The foundation sector may be key to addressing social and environmental challenges, according to a study by Esade and BBK
Philanthropy and the foundation sector are on the rise around the world and will play a key role in solving major social and environmental challenges, as they can invest in those sectors where governments have scaled back. That is one of the conclusions of the study ‘De la medición del impacto al aprendizaje para el impacto: los itinerarios de aprendizaje de las fundaciones europeas’ [From measuring impact to learning for impact: the learning paths of European foundations], conducted by the Esade Entrepreneurship Institute (EEI), with the support of BBK and in collaboration with the Spanish Association of Foundations (AEF). The report reviews impact measurement and management based on the study of four leading European foundations (Reach for Change, Calouste Gulbenkian, Impetus and Esmée Fairbairn) and underscores the importance of knowing the impact these organisations have in order to learn to maximise it.
European philanthropy has responded agilely to the current crisis. Numerous emergency funds have been set up. Collaboration within the philanthropy sector has also increased. More than 180 European funders signed a joint letter describing how they will respond to Covid-19. According to Lisa Hehenberger, director of the Esade Entrepreneurship Institute (EEI), ‘This has been a major shock with huge implications for the entire sector. Dramatic and unprecedented changes are taking place within philanthropy, especially in terms of resources and focus. The most obvious one may be the shift from culture to healthcare. Many foundations are beginning to fund new areas and to reassess all their programmes in the face of the pandemic.’
Nora Sarasola, director of Obra Social BBK, explained, ‘We are dealing with an increasingly committed and demanding society that advocates responsible consumption and wants to know how organisations’ activities affect the environments in which they operate. That means organisations have to assess and showcase our contribution to society. In this context, the importance of measuring impact goes beyond understanding, measuring and communicating organisations’ social value. It is also a key factor for the responsible management of companies and organisations, which aim to maximise our impact and determine the transformational effect we have on our environment.’
A catalytic role
The foundation sector moves a lot of money. In Europe alone, foundations spent almost 60 billion euros in 2015. In America, foundation giving reached 75.86 billion dollars in 2018. More than 147,000 donors and foundations from the 24 European countries are represented in the Donors and Foundations Networks of Europe (DAFNE) network. Although spending on philanthropic issues accounts for a minor share of overall spending on social and environmental affairs, the foundations sector plays a catalytic role: it can amplify innovations that the public sector has failed to integrate and direct resources to areas affected by spending cuts or a decline in activity.
To this end, the report stresses the need to help the European foundations sector better understand impact management, appreciate the importance of less tangible or ‘soft’ factors (such as culture, processes and capabilities) and manage them properly. In this regard, the AEF will play a key role in conveying the study’s recommendations to Spanish foundations.
Transformational change that goes beyond writing cheques
As foundations become more willing to act in major areas such as youth unemployment or refugee integration, the impact they can achieve will go beyond the specific outcome of their projects or individual aid. According to the study, due to cuts in public spending on major items and the need to redouble efforts to achieve environmental and social goals (such as the Sustainable Development Goals), impact management has become much more important, particularly given the role that non-profit foundations can play as drivers, which is different from that of other public and private actors.
The trends towards catalytic and strategic philanthropy have underscored the need for foundations to manage their impact more decisively. Catalytic philanthropy refers to an approach that donors adopt to promote transformational change that goes beyond simply writing a cheque. Strategic philanthropy has prioritised foundations’ commitment to clear goals, data-driven strategies, greater accountability and more rigorous assessments. These philanthropic trends have emphasised the need for data-driven decision-taking and strategic learning to be at the forefront of reflection and impact management methods.
Impact management roadmap
The research lays out a roadmap to help foundations explore all the issues to be considered when approaching impact management:
- Design an impact management approach: This covers the ‘what’, ‘where’, ‘when’ and ‘how’ of impact management. Foundations need to determine what tools will be used, how the impact data will be collected and from whom, how they will be validated, and how to include the various players and stakeholders in the process. Many foundations get bogged down in the first step, that is, designing the impact management approach, and fail to pay enough attention to the skills and environments needed to ensure that the design can be implemented to its full potential. The roadmap underscores the importance of these other ‘soft’ facilitating factors, which help foundations avoid the usual scenario of a technocratic solution for impact management that fails to advance, internally or externally.
- Allocate resources and organise to be able to manage the impact: The aim is to ensure that the organisation allocates enough resources to be able to carry out the activities related to impact management and that it creates an appropriate organisational framework to make it a foundation-wide activity, breaking down silos.
- Make impact management part of the culture: Foundations should strive to make this management approach part of the organisational culture in order to shift from a mentality focused on regulatory compliance and communications to one that prioritises learning and honest reflection. To this end, they should ensure that management and trustees take the lead in the process, foster an impact mentality throughout the organisation and transition to a learning approach shared with the beneficiaries.
- Create internal and external impact management capacity: There is a considerable knowledge and skills gap amongst foundation staff when it comes to impact management, especially with regard to how to build aid recipients’ skills. An overall impact manager at the foundation-wide level can help guide the staff responsible for specific impact-related tasks. As the case studies show, foundations have created resources and tools for programme staff, as well as training support sessions. However, they acknowledge that staff skills in this area vary greatly. The report thus proposes training aid recipients. Most aid recipients do not currently have the necessary resources (financial or non-financial) to successfully manage their impact. The surveyed foundations are testing different approaches to help the recipients of their aid, from working with them intensively on their impact to offering financial support for assessments and internal impact management training.
- Collaborate, share knowledge and be transparent: There are promising signs that foundations are teaming up to pool data, reduce beneficiaries’ reporting burdens and openly share their ideas and lessons learnt. The technological and data revolution can offer interesting opportunities for foundations to work together to improve impact management across the sector.
The research was presented at a digital session featuring Koldo Echebarria, director general of Esade; Lisa Hehenberger, director of the Esade Entrepreneurship Institute (EEI); Nora Sarasola, director of Obra Social BKK; Silverio Agea, director general of the Spanish Association of Foundations; and Leonora Buckland, author of the study and a researcher at the EEI.