Social Impact and Inequality

“As long as poverty, injustice and gross inequality persist in our
world, none of us can truly rest.” Nelson Mandela

Inequality is a difficult topic to understand and tackle but it seems to be increasing in a relative sense and surely has to be addressed by all those working for a fairer society – that includes those pushing for a wider and more effective social economy.

According to the OECD, the average income of the richest 10% of the population is about nine times that of the poorest 10% across the OECD, up from seven times 25 years ago. (OECD).

There has always been income inequality but as the world becomes more and more interconnected, the divisions between those that ‘have’ and those that ‘have-not’ is increasingly widening.  And this has a knock-on effect where the disparities in income translate into disparities in wealth – raising the question, who owns our world?

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UN’s Sustainable Development Goals ….an answer to social impact reporting?

One of the ‘holy grails’ of impact reporting is a single set of universal measures that can be consistently applied, regardless of an organisations’ activities, size, community, type, and so on.

Finding the ‘holy grail’ has proved rather elusive since early forays into impact reporting by the co-operative movement that date back to the mid-19^th century, although we have seen some harmonisation in recent years around the principles through which we should at least approach our reporting (most visibly and materially through the work of the national Inspiring Impact initiative[1]).

Social accounting should be about good organisational practice, not just a tool for measuring social value…

In his recent blog for the Social Audit Network (SAN), Alan Kay sent out a rallying cry to the social economy:

‘I think that social enterprises should be looking seriously and overtly at the degree to which they contribute to social capital.  This would mean putting in place how they build trust between people and organisations; how they encourage reciprocal working and mutuality; how they state and then live up to their values; how they support a commitment to a community and a sense of belonging; and how they actively create connectedness through informal and formal social networks.

Resurrecting a positive role for the much-maligned notion of ‘social capital’

‘Social capital describes the networks together with shared norms, values and understandings that facilitate cooperation within or among groups’ (OECD, 2001)

I want to put out a call for the rehabilitation of what we understand by ‘social capital’.

Recent criticism of the essential concept of social capital has caused people to cast it aside – considering it a redundant approach.  Several influential academics on the left of the political spectrum have written books and articles criticising social capital. Their criticism became particularly virulent at a time when the World Bank formed a social capital strategy in their assistance to developing countries.

In short, the main thrust of the criticism was that the notion of social capital was being used as a substitute for not materially helping populations.  Communities were being told that…we know you are poor, downtrodden and disadvantaged but you have ‘social capital’ and you should be using that more.

Caught in a spin – can impact unlock a contract?

I have recently had the honour of being involved in the Investment and Commissioning Panel for the Impact Management Programme (IMP). Examining a range of exciting submissions from across the country, I have read how enterprising organisations are seeking funding from the Impact for Growth strand of the IMP to raise investment for their work or write successful tenders, and in many cases to seek contracts with the Public Sector.

A healthy number of these organisations have also secured previous ‘social investment’ to help with their contract readiness.

But experience leads me to query why an ability to manage their impact will make these charities, social enterprises and ‘ventures’ more likely to secure a contract with the Public Sector?

As Adrian Hornsby wrote in an article for the same programme in October 2017:

“ventures and commissioners ‘pass like ships in the night’; and with commissioners showing hesitancy around impact, and social investors inevitably following revenues back to commissioners, the question arises as to where the essential driver for impact management can be found.”

Adrian’s article added to my questioning; what would be the motivation for managing and explaining your social impact if social investors and commissioners pass the buck back and forth between them?

Having been involved in commissioning services from voluntary, community and social enterprise (VCSE) providers for many years, I wonder if the problem for commissioners goes deeper than just a ‘hesitancy around impact’…

Perhaps it is a wilful misunderstanding caused by austerity and the need to make financial savings and efficiencies caused by pressures on the public purse?

In their desperation to raise income to replace lost government money, public agencies are courting partners who they think will bring in additional funds, and not necessarily giving social impact the proper consideration that it should be given.

Essentially, they see social impact as a means to draw in money without fully understanding what social impact means.

Furthermore, we could be heading for a situation where the Public Sector descends into simply becoming a ‘regulator’, diminishing their commissioning role completely. With the reduced strategic contracting capacity of a local and independent organisation with responsibility for public benefit, who will encourage social impact when all society’s ills have to be addressed purely by free markets?

