Measuring and monitoring the impact of corporate SDG investments should be based on predefined goals, targets, and indicators connected to the impact thesis. Impact measurement should allow investors to monitor the progress of the SDG impact strategy throughout its implementation.
Therefore, impact measurement should address various steps in the life cycle of companies’ strategies to generate such impact, including input, output, and outcome. Outcome-based measurements can help gauge the private sector’s actual contribution to the realization of the SDGs.
Measuring Input
Input measurements track the resources and efforts directed towards the SDGs. Input-based measures of impact can take two forms:
- Investments. Impact can be measured through the quantity and quality of investments in impactful areas, reflecting the strategic deployment of capital toward impactful activities. This method is ideal when there is a high correlation between efforts and results (e.g., investments in a solar-power plant and reduction in GHG emissions).
- Initiatives. Impact can be measured through strategic efforts or initiatives. This type of measurement applies to SDG impacts that derive from improvements in the internal operations and capabilities of the company (e.g., energy efficiency, clean production, employee diversity and development, working conditions).
Measuring Output
Output measurements focus on direct results, or the quantity of output of SDG investments or strategic initiatives. For example, output measurements can include the quantity of solar-powered electricity produced or the number of essential goods and services provided.
Measuring Outcome
Outcome measurements focus on the ultimate result of SDG investments or strategic initiatives, beyond their direct output. For example, outcome measurement can include reduction in total GHG emissions, increased economic opportunity, growth in income and higher standards of living, improvement in education, and reduction of inequalities. Outcome-based indicators relate a company’s contribution directly to the official goals and targets of the SDGs and can therefore be considered the highest form of impact measurement. However, they are also the most challenging and often involve assumptions about causality and ambiguity as to the exact role of the issuer in bringing about the impact.
Ex ante Measurement
In addition to measuring the actual impact of SDG strategy through key performance indicators (KPIs), companies should also estimate the expected, or ex ante, impact and set targets for performance based on those same KPIs.
