

Abstract: Social impact investors, philanthropists, or corporations pursuing social responsibility try to demonstrate that they are indeed"doing good."This essay classifies the various types of measures that currently exist to capture social and environmental impact in a simple scheme. It argues that there is a basic"staircase of results measurement."A first level of measures captures some aspect of"organizational readiness."The next level describes some form of"result"that may or may not be attributable to the organization trying to do good. The third level gets at"impact"that can be attributed to an intervention. Beyond this, there are measures that assess the costs and benefits of interventions, allow aggregation of results from different interventions and comparison among them or across time. Finally, the essay discusses how measures are tied to incentives. It argues that the various approaches can produce more or less helpful measures but cannot be expected to yield anything approaching a true"double"or"triple"bottom line. A true"bottom line"involves aggregation and comparability of costs and benefits and provides incentives to perform. The multitude of social and environmental measurement schemes will by necessity remain a patchwork that can be thought of as describing the"product characteristics"of a company's output. Accounting profit remains the only measure that effectively aggregates costs and benefits and provides incentives. Profit itself is not just a necessity for organizational survival. It measures whether organizations meet client needs. It is thus an important measure of social impact in its own right. This may be unsurprising, but it sets expectations straight compared with currently widespread unrealistic hopes for the measurement of social and environmental impact and redirects attention to paying attention to profitability as part of impact measurement.

Keywords: Environmental Economics&Policies; Economic Theory&Research; Labor Policies; Debt Markets; E-Business (search for similar items in EconPapers)
Date: 2014-02-01
New Economics Papers: this item is included in nep-env, nep-hme and nep-ppm
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