Social Impact - Not Everything That Counts Can Be Counted

There is growing excitement about social impact assessment across industry here in Australia. And justifiably so. Measuring social value helps organisations move beyond measuring financial impacts and better demonstrate how they contribute to social value creation across communities, culture and wellbeing. 

But social impact assessment is not a shiny new invention, nor a magic calculator. It is grounded in long-established economic and social science methods, designed to sit alongside, not replace, qualitative tools like impact narratives, stakeholder engagement and theories of change. 

When used well, social impact analysis strengthens those stories with robust, quantifiable and credible evidence, helping funders make clearer, fairer and more transparent decisions about where to invest limited resources.

There are true and tested methods from social science and economics to measure, quantify and report on non-market benefits. In other words, benefits to communities that are not bought or sold.

What has become apparent to us, is that many may not realise that social impact measurement is not new at all. But rather it is being marketed heavily to industries where measurement and evaluation may not have had the same value placed upon it in the past. It is a long-standing, well-established practice in the public policy sphere, particularly for program evaluation in the health, education and social services sectors. Governments and not-for-profits such as Australian Red Cross and Mission Australia for example have been doing it excellently for years.

Core to that approach is the gold-standard method of social cost-benefit analysis (CBA). Social value can be captured in CBA as non-market benefits. And there are many ways of monetising these benefits to convert them into dollar values, and ultimately feed them into our cost-benefit calculations.

Our Sparrowly alumni and economist Sam Miller explains in his blog post on why we need the dollar as a common yardstick:

“That dollars are only a convenient, but arbitrary, yardstick of relative preferences and therefore well-being is aside to the actual aims of economic analysis. Albeit one often poorly explained by economists, and therefore, commonly misunderstood by non-economists through no fault of their own.”

We are seeing this play out day to day.

Non-economists are being bamboozled by the promise of social impact assessment in dollar values, often without understanding the deeper aims of economic analysis or the virtues of having a trusted economic advisor on your side through the process.

In our work at Sparrowly Group, we have been undertaking economic analysis and business cases for a number of years. And non-market benefits (that is, social benefits) have always been a core component of that work. They are integral to Treasury aligned economic analysis.

Over the years, we’ve also learned to appreciate the complexities of treating non-market benefits in CBA, and have been able to tailor and nuance each analysis to its own context.

For example:

• For the NSW Government’s Regional Growth Fund Impact Narrative and Business Case, we modelled the value of increased public amenity to quantify the social impacts of regional infrastructure investments.

• In the Gundagai Old Mill Business Case, we explored the value of good-condition heritage assets to a community recognising that heritage contributes to identity, pride and sense of place in ways that are rarely captured by traditional financial analysis.

• In the Aboriginal Initiatives Evaluation, we examined the value of connection to culture - something deeply meaningful and socially significant, but not easily reduced to a simple dollar figure.

• In the Productivity Bootcamp Evaluation, we looked at the value of reducing long-term unemployment and improving mental health - outcomes that deliver profound personal and community benefits far beyond immediate economic productivity.

Each of these projects required careful consideration of context, evidence, assumptions and methodology. They required dialogue with stakeholders, sensitivity to local conditions and a clear understanding of what the analysis was and wasn’t able to demonstrate. Critically, we always incorporated impact narratives, stakeholder engagement and theories of change.

This is where we need to pause and sound a note of caution.

As social impact assessment becomes more popular in tourism, economic development and corporate settings, there is a growing market for rapid-fire tools and platforms that promise to “calculate your social impact” at the click of a button.

These tools can be appealing. They are fast. They feel objective. They produce neat benefit-cost ratios that look authoritative on a slide deck.

But social impact assessment is rarely neat.

Reducing complex human, cultural and community outcomes to a single number requires judgement, transparency and methodological rigour. Without that, there is a real risk of oversimplification. Or worse, of producing figures that look impressive but lack credibility when properly interrogated.

Good social impact assessment is not simply about generating a number. It is about understanding change, explaining how and why that change occurs, and being honest about uncertainty and limitations. More on taming uncertainty in this article. Further, good social impact assessment complements the quantitative analysis with qualitative analysis such as stakeholder narratives, theory of change, causal mechanisms and contextual analysis.

That is the essence of robust evaluation practice in public policy and it is a set of lessons that tourism and economic development practitioners would do well to borrow.

While the concept of social impact assessment of non-market benefits may be newer to those working in the world of business, tourism and economic development, it’s important to acknowledge that lessons should be translated from existing practices in social science and public policy. Equally, we need to remember that social impact assessment is complex, nuanced and therefore fast and cookie-cutter tools for doing it should be approached with extreme caution.

Image credit: Tourism and Events Queensland.