Back in the days of plenty when I worked for Salford’s New Deal for Communities programme, we could afford to work with our providers to understand their impact and the outcomes that they were generating for us. We could even afford to provide training in the tools and techniques which are now part of the IMP.

Now we live in a vastly different world. With the increasing squeeze on public budgets, I am witnessing an appeal from the Public Sector to charities, social enterprises and ventures to bring in other money – grant funding and social investment – for services and activities which were previously fully funded by the Public Sector.  But why would people with money invest in these services – unless there is something for them in it?

In Salford, the amount of money flowing from the Council to the VCSE sector through contracts and grants has reduced by over 40% in the last 5 years. Our research shows that the middle is falling out of the sector – small community groups which rely on volunteers continue to thrive, their members driven by a shared interest in tackling unfairness, poverty and inequality in today’s society; and the larger ‘enterprises’, many of whom are national organisations or Public Sector spinouts, continue to succeed in contracting.

This leaves small and medium-sized ‘ventures’ caught in a spin between the Public Sector pushing them towards grants and ‘social investment’ as means of enhancing dwindling budgets; and social investment providers offering support for them to be ready to contract with the Public Sector.

I believe that the Public Sector doesn’t really understand that ‘social investment’ must get a return, just like any other form of borrowing, and social investors don’t really understand the state of panic in the Public Sector.

So, should this be where impact management fits in?

Public Sector commissioners want services, and they want outcomes. They want people to have better wellbeing, better lives; and ultimately, they need people not to need public services so much.

Social investors want many of the same things, but these outcomes must be measurable and accountable. They need to understand the financial and the social return, they may need to see financial growth, but ultimately the investment should be repayable in both social, and often also financial, impact one way or another.

So, a better understanding and management of the impact that a charity, social enterprise or venture is creating will help bridge the gap between the investors and commissioners.

And, I believe that it is also essential for their survival.

The NeuroMuscular Centre (NMC) in Cheshire has been part of the GSK Impact programme for several years. Over a 10-year period, NMC has kept social accounts, covering both the impact that the Centre is having for service users, their families and other stakeholders, and how it is managing the organisation in financial terms to maximise that impact.

NMC has a greater understanding of outcomes and impact; continuous dialogue with service users, funders and commissioners which takes places to prepare the social accounts; and the ability to accurately describe their impact in tenders, funding bids, and publicity. All this has helped this organisation triple its turnover and move from a position of uncertainty to one of a secure and rosy future.

By embedding social accounting and audit as a means of impact management, NMC has broadened its financial base, grown in size, and secured its position as the leading provider of services for people with neuromuscular disease in the country.

And who should pay for this impact management? I believe that if commissioners or social investors want evidence of ‘impact’ they should also have to pay for the work evidencing the impact…

In conclusion, there will always be a need for social and community organisations to take the heat out of the public purse – social accounting and impact management are probably the best ways for them to achieve this.

Social investors and Public Sector budgets will come and go, but the people who need support from charities, social enterprises, and other community-based organisations will always be there!

Ultimately, I believe that the essential driver for impact management should, therefore, be to achieve the best possible outcomes for the people (and/or the environment) that an organisation supports, and in doing so making it relevant, investible and successful for the long term.

Anne Lythgoe, Social Audit Network (SAN)
www.socialauditnetwork.org.uk 

Social impact and challenging the ‘sacred cow’ of how financial accounts are presented

Definition: ‘sacred cow’ (noun) – a belief, custom, etc. that people support and do not question or criticise: Example: They did not dare to challenge the sacred cow of parliamentary democracy (Cambridge Dictionary)

Challenging ‘sacred cows’ is a bit of a dodgy business and may get me into hot water.  But I take courage from the work of John Pearce and his life’s work which was always challenging the status quo and trying to approach economic, social and community problems in a different, innovative and often pragmatic way.

I had the privilege of working with John Pearce for most of my working life.  In many ways he was quite a complicated character – forming alliances, charming people, making enemies, challenging the norm… But always taking the side of the dispossessed, those with fewer advantages and the folk that are made to feel like pawns in, the supposedly ‘normal’, economic system.

