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Why is Measuring Impact in SMEs Important?

Jul 18, 2019

Why is Measuring Impact in SMEs Important?

Worldwide experience proves the importance of Small and Medium Enterprises (SMEs) within the national economies. SMEs are critical in creating employment opportunities in economies marred by high unemployment rates. Besides jobs creation, there are other benefits have been attributed to SMEs. The rise and emergence of the term social impact has brought about a different perspective to the value that SMEs create besides profits.

Social impact has been defined as the positive change that an organization has created or effected over time. This change could either be social, economic and/or environmental. Impact is central to any organization’s strategy as it helps to know whether the organization is meeting its mission and vision in the long-term.

Measuring impact helps organizations to understand, manage and communicate the social value that they create in a clear and consistent way. Businesses that have the structures and capacity to demonstrate their social impact are more likely to be attractive to potential investors than those without.

The other reason why social impact measurement is important is that it helps organizations plan better, implement more effectively and successfully bring initiatives to scale. By capturing feedback from clients, businesses are able to understand the benefits that the beneficiaries accrue which helps in targeting activities that prove to be more beneficial to clients.

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An example is that research suggests that the sale of solar lanterns in areas not served by the national grid helped in improving performance of school going children in those areas. Businesses aligned to such activities focus more on households where there are school going children to maximize on their impact.

Apart from attracting investments and understanding the nature and extent of impact to beneficiaries, impact measurement helps to create new knowledge and information that is critical for decision making. As businesses gain experience and continue to capture information on their impact, new details emerge. The details can be used to improve the quality of decisions made by the businesses.

One of the purposes of enacting the Sustainable Development Goals (SDGs) was primarily to produce a set of universal goals that would help solve urgent environmental, political and economic challenges facing the world. Unlike their predecessor Millennium Development Goals, the SDGs explicitly call on all businesses to apply their creativity and innovation to solve sustainable development challenges. Each goal has a specific unit of measures or indicators that tell how businesses can measure and report the successes attained around the goals.

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Alan McGill, Global Sustainability Reporting and Assurance Leader, PwC comments: Success with the SDGs depends on making them a central part of business strategy. What is planned for, measured and reported in public filing is a good indicator of what is embedded in a business’ strategy and priorities. Invariably that strategy is shaped at the very top of the organization by CEOs and embedded with key performance indicators and reporting. The increase in companies indicating the SDGs challenge in their reporting is a positive sign of engagement that will increasingly need to be backed by strategies that look beyond business as usual at the opportunities being presented.

By Stephen Musyoka

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