by Denise Carvalho, Senior Manager of Monitoring and Evaluation at IDIS.

In the corporate world’s waze of words, ESG has become a consensus for assessing and validating whether a company is socially conscious, sustainable, and has good governance. These are criteria supported by impact measurement methodologies that identify good companies to invest in. After all, ESG is directly linked to sustainability – here, related to the very viability of businesses’ existence and profit generation.

Transitioning to the realm of social investors, where profit is not the ultimate goal, ESG serves as a compass guiding organizations’ strategic actions and opens doors to measure the impact that developed projects have on the communities served. But how do you know if the positive impact justifies the investments involved?

Environmental impact measurement, for example, fosters various relationships: how many hectares have been spared from deforestation, how many greenhouse gases have been avoided, which water bodies have been cleaned, how much waste has been reduced. However, the calculation on the social side may be somewhat different.

One of the main obstacles faced by social investors, as highlighted by the ecosystem itself, is obtaining quality data related to the social pillar of the ESG Agenda. This perception was corroborated by the ESG Global Survey 2023, conducted by BNP Paribas, in which 71% of respondents pointed to result measurement as the biggest concern for investors. This agenda is seen as a guiding element for organizations towards more responsible practices, yet the challenge of standardization and consistency of data persists, particularly in the social sphere.

Currently, impact assessment methodologies are capable of rigorously measuring the results generated by the actions of social projects. These methodologies provide a thorough and well-founded analysis of how an organization’s activities influence people, communities, and the environment, seeking to understand the extent and effects of its actions, programs, and projects.

Impact assessment doesn’t just study “what” but also measures “how much,” “why,” and “how” changes occur. Since impact assessments are always data-driven and can provide information in a common language, communicating these analyses can bring great visibility to the organization itself, as well as enrich the debate on the ESG agenda in the corporate world.

Some companies and organizations already recognize the potential of impact assessments as allies of the ESG Agenda. For example, Petrobras has been conducting rigorous analyses in its various social and environmental projects as part of its commitment to the agenda. To achieve this, the company began a process of diagnosing and harmonizing indicators aligned with its socio-environmental strategy, allowing for a clearer identification of the impact in the communities where it operates. Intelligently used data enables strategic direction of actions and the expansion of the positive impact of projects.

Another aspect to keep an eye on when it comes to measuring social impacts is the adoption of tools such as Artificial Intelligence and blockchain as allies in this process, aiming to ensure even more transparency for social investors. The decentralized nature of blockchain, for example, prevents potential data manipulation, enhancing the credibility of impact reports. This allows investors to assess the socioeconomic results of funded projects more precisely, securely, and efficiently. Fintech Moeda Seeds and the Banqu platform are examples of organizations that have been working with the support of these tools to increase the credibility of the data presented.

It is through the materialization of impact that managers are armed with data that enable the strategic actions of organizations, relating the invested value to the social return of projects. It’s the antidote to the infamous “washing”.

Impact assessment is fundamental to establish a solid foundation for the sustainable success of organizations. It transcends mere measurement and becomes a strategic guide, directing companies towards paths more aligned with the ESG agenda. Although conducting impact assessments can be challenging, the benefits it offers far outweigh the possible obstacles.