Deloitte reveals new tool to measure social impact of corporate investments

27 February 2019 Consulting.us

Accounting and consulting firm Deloitte has developed an advanced measurement tool to help corporations, governments, and stakeholders better determine the impact of corporate investments on various social measures.

People – especially millennials – are increasingly focused on the social impact companies make. As such, companies are keener to craft a company image that "cares," that genuinely supports causes because it is the right thing to do. The fact that it might boost revenue and increase brand loyalty, however, is a solid bonus.

In the wake of such information, Big Four firm Deloitte has released a machine learning-powered tool that helps measure the social impact of large corporate investments across more than 75 social areas, including education, housing, income and employment, and transportation.

"With the rise of the social enterprise – those organizations looking beyond revenue and profit to understand their impact on society – many of our clients are raising the profile of purpose-driven outcomes," said Janet Foutty, chair and chief executive officer, of Deloitte Consulting LLP. "The Social Impact Measurement Model (SIMM) enables our clients to understand if their investments will pay social dividends, providing value to companies, communities, and local governments."

Deloitte reveals new tool to measure social impact of corporate investments

When a large company previously company invested a great deal of money into a county build a widget factory, analysts typically examined surface level figures such as job creation and income to determine the initiative’s economic impact. Deloitte’s model quantifies the social impact of that investment over four years, illuminating how it may affect poverty, home ownership, and high school math scores.

While many might take a "ra-ra" attitude to any corporate investment, critics on the other side of the debate counter that it isn’t always rainbows and sunshine. Cities like Seattle and San Francisco have basically had their quality of life – especially in terms of living expenses – in part destroyed by massive tech industry expansion and investment.

Yes, the tech industry has created ultra-high-paying jobs and the indirect economic benefits which spring from them. But it’s also placed a large amount of pressure on housing, increasing rent and housing prices to laughable levels. In the meantime, neighborhoods have been blasted by gentrification, with old establishments pushed out by upscale resto-bars that cater to the rich, as the city takes on the form of a playground for the wealthy.

Meanwhile, the non-tech-elite toil at stagnating wage rates, pushed out of the city by the skyrocketing cost of living, commuting to low-skill jobs that soon won't exist because of the advancements in the tech industry.

The question is, does attracting tech investment wreck a town for the people that don’t have the niche skills required to take part in the digital dream? It’s not like opening a factory, where most anybody can jump in; instead, it might just bring in a bunch of well-heeled youths from elsewhere, who mess up the game for everyone else.

In any case, Deloitte’s SIMM can bring more data to that worthy public discussion. "Businesses make many corporate investments each year, some of which induce fierce bids by local governments and generate strong debate," Darin Buelow, principal of Deloitte Consulting LLP and real estate and location strategy practice leader, said. "The ability to estimate the social impacts of a capital investment allows citizens, corporations, economic development officials, and other stakeholders to bring data to the debate, better informing decisions and portraying long-term social outcomes that were previously unknown."

As such, the tool can help corporations guide decisions about what whether to make capital investment in the first place, while allowing policymakers to see how communities translate financial investments into social outcomes.

Different impacts

SIMM has already shed light on how investments in the same industry can have different impacts in different locations. For example, a half-million dollar investment in a rural wealthy county has less overall social impact than the same investment in a densely populated, wealthy county.

Similarly, investments in poor, urban counties can improve child poverty levels, and reading and math scores, while the same investment drives little to no change in child poverty and reading and math scores in poor, rural counties.That investment does decrease the adult poverty rate to a higher degree in poor, rural counties than poor, urban ones. When poverty rates are approximately equal, investments seem to help children more in densely populated areas, while helping adults more in rural areas.

Although it’s a helpful quantitative tool, Deloitte cautions that SIMM merely gives an estimate, and is only meant to supplement established information gathering methods and analyses in regards to capital planning and allocation. SIMM also doesn’t isolate an investment as the sole cause of changes in social measures, but it does “create a causal link between the investment and other contributing factors,” according to the consulting firm.

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