John and the work that he did was ways ahead of his time.  I recognise that this is a cliché but it is on record that he started and developed initiatives that were only appreciated much later by the established mainstream.  Here are some examples:

• in the 1970/80s, he proposed that community development had to include local economic development in a much more tangible way. Money, earning power, ‘good’ work was integral to social change within communities – and he believed that local folk could take control of their own economic activity for the wider benefit.  John, along with others, started the community business movement in Scotland;
• he thought that acting locally but thinking globally was crucial to avoid community and national introversion. John, again along with other like-thinking people, established COMMACT (an international network dedicated to sharing community development practices);
• in 1990 he pushed for the establishment of a fund owned and controlled by the community business movement to enable community businesses to have access to capital which was not being provided by high street banks or traditional investors. John led on the formation of the Scottish Community Enterprise Investment Fund which was active for 10 years before it was incorporated into the Charity Bank;
• he recognised that organisations with a central core purpose of social and community change had to get better at explaining and reporting regularly on their social and community impacts as well as their values, approach, and credentials. John initiated the process of social accounting and audit running alongside financial accounting and audit.  This moved him (alongside others) to found the Social Audit Network (SAN).

I could go on explaining some other aspects of John Pearce’s approach and work but they have been documented elsewhere and re-surface annually in the John Pearce Memorial Lecture.

Essentially, John’s work often challenged the ‘sacred cows’ of traditional economic community development.  He believed that social and community enterprises/businesses should do things differently and not ‘ape’ traditional business.  He pushed for business planning to become a more relevant form of social enterprise planning; for social capital to be part of a local community enterprise strategy; and for social benefits to be recognised as having an integral and tangible value.

And this latter point brings me to an area that John worked on but never really followed through.  It has remained an idea, I believe, that is yet to come.  It is about changing the way financial accounts are presented to show the amount of time, money and resources that have been used by social and community enterprises in furthering their social and community aims.

Back in 2004, he referred to this in a short paper included in the Social Accounting and Audit Manual and called it the ‘Social and Economic Impact Accounts’.

What John was trying to show was that financial accounts could be presented in a way that separated out the Trading Costs from the Social Benefit Costs.

Please bear with me and I shall try to explain using an example of a community-owned shop and cafe.  In the interests of illustration, I have used a table – which is rarely normal, and the figures are made up…

John reckoned that this simplified but traditional accounting of profit and loss could be recast.  The re-cast shows Revenue Costs divided between Trading Costs and Social Benefit Costs.  By illustration, as follows:

The ‘sacred cow’ of financial accounting presentation has, of course, been subject to examination and change before.  Academics, in particular, often re-do traditional financial accounts to take account of environmental and social change.  They refer to this as ‘shadow accounting’.

Similarly, the Office of the Scottish Charities Regulator (OSCR) asks for charitable financial accounts to separate out Governance from Charitable Activities.  I seem to remember that the new economics foundation presented their accounts in their annual report some years ago, applying a similar principle to the example I outlined above the one above.

I realise that thinking along the lines John outlined, will require a lot more work by qualified accountants and their respective bodies – but hopefully, the principle could still be applied.

If social and community enterprises adopted this as a regular practice there are a number of clear benefits, namely:

• there is an openness in understanding the social and community enterprise priority towards social and community benefit;
• it can help a Board of Directors make more transparent decisions over resource allocation;
• it can, to a degree, help in our collective understanding of what a ‘social enterprise’ is actually doing; as opposed to what it says it is doing;
• it can lead to better management of a social or community enterprise as it can assist a social enterprise to assess just how much social benefit it can afford to engage in without compromising its financial sustainability;
• it might help when an enterprise asks for funding for its social and community aims as opposed to requesting funding for the overall expansion of its business;
• it can counter the argument for Social Return on Investment (SROI) that has received considerable support in recent years. This alternative approach requires a focus on the real costs of providing social impact rather than trying to monetise all the outcomes into an impact score;
• it is especially useful for a social enterprise whose audited accounts show that it is only marginally viable (or even loss-making) whereas the true picture is that it is fundamentally profitable but devoting (perhaps too much) surplus to social benefit.

I admit that the Social and Economic Impact Accounts are based, to a degree, on assumptions and allocative decision-making within the enterprise.  But at least there would be greater clarity and more understanding of the type of organisation it is, and how much it focusses on social aims.

