Charities are under greater pressure than ever from funders to measure their impact, according to a new report by the Swedish-based not-for-profit organisation Charity Star.
Charity experts, including those from the Cass Business School and Amnesty International in the UK, contributed to the report Return on Donations. Charity Star works to boost the legitimacy of charitable organisations through an international certification system.
The report gives examples of increasingly large donations to charity, including those made through the 'giving pledge' set up by the US businessmen Warren Buffet and Bill Gates, in which very wealthy people pledge to give away most of their wealth.
"With these great amounts of money going into the non-profit sector, the donors are starting to put greater pressure on the organisations and are wanting more precise answers to what exactly their money is contributing to," the report says.
It argues that work needs to be done to improve corporate donors' understanding of charity impact. These donors need a better understanding of how social impact is measured, it says, and charities "need to understand the data that most companies are used to reviewing when making an investment".
It says:"Structuring and communicating clear figures of result is therefore of greatest importance for any non-profit organisation that wants to attract corporate donors."
It also reports that impact measurement is of great importance to public sector funders.
"The demand for clear NGO performance and transparency information is required by governments towards taxpayers and citizens, which means that the same information is required by the recipient NGOs," it says.
The report also discusses the concept of a sector-wide method of measuring impact – something that Charity Star wants to establish by means of international certification for charities.
It says the most recognised method of measurement is social return on investment.