Incorporating environmental criteria in social performance management standards

The updated Universal Standards provide improved, more practical guidance for financial service providers


Photo: IFAD


It’s now been over ten years since the original launch of the Universal Standards for Social Performance Management (SPM). Last year, Cerise+SPTF celebrated this important milestone of a tenth anniversary by updating the Universal Standards to include an “E” for Environmental. Now called the Universal Standards for Social and Environmental Performance Management (SEPM), this manual of best practices helps financial service providers put clients and the environment at the center of all strategic and operational decisions. And as of January 2023, we now have the updated, fully aligned Social Performance Indicator (SPI) audit tool available as well to help impact-driven organizations assess and improve their social and environmental performance.

What’s new in this updated version of the Universal Standards?

We took what we have learned over the past decade of implementation to provide improved, more practical guidance for financial service providers. The updated Universal Standards are rich in new content and they also revise elements of the original text for clarity and improved organization. Here are six key updates you’ll find in the new Universal Standards for SEPM :

  1. We added a dimension on environmental performance management. The older version had an optional “green module,” but the new version has a mandatory seventh dimension on green performance, which is fully aligned at the concept level of the standards and essential practices with the Green Index 3.0 developed by the e-MFP Green Inclusive & Climate Smart Finance Action Group.
  2. We strengthen data analysis techniques, so that data can inform decisions. We now ask providers to segment any data analysis they do by gender, age, location (urban/rural) and income/poverty level, as well as by any other segments that are relevant to their target market. In addition, we require both qualitative and quantitative data collection, because the combination of the two provides the greatest insights. Finally, we discuss contexts in which proactive analysis is important, such as checking whether certain segments of clients seem not to be using the complaints mechanism, or checking transactional data for early warning signs of products not meeting clients’ needs.
  3. We monitor negative as well as positive outcomes, for clients and their households. While the older version did say to monitor client outcomes, we now explicitly say to monitor negative consequences as well as positive ones, and to consider the household as well as the client. Further, we ask the provider to reflect on indirect negative consequences (e.g., child labor, gender-based violence) as well as those directly connected to the use of financial services (e.g., over-indebtedness or humiliation from disrespectful loan collection practices).
  4. We shifted our language from “have a policy to do ‘X’ to a simple statement of “Do ‘X’.” Writing a policy can be an important tool to guide actions, but it can also be a document that the provider ignores in daily practice. We therefore adjusted our language so that the indicators we use to assess compliance with the Universal Standards focus on what the provider actually does, not just whether they have a policy in place.
  5. We strengthened the practices around human resources development. The latest version of the Universal Standards shifts all indicators related to employee management into a single dimension, while also adding practices related to building employee skills and improving communications between employees and management.
  6. We revised the dimension on Responsible Growth and Returns (dimension 6) in two key ways: a) it used to contain practices for both providers and investors, but now it focuses solely on what providers can control; b) the practices on growth focus specifically on mitigating risks to clients and to employees.

Digital is coming next…

Since 2022, Cerise+SPTF has been interviewing experts and leading a working group to develop standards for the responsible provision of digital financial services (“DFS Standards”). Stakeholder feedback has been clear that everything in the core Universal Standards manual still applies to DFS providers. For example, committed governance, adapted product design, responsible treatment of employees – these all apply no matter what delivery channel the provider uses. However, there are additional risks inherent to digital channels that providers must recognize and mitigate. After 18 months of research and debate, Cerise+SPTF has identified about 150 DFS indicators. Cerise+SPTF will pilot test them through 2023, then integrate the new, field-tested content on DFS into the Universal Standards in 2024.

We’ve learned a lot over the last ten years

Cerise+SPTF’s goal in creating the Universal Standards was to develop a set of standards that would be to social performance as generally accepted accounting principles, or the international financial reporting standards, are to financial performance.

When we first started this work, a lot of people thought social performance management was too complex to standardize – too subjective and too dependent on individual institutional-level priorities. And it is true that institutions do – and should! – define their own priorities based on their customer profiles, their regulatory environment, their stage of institutional maturity and a host of other variables. However, the fact remains that for all institutions, customer-centricity is the key. This is practical, not idealistic. No business survives for very long without making it a primary focus to understand its customers, to deliver what they need and value, and to stay connected—because clients’ needs and priorities can and do change.

The Universal Standards and the associated audit tools can help you understand with great precision where you are now relative to where you want to be in terms of social and environmental performance, and can deliver concrete guidance, step by step, to take you where you want to go.


This article was originally published by CGAP