Back to John Pearce.  I mentioned at the start of this piece that he was ‘complicated’.  True. but he was someone with a clarity of vision and a clear idea of how we, through working collectively together, can change things for the better.  He believed that the way to do this is within your own community – and if along the way you take a poke at a sacred cow or two, so much the better…

Alan Kay, Social Audit Network (SAN)
www.socialauditnetwork.org.uk

Social impact and the argument against unqualified ‘growth’

In connection with business and the economy, we hear a lot about ‘growth’.

Economists argue that the economy has to grow year on year.  Investors claim that businesses have to continually grow as the alternative is for them to stagnate and get overtaken in an increasingly competitive market.  Even social enterprises are being pressed into ‘growing their business’ – usually in business terms such as increasing turnover, improving profits, increasing staff and, generally, expanding market share.  It would appear that the winners in the pervading and traditional economy are the enterprises that are growing and, if you are not growing, you join the losers.

I want to challenge that idea when it is applied to ‘social and community enterprises’.  I shall argue that social economy organisations are different from mainstream businesses as their core ‘business’ is achieving an essentially social or community goal.  Therefore, they should operate differently – making different decisions for different reasons – and ultimately judging their success or failure, not in terms of growth, but in terms of positive, qualitative social change.

I suppose what I want to say about ‘growth’ is not particularly new.  Barack Obama has said…

Trade has been a cornerstone of our growth and global development. But we will not be able to sustain this growth if it favors the few and not the many.
[Speech in Berlin, 24 July 2008.]

He was talking fundamentally about sustainability.  Interestingly, this contrasts significantly with Benjamin Franklin one of the Founders of the USA, who several centuries previously, stated…

Without continual growth and progress, such words as improvement, achievement, and success have no meaning.

Indeed, the context was quite different in Franklin’s time and the world was not hurtling towards climate change and potential environmental Armageddon.  Thus, the historical context matters in how we consider concepts such as ‘growth’.

In 2009 Tim Jackson wrote Prosperity Without Growth: the transition to a sustainable economy. The second edition, Prosperity Without Growth: foundations for the economy of tomorrow was published last year (2017).  In it, Jackson sees enterprise as a ‘form of social organisation’ with work representing participation in society where money should be used for the ‘social good’ – reducing inequality and supporting ecological stability.

This appears to me to be very close to what the pioneers in the social enterprise movement talked about.   There has to be an alternative way of looking at the economy which is inextricably linked to notions around creating zero waste through recycling and working towards a more ‘circular economy’.

I know of a number of social and community enterprises that responded to the urge to grow.  They have tended to assess their success in increased turnover, improved surplus or profit, and in recruiting more staff.  These are ways in which a traditional business measures their success and quantifies their achievements.   But what of improving the quality of the social change that happens as a result of what they do?  Is that to be sidelined in the drive for business success?

With community enterprises, in particular, growth can be difficult.  They are community-based, often operating within a particular locality, and with no intention of growing through domination or expanding into other areas.  They are often owned by the community to create community benefit on behalf of that very same community.  They want to get better at what they do and make a difference to local people by working closely with local residents.

The Scottish Government published its Social Enterprise Strategy earlier this year.  I was interested to see that it recognises the wide community-based nature of social enterprise in Scotland – often operating in financially perilous waters.  To its credit, it does not bang on about ‘growth’ and in terms of ‘scaling up’ social enterprises.  It states…

In increasingly competitive and uncertain markets, scale can be a weakness as well as a strength. For social enterprises, it may become increasingly preferable to scale capacity and impact through partnership rather than pursuing an organisational growth strategy. Collaboration, franchising, and replication will all come into sharper focus.

The last sentence of this quote is crucial.  It highlights the need for collaboration – implicitly in place of competition; and the role of looking to replicate practices in another place.

However, there lies a danger in both of these: collaboration is difficult to foster when funding and investment are usually distributed through highly competitive structures.  Similarly, replication is problematic due to varying contexts – what works in one place will not necessarily work in another, or certainly not in the same way.

Within the social economy, I believe, we should be doing enterprise differently and one example of this is that collaboration should be encouraged to replace overt competition.  Admittedly, this is a controversial notion and difficult to achieve but it is central to working together for the common good.

