What are the challenges to measuring the social impact of social enterprises?

Social impact measurement aims to assess the social value and impact produced by the activities or operations of any for-profit or non-profit organisation. Although any business can have a social impact, non-profit organisations and social enterprises are explicitly designed to create social value while addressing social challenges and are therefore expected to produce social impact. The analysis of both the academic literature and the laws and policies implemented to date highlights several key characteristics of social enterprises. Producing social impact is only one of the conditions (albeit an important one) required for an entity to be recognised as a social enterprise. The legal forms of social enterprises in different countries show that they typically share certain features, such as operating in specific fields deemed of public interest by the state or the community, being constrained in the distribution of profits, and in most cases are bound by an asset-lock provision, and being required to have participative governance and democratic management. The profit distribution and participative governance criteria exist specifically to ensure that social enterprises achieve their mission of producing positive social impact. Regardless of whether they meet these criteria or not, social enterprises that seek funding are expected to measure their social impact. Traditional for-profit businesses should be expected to do so as well. This could ensure that investment funds finance traditional businesses or social enterprises with significant social impact. It is worth mentioning that social impact measurement is a relatively new field, hence some experimentation might be needed to help structure it and create a measuring culture. Moreover, the very concept of social enterprises is still being defined in many countries. This policy brief will present the fundamental issues and ongoing debates surrounding social impact measurement. It will also provide concrete examples of measurement methods, underline challenges related to social enterprises and conclude with a number of issues relevant to policymaking.