Blog
Delivering More Value
Doing 'good' things is more than we learn from financial accounts - asking oneself "did we make a profit for the owners?" - companies need to answer the question "how much good (or bad)?"
To answer this they need a language, a language that is understood by others. The lack of consistency in the language used to account for wider value being created is holding back understanding and investment. And yet so often the discussion is about the number of approaches available to 'measure impact' and the need for different approaches.
Imagine if this was the same in financial reporting. The directors are reporting to the shareholders. 'Did we make a profit?' the shareholders ask. 'Well we had a positive financial impact! But we don't really compare income and expenditure as a measure of financial performance... We are looking at how we could do this next year'. There are so many tools and approaches for financial accounting that we aren't sure which one to use that is best for our type of business.'
Boards need to hold the executive to account for the social and environmental value that is being created, and have an idea of whether and how more value could be created with the resources available. But without a consistent language, comparing performance against expectations is easier said than done.
The SROI Network's approach to this challenge is to start from a set of principles and apply them in a framework; providing consistency but allowing value to be specific to those who gain or lose any value arising from a business' activities. Principles that ask - "who changes as a result of the activities, how valuable were the changes and would they have happened anyway?". The resulting account of value created is the starting point for discussion perhaps communicating to the outside world or to inform internal decisions.
The CREATE Foundation is a social enterprise based in Leeds that provides long term social benefits by helping vulnerable people transition into work through work experience, skills training and volunteering opportunities. In the words of their CEO, Sarah Dunwell:
"We were already using the P & L and financial accounts
to measure our businesses and assess how successful they are and now, by using
SROI, we can do the same with our social objectives. SROI has already shown us
ways we can improve: it provides a great way of making sure that we manage our
businesses to deliver the maximum social impact."
And this is the key - how can understanding our impact help us improve - delivering more value with the resources at our disposal.
Jeremy Nicholls became the chief executive of the Social Return on Investment (SROI) Network in 2008. Starting his working life as an accountant, his work has increasingly focused on understanding and managing the value of the impact of organisation's activities. He set up the Cat's Pyjamas running events to promote the value of social enterprise and shortly after started working on the development of SROI. He wrote 'There is no business like Social Business' with Liam Black and co-wrote the UK Government supported 'Guide to SROI' He is the chair of FairPensions, a director of the FRC Group - a social business based in Liverpool and a director of Social Evaluator - an online platform for the analysis of social returns. As an occasional lecturer he has lectured at several Universities including Said Business School at Oxford University. Cambridge University and the University of Western Australia.
Blog
Tue, 20 Sep 2011 17:18
In this production blog Down to Business expert Leo Johnson visits Scottish inventor David Osborne to see how he can continues to grow his business, based on an innovative stove-top device that allows you to heat water and cook food at the same time.
Thu, 15 Sep 2011 08:22
London, 7 September, 2011. BBC World News' special sustainable business feature Down to Business begins transmission on Saturday 17th September. Presenter and sustainability expert Leo Johnson visits his choice of four enterprises yielding a social dividend while making a profit - and tries to help them deliver on their potential.
Wed, 14 Sep 2011 20:39
Social and environmental businesses do good things don't they? Of course they do! But if the aim is to create social and environmental value then this doesn't go far enough. Businesses need to account for the good things but also any unintended consequences of their work.