Measuring the Success of a Social Purpose Business

Learn about Social Return on Investment, a methodology for measuring the triple bottom line of social purpose businesses.

Socially-minded entrepreneurs establish businesses with the objective of creating a combination of financial, social and environmental value. Tal Dehtiar founded Oliberté to manufacture and sell leather footwear and accessories as well as to create valuable, fair-paid employment opportunities in Africa by producing its products there. Christine Poirier co-founded Momzelle to make stylish, practical nursing apparel as well as to help other women have positive breastfeeding experiences and provide support to those who are struggling. Both Tal and Christine based their Social Purpose Business on what is called “blended value”, falling somewhere between pure financial and pure social value. This differs from commercial enterprises which focus on pure financial value.

Ontario’s MaRS and SocialFinance.ca have created a continuum to illustrate the types of value, and by extension, the types of returns, that various entities seek to generate. While social entrepreneurs sitting in the middle of the continuum seek blended value, they likewise measure their success based on “blended returns.” That is, success is measured by profit as well as through their impact on, and commitment to, community and society. It’s what is commonly referred to as the “triple bottom line” – people, planet and profit.

As an example, DeliverGood, a for-profit business founded by Futurpreneur Canada-funded entrepreneur Robb Price, benefits both community (people) and the environment (planet) by connecting charities and not-for-profits who need business-related goods and services with people and companies who have such goods and services to donate. Resource-limited organizations benefit from donated supplies, while excess equipment stays off the landfill.

Measuring social impact: ROI vs. SROI

The success of a for-profit business is traditionally measured through an “economic lens”2 that does not consider the social impact it has on the other two-thirds of the triple bottom line – people and planet. Return on Investment (ROI) is used the world over to measure financial returns based on metrics such as revenue, profit margin, staff turn-over and customer satisfaction. All of these are metrics that are measurable and all have been used and reported since the beginning of enterprise itself.

But what about measuring social impact? Social Return on Investment (SROI) has been used and refined over the past 20 years as a leading standard for valuing social impact. SROI blends traditional qualitative measures with quantitative representation, appealing to both investors looking for the bottom line as well as funders, entrepreneurs and community interested in the triple bottom line.

Social Asset Measurements (SAM) is a Toronto-based firm that helps both not-for-profit and for-profit clients measure the social impact of their work and determine their Social Return on Investment (SROI). Unlike other social impact metrics, such as Impact Reporting & Investment Standards (IRIS) and the Global Impact Investing Rating System (GIIRS), SAM uses metrics that focus on the drivers of success, not just indicators, so that social enterprises can make better decisions about where to put their limited resources.

Challenges in measuring social impact

Measuring SROI is more difficult compared to assessing ROI because it brings together social, financial and environmental value. SROI attempts to measure value outside of the venture itself, and choosing which of the endless possible factors to identify, capture and measure is challenging.² There is also limited awareness about what social impact means and how it can be used as an indicator and driver of success.

Social impact also shifts depending on a social business’s community and context. As Anshula Chowdhury, founder of SAM, points out, “Creating housing opportunities in Toronto versus in the slums of India would result in completely different social and environmental impact and need to be evaluated differently.”²

Social impact has always and will continue to be difficult to measure. However, as awareness of and appreciation for social impact measurement gains momentum, and with the social impact measurement industry growing, the measurement of social returns is set to become less challenging for entrepreneurs.

References

1. MaRS Centre for Impact Investing and SocialFinance.ca. Your Guide to Social Finance: Are you operating an enterprising non-profit? MaRS Centre for Impact Investing and SocialFinance.ca. [Online] [Cited: February 23, 2012.] http://socialfinance.ca/guide/am-i-eligible/are-you-operating-an-enterprising-non-profit.
2. Brace for (Social) Impact: The rise of social entrepreneurship in Canada. Rachel Shuttleworth, April 2012.