Another area where we should be doing things differently in the disputed arena of ‘social impact’.

Social and community enterprises trade in exchanging goods and services.  They do this to achieve a central aim of improving people’s lives; not adversely harming the environment; in changing behaviours or influencing cultural norms for the betterment and well-being of all.

So how do they know whether or not they are successful?

The Social Audit Network (SAN) has been working in this area of impact and subsequent accountability for a long time.  It believes that social enterprises should report on their social and community achievements on a regular basis.  At the same time, social enterprises should check on their internal aspects or social enterprise credentials.

In summary, these credentials are: being good to their staff and volunteers; being accountable through appropriate governance; not making individuals wealthy at the expense of the wider society; ‘washing their face’ financially; being environmentally responsible, and helping the local economy along…

SAN also believes that social reports should not be used primarily for marketing and that they should be subjected to some form of audit that checks facts and interpretations made in these reports.

Some form of social accounting and audit (SAA) is required urgently by the social enterprise movement.  SAA is an alternative way of doing things – recognising that working towards social change is a different aim, and cannot be measured in financial terms or in terms of business growth.

Social accounting is not about money.  It is, crucially, about how a social or community enterprise can be accountable – and importantly – held to account for what it is trying to do and what it is trying to be, in social, environmental and cultural terms.

In conclusion, I have always believed that in the end, the future of social and community enterprise will come down to how accurately they gauge their success and how they report this differently, but not entirely different, from traditional business.

We have to not only create a new way of seeing the world’s economy (as referenced in Prosperity Without Growth), by getting in place more appropriate mechanisms that suit an alternative way of doing business.  That includes social funding, social management, social accounting, social capital, social enterprise planning and so on…

So, ditch unqualified growth and get busy at doing things differently.  A possible New Year’s resolution?

Alan Kay
Social Audit Network (SAN)
www.socialauditnetwork.org.uk

How to make change in a creative way: using art to describe your social impact

Creativity: use of imagination or original ideas to create something
https://en.oxforddictionaries.com/definition/creativity 

I guess it might seem counter-intuitive… demonstrating social impact in a creative way. I can feel my social auditor colleagues quivering at the thought of ‘fake news’ and being creative with data sets, particularly where these are already ‘soft and fluffy’ opinions, qualitative feedback, and observations…

But what if we see the art as a tool to present social impact?

I would argue that art has an impact itself – in its delivery, in creating an immediate (and maybe lasting) impression, in its use of language or media, or because it is easier to understand? 

Are we really creating ‘value’ and how do we know?

I attended two events recently and both got me thinking about the question in the title of this blog.

One was a seminar led by Stephen Osborne which examined the ‘value’ created by public services.  The other was the Social Audit Network (SAN) Annual Gathering.

Stephen Osborne is an esteemed and well-regarded academic at the University of Edinburgh Business School and has written extensively on public services.  He was speaking at Glasgow Caledonian University and three things struck me about his talk and the subsequent discussion.

The first was that delivering services in response to public needs requires a quite different approach from running a business that sells products. Apparently, legislation states that public sector organisations have a duty to respond to ‘need’ in the population. Some discharge this by delivering services, others commission or buy the services from others.

The key point is that the public sector must address ‘need’ which is evidenced in the population rather than creating demand for a service or product. In any case, the delivery of the service should use a ‘different business logic’ which is dependent on the co-operation and trust of citizens.  This working together and collusion is about adding value and positive change for citizens – in terms of meeting the needs, improving people’s quality of life, creating capacity within the community and generally making a better society.

The second was that public service delivery has fundamentally different values and a different end-game in comparison to running an enterprise.   The delivery can use business management methods to improve internal systems, but it is essentially quite a different animal with a different set of values.  This possibly has implications for social and community enterprises that also address social needs – they may need to look at their values as well as their financial bottom line.

The third relates to the discussion following the presentation, where there was a debate on accountability and the need to track, measure and report on whether or not the public service delivery was actually achieving its goals.  The verbal exchanges recognised that tangible and often measurable indicators can be used to explain what has been delivered and to what effect, however, the less tangible, outcomes in terms of happiness, confidence and self-esteem are harder to account for.

