Firms understand data collection is in their interest

Nigel Twose, director of the development impact department of the International Finance Corp. (IFC), part of the World Bank Group, spoke in an interview about the role that Indian businesses play in social development, and how improving data collection on development results can also improve a company’s bottom line. Edited excerpts:

add_main_image What does IFC do?

IFC is a part of the World Bank Group—we have a double bottom line. One is to retain our own financial sustainability. If we went bankrupt, we wouldn’t be able to help anybody. But the other is to maximize our development results. For the first bottom line, we collect data on financial results, and the financial results that we invest in. There are decades of accounting conventions that everybody understands, so everyone reports in the same way, so we can compare and contract what financial results would be. But the second part of the double bottom line is still a world of anecdote, with different people using different systems, reporting in different ways, and it’s been incredibly hard to simply have credibility and to learn anything across different institutions that are trying to do the same thing. So the challenge here and the huge progress we’ve made in the last couple of years is moving towards standardization of how we learn about our development results, getting similar standardization about how we find out about financial results.NextMAds

How do companies gain by improving their data collection on development?

Over the last seven years, we’ve been putting in place a system with IFC to standardize our own development results reporting. By using standardized indicators, we can track what happens with the investments we make developmentally as well as financially, so we can track what happens, make goals to drive our business, and evaluations so that we really learn what the impact was. So when we invest in a firm, along with the money comes a requirement to report to us on the development results that they achieve. We give them a list of indicators that we want them to report on. In the past, they were just giving it to us because it was a compliance requirement, and if they didn’t do it, they wouldn’t get the money. But what I find so exciting today is that the firms that we work with see that it’s within their interest to understand what development results they are achieving, and so they want to collect this data, and they want to use it for their own business purposes. In India, I find this more advanced than in most countries, not just because of the big debate you’ve been having around the whole corporate social responsibility (CSR) and the potential for a CSR law and policy, and so on, but because firms see that it’s within their interest, because there’s a clear relationship between their business needs and their development gains. So if you’re a financial institution lending to poor people, it’s within your interest to understand what kind of loans achieve the best development results, so you can do more of them. Or like a sugarcane firm: They need to know how to increase productivity in their sugarcane farmers, so the company is more productive, but the sugarcane farmers get a better income, too, and their households improve, so it’s about understanding this sweet spot that’s the crossover between a firm’s desire to be profitable, and the development results that they can also achieve, and that’s the goal we are all pushing towards.

What have the biggest challenges been in getting firms to adopt this approach?

The biggest challenge we faced was when we approached this as “give me this data, or you can’t have the money”. The way of overcoming that challenge is to say to a firm we are about to invest in, not only can we provide you with the financing you need, but also if you report in this standardized way on your development results, we can share with you the same development results of other firms that are doing the same thing, in other countries all over the world, and you can learn from their experiences, and improve your own performance. So we are not just giving money, but also advise on how to improve your development results, and additionally we can give you advice on how to strengthen your results measurement system within your firm, so you can do this more easily too. So the trick is to turn this into a win-win proposition, instead of an apology, sorry we’re going to extract all this data from you that you don’t care about.

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