{"id":834,"date":"2008-11-05T09:08:32","date_gmt":"2008-11-05T14:08:32","guid":{"rendered":"http:\/\/ietransfer.wpengine.com\/?p=834"},"modified":"2008-11-05T09:08:32","modified_gmt":"2008-11-05T14:08:32","slug":"the-new-business-metrics-measuring-social-returns","status":"publish","type":"post","link":"https:\/\/inspiredeconomist.com\/articles\/the-new-business-metrics-measuring-social-returns\/","title":{"rendered":"The New Business Metrics: Measuring Social Returns"},"content":{"rendered":"
This growing sector, driven by both social purpose and financial promise, is attracting growing amounts of talent, money, and attention. Initially funded primarily through philanthropic support<\/a>, social enterprises are now reaching the status of mainstream investment opportunities for banks, venture firms, foundations and wealthy individuals.<\/p>\n But with new models come new metrics, especially if this sector will continue to attract significant capital investment. These new metrics (referred to as Social Return on Investment or SROI) were one of the key topics at the recent Social Capital Markets<\/span><\/a> 08 conference. The conference,\u00a0held on\u00a0October 13-15 in San Francisco,\u00a0sought to\u00a0bring together social capital and social enterprise to address this basic question of social investing: How do you measure the non-financial, social, or environmental value created by an enterprise?<\/p>\n <\/p>\n The Social Enterprise Alliance<\/span><\/a> recently offered a definition for social enterprise that is gaining wide acceptance: Social enterprise describes any non-profit, for-profit or hybrid corporate form that utilizes market-based strategies to advance a social mission. This differentiates a social enterprise from a socially responsible business, which may strive to be a good corporate citizen, but does not typically incur a significant structural cost for addressing a social or environmental issue as part of their business model.<\/p>\n The glossary from the Social Capital Markets 08 conference defines SROI as: A concept developed to account for (monetize) both traditional financial as well as social value created by an enterprise. SROI expands the concept of financial return by broadening the concept of “who” benefits from returns widening this concept to include the whole community.<\/p>\n As recently as 1996, the term SROI was not even in our vocabulary. It was around this time the Roberts Enterprise Development Fund<\/span><\/a> (REDF), a San Francisco-based venture philanthropy fund, pioneered the concept of SROI in the context of their job creation programs. Since then, the REDF framework has been widely adapted (it\u2019s currently taught at Harvard Business School) but still there is no current standard methodology. <\/strong> Despite the variety of approaches, almost every social capital firm now uses some SROI tool to address these basic questions:<\/p>\n Social Return On Investment (SROI) in Practice <\/strong><\/p>\n According to the UK-based new economic foundation<\/span><\/a> (they prefer to go all lowercase) the critical stage of the process is identifying \u201cindicators\u201d for your project outcomes, and when necessary developing \u201cproxies\u201d to calculate a monetary value for these indicators. From their \u201cMeasuring Real Impact\u201d guide: An indicator is a specific piece of information, sign or signal that you can measure to determine whether you have achieved a given outcome. For example, if \u201cimproved physical health\u201d is one of the outcomes of your health care program, an indicator refers to the way you would measure this improvement.<\/p>\n Some indicators are easy to monetize. The indicator for improved physical health could be a reduction in doctor visits, for which you can easily derive a monetary value based on publicly available data. When direct monetary value of an indicator is less clear-cut, you must use a proxy to approximate the value with a close substitute. The use of proxies is gaining acceptance as practitioners can at least agree and standardize on an approach even if it is recognized as imperfect. When used within the same sectors, proxies provide a method to create benchmarks for comparison.<\/p>\nThe Responsibility Revolution and How to Measure it<\/strong><\/h3>\n
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\n<\/strong><\/p>\nOne Size Does Not Fit All<\/strong><\/h3>\n
\nCertainly the determination of social value can be very difficult to quantify. So different social enterprise sectors are developing their own measures, and some are unique to particular countries, regions, and type and size of enterprise. The range of tools and frameworks available is staggering. Some provide user guides that are hundreds of pages long, while others offer simple web based tools: answer a few questions, plug in a few numbers then hit the calculate button.<\/p>\n\n