Osbourne said that these highly important factors require a more investigative approach and one that often is inevitably more time-consuming and more expensive.  It is interesting, in passing, that many local authorities have not re-instated previously abolished national performance measures – mainly due to cost.  There would seem to be an opportunity to set local and meaningful targets on ‘social impact’ which is happening in Salford and reportedly across Greater Manchester as part of the devolution agreement.

The SAN Gathering was held in Liverpool on 20^th October and was in two parts.

The morning looked at the basis of social accounting and audit and a number of case studies were presented which examined things that had worked well and others that were more of a challenge.  There appeared to be a general consensus that regular reporting on the change that happens as a result of what a social or community enterprise does, is a good thing.

The afternoon concentrated on how we can believe what is contained in social reports.

An increasing number of annual social reports are being written by a wide range of organisations – from the small community-based enterprises running lunch clubs to the mega-corporate bodies providing a range of social services – both often under contract to, or at least working alongside, the public sector.  With more and more organisations being contracted to deliver services for citizens in our society – how do we know they are doing a good job?

Looking at unsubstantiated and unverified social reports makes me concerned that self-reporting as advocated by approaches such as social accounting, may descend into purely marketing exercises.  There must be some kind of ‘audit’ of social reporting to ensure faith in, and the rounded integrity of, social reports.

Over many years SAN has worked with social, voluntary and community organisations in developing a ‘social audit process’ where qualified SAN social auditors chair a Panel meeting which is a learning and supportive process as well as providing rigorous and robust scrutiny of an organisation’s social report.

The afternoon session at the Gathering also considered standards for audit processes and in particular, the forthcoming BSI standards for social value assessment reports were mentioned.  This has to be welcomed as a way of ensuring that social organisations are not pedalling ‘fake news’.

A nagging concern, however, is that standards will be created by umbrella bodies without the active involvement of organisations on the ground – things will be done to people and grassroots organisations rather than with them.  In applying national standards across the board, there is a significant danger of turning the ‘social audit’ into yet another tick-box compliance exercise, especially if it is controlled by a national standards institute.

In conclusion, I want to tie these two events together as in my mind there would appear to be common threads.

• ‘Value’ for society is being created, but as a society, we need to be able to track it and in doing so, we need to see the degree of value created and how to improve on it, thus being as effective as possible.
• Self-reporting is the only practical way of tracking change created by the expanding plethora of different organisations that soon will be delivering all sorts of public services – either off their own bat or on contract to the public sector.
• We, the public, need to have faith in the social reports and one way of creating this is to insist on some form of ‘social audit’.
• Standards have to be established for the ‘social audit’ to ensure a procedural uniformity – but those standards should not be created in a vacuum but in some form of co-creation with social and community organisations. Thus, ensuring that they are understandable, transparent and trustworthy – and perhaps there is an opportunity to recognise the context with local measures.

Finally, there would appear to be a considerable degree of consensus within the public and social sectors on the need for social reporting – not only of the tangible but also the intangible.

There is wide recognition that there has to be some form of check or audit to ensure that reality is reflected in the reporting.

My plea is that in setting social audit standards they are not too complicated but are understandable and accessible (in all its meanings).  Only that way will they become accepted and adopted by all.

Alan Kay – Social Audit Network (SAN) www.socialauditnetwork.org.uk

 

Social Impact reporting – ‘truth’ or ‘covfefe’ ….

‘One of the key dangers facing society is the lack of trust and belief in experts, in government and in one of the cornerstones of Enlightenment thought; verifiable facts’

(Gavin Esler, 2017 Magnusson Lecture, Wigtown Book Festival)

Esler summarised succinctly in his lecture the ‘trust gap’ between reality and media, both in the US and here in the UK. What can really be relied upon to be ‘good news’ and what is ‘fake news’ made up to strengthen a point, cover up failings, or stir up feelings, for example?

And the same is true in the social economy sector in social impact reporting….

‘Social Value’ and ‘Responsible Business’ practices are increasingly popular across all sectors with the number of social value accounts, social impact reports, community accounts and so on being published every day on the increase (I know; I wrote one of them for Salford City Council recently).

So how do we know whether the ‘social impact’ we are reading about is truth or ‘covfefe’, (as Donald Trump put it recently)?

‘Despite the constant negative press covfefe’ (Donald J. Trump (TWITTER @realDonaldTrump) May 31, 2017)