Are We Making a Difference? Measuring the Social and Environmental Impacts of Small and Medium Enterprises

New Ventures entrepreneur Ben Ripple had plenty to say at the Triple Bottom Line Conference in Paris last week, where he participated in a WRI-organized panel on monitoring and evaluating non-financial impacts.

“I feel like a hamster in a wheel, trying to respond to all kinds of different reporting templates for environmental, economic and social impact.” Ben is the founder of Big Tree Farms, a specialty ingredients company sourcing from farmers in Bali. He feels that the pile of data that his company has to collect for aid agencies, international NGOs, investors, and other sponsors is never-ending.

Collectively, his staff spends 60 hours per week on data collection and reporting to donors and sponsors. There are internal benefits for the company in all this, he concedes: it allows him to stay on top of the organizational stability of his farmer network and provides meaning for the employees who know that they work for a company that does good. But Ben is doubtful that these benefits are offsetting the cost of monitoring and reporting.

Emma Staub from E+Co, an investor providing seed funding to energy entrepreneurs in developing countries, and Mildred Callear from SEAF, the Small Enterprise Assistance Fund, also spoke to the cost and labor of reporting. However, for both of them, monitoring and evaluation makes sense. It allows their companies to become more and more deliberate in making investments that maximize non-financial benefits, and it helps fundraise with international financial institutions, foundations and philanthropic investors.

E+Co, for example, provides a range of compelling factoids about numbers of people with access to modern energy services, liters of clean water provided, firewood displaced etc. in their “Triple Bottom Line.” SEAF has conducted an in-depth study of the impacts of 18 of the fund’s investments in Eastern Europe and Latin America and found that every dollar invested generated another 12 dollars in the local economy. However, both funds have had to rely on additional funding for their monitoring and it is difficult to see how these costs can be absorbed in the general overhead of an investment company.

In discussions, the idea of a reporting standard for SMEs, financed by development funds, resonated with many in the audience as it would help to reduce cost and increase comparability. There is no doubt though, that some impacts and indicators defy standardization, especially across borders and geographical regions. Several SRI analysts expressed their appreciation for the complex efforts underway in the SME space and noted that large cap companies had a lot to learn from SMEs when it came to determining real, tangible environment/development impacts.

I would be surprised if anyone left the room with doubts about whether investments in sustainable SMEs are making a difference. How to measure, quantify and report that difference will be an ongoing conversation. We look forward to hearing from others about their experience and thoughts.