‘Social value’ looks good and it feels good. But does it actually do you any good? And does it do the world any good?
To find out it would help if we understood what it means, but that is hard. It seems to be very relevant to CSR and to sustainability, but it is not quite clear how. It is related to, but probably not the same as the ‘shared value’ in Porter and Kramer’s venture into CSR, which they called ‘CSV’. And it has been used to describe the kind of impact that charitable organisations and social enterprises aim to have. Which might seem to sort it, but then how does it apply to mainstream business?
Back in the 1990s, some US philanthropists wanted to know how much difference their investments in social enterprises actually made. To do that they separated the commercial part (which might sell furniture) from the charitable element which intended to remedy some social problem (the furniture might have been repaired by recently unemployed young people). They then tried to put a value expressed in dollars on the charitable part – and called that social value. The methodology they developed came to be called SROI, or social return on investment, which related their financial investment to the social value it produced. SROI, which seems to offer the holy grail of quantitative measures of social impact has become very popular in the UK, across Europe and increasingly worldwide.
But if you are a large, mainstream business, how does that help? It is true that many companies have a positive social purpose: they do something that others in society find useful and are willing to pay for. Yet few express their purpose in quite that way. And there may be some for which the social value produced is questionable or even negative.
For mainstream business activity, many social outcomes are not intended
Community programs vs. mainstream activities
However many mainstream businesses have community programs or philanthropic foundations. They are like in-house social enterprises and are directly intended to benefit society. So their social value should be demonstrable and measurable, and it is. As a result a number of large companies have in the past used the technique to assess their programs. But before getting too enthusiastic, it is worth pointing out that it can actually be rather hard to put financial values on the outcomes of activities. There is a growing body of experience to draw on, but it is still not straightforward. How do you value the self-esteem resulting from having a job, for example?
A bigger problem is what to do about mainstream business activities. Mainstream activities also have social consequences – and in general these will be much larger and more significant than those of a company’s community programs. So it is even more important to measure them. But are they amenable to SROI social valuation techniques?
The jury is out on that question at the moment, although some businesses are exploring just such an approach. In the end, it is likely that both traditional social reporting indicators and SROI are going to have to change to some extent. For example, the usual approach of limiting quantified social value to intended marginal changes that excludes what would have happened anyway may have to give some ground. After all, for mainstream business activity, many social outcomes are not intended and the issue is not over-claiming positive social outcomes, but under-claiming negative ones.
So in a way, the debate about social value has come full circle. Originally it was an attempt to remove commercial activities from the calculation of value. Now it is perhaps important to consider how an organization can acknowledge responsibility for, and quantify, the entirety of its activities and their effects on society.
Companies in their entirety should be seen as part of society. Their social contribution encompasses everything they do, not just those projects with an explicit social purpose. Every investment they make is a social initiative – and understanding their social value is essential. It needn’t be just a placebo.
Adrian Henriques is Professor of Accountability and CSR at Middlesex University, a member of the SROI Network’s Assurance Panel and author of 'Corporate Impact - measuring and managing your social footprint'. www.henriques.info