Tag Archives: social accounting

Social impact and our peculiar understanding of ‘community’…

Many social enterprises, and perhaps more accurately, community enterprises, say that they are having an impact on The Community.  But do we really understand what we mean when we talk about ‘community’?

I have been involved with a number of EU funded projects over the years and conversations with European partners turns to semantics and discussion on whether or not there is a shared understanding of some of the major concepts that we in the UK bandy about with abandon.

One of those, and one that often forms a bit of a stumbling block, is the word ‘community’.  The Germans say it is untranslatable; the French use it in other ways; the British say it all the time in the hope that the others get their meaning.

Turning to definitions, the Oxford Living Dictionaries states that it is, ‘a group of people living in the same place or having a particular characteristic in common’, which implies a ‘geographical community’.  But it also goes on to say that community can be, ‘the condition of sharing or having certain attitudes and interests in common’.  This suggests more of a ‘community of interest’.

These discussions remind me of when I worked with community businesses in Scotland in the late 1980s.  Talking about a geographical community made sense as local people in hard pressed areas got together, formed an enterprise that created benefits for the locality by providing employment for long term unemployed and much needed services to benefit residents in the area.

But then ‘community of interest’ emerged.   This broadened the definition and at one meeting we realised that a golf club could be a community business serving the ‘community of golfers’.  Was this right?  And so the argument continued within, in those days, a smoke-filled room of activists…

Added to this are two critical dilemmas worthy of consideration.

The first is that ‘community’ is not a homogenous unit.  Within a geographical area there are a range of different people with differing values, outlooks, social and economic status, faiths and ethnic groupings.  How do we, as community-based organisations, whose central purpose is to work for community benefit, serve the whole community?

What are the priorities; how are they decided; and so on?   Local people on a Board of a community enterprise would be expected to understand the local community better than an outsider – but they may have their own interests and views that may not address the problem of all people living and working in the community.

The second is how the geographical community is defined.  Where are the boundaries outlining the community?   For some communities this is relatively straightforward as they may be islands, or particularly remote and self-defining, or they may be a housing estate squeezed into an area bounded by a major road or railway line.  But for many community based organisations this is an issue and one that has to be tackled and re-addressed.

Many community enterprises over the years have tried to report on the impact that they have on their community.  If they keep social accounts they are expected to draw out a local stakeholder map that charts the nature of the relationship they have with different stakeholder groups.

This is an exercise that many find particularly useful as it exposes many in their organisation to the dilemmas mentioned above.  Often there is not total agreement, but the discussion over stakeholder relationships can create a better understanding of differing positions within and around the organisation.

Also, as part of social accounting, there would be a need to consult or engage with the ‘community’ – some refer it to as the ‘wider community’.  This presents a problem as the community may be made up of thousands of households.  Through my involvement with social accounting and audit, I have tried to do and suggest a number of things.

One time we worked with a community enterprise in carrying out a survey that involved a questionnaire going to each household distributed in a community newsletter.  The returns were few.

Another time we worked on visiting a random selection of households in an area and conducted interviews.  This was more successful but fraught with difficulties over people being out, not wanting callers, not to mention fatigue and a wearing down of shoe leather…

However, something that did seem to work well, was the creation of a kind of ‘community jury’.  The community enterprise identified a local councillor for the area; a head of school, a local social worker, a prominent business person, a faith leader, a local MP.  These were people who were not close stakeholders but who would know about the community enterprise and a little about its work and impact.

Ideally this group would be brought together and issues about the performance and impact of the community enterprise would be discussed.  In practice this was very hard to achieve and the fall-back position was to interview these people with the same questions.

The consultation and engagement with a ‘community of interest’ may be clearer in some ways, as the community enterprise may only be consulting those people that have expressed an interest in what the enterprise is trying to do.  But that leaves out all the people that could be in the community of interest but do not know about or have never used the services provided.  Difficult or what?

I think defining and understanding ‘community’ is crucially important.  At a meeting several years ago a prominent member of the social enterprise sector in Scotland was asked what he thought was the future of social enterprise.  He said he thought it would be ‘community based enterprise’.  This harks back to the burgeoning community business movement in Scotland in the 1980s – plus ça change, plus c’est la même chose

I also think that community enterprises are going to be more and more important.They tend to be tenacious organisations due to their close connections within communities.  This is evidenced by the number of community co-operatives in the Highlands and Islands that are still around in one form or another.

Community enterprises are also like ‘anchor organisations’ – a conduit for local development.  They usually have a clearer purpose compared to the plethora of recent social enterprises that are currently emerging – which are not community-based and struggle to show their distinction from being traditional businesses with a philanthropic arm.

Finally, we all live in ‘communities’ in one form or another.  We are not only individuals but part of something that underlines the connections and relationships between us that make life worthwhile.  I leave you with a quote from Cesar Chavez (1927 – 1993), an American labour leader and civil rights activist…

We cannot seek achievement for ourselves and forget about progress and prosperity for our community… Our ambitions must be broad enough to include the aspirations and needs of others, for their sakes and for our own.

Alan Kay, Social Audit Network (SANwww.socialauditnetwork.org.uk 

Social impact reporting and marketing: a hazy divide?

“Marketing is manipulation and deceit. It tries to turn people into something they aren’t – individuals focused solely on themselves, maximising their consumption of goods that they don’t need.” Noam Chomsky

It is a powerful quote from Chomsky and not one that I entirely agree with as I feel that businesses have to promote and sell their products in the competitive environment which is part of our prevailing economic system.

The whole idea of marketing reminds me of a time I was wisely told by a colleague that there is often a difference between what people say they are doing and what they are actually doing.  This brings me to the main thread running through this blog which is the relationship between ‘marketing’ and ‘social impact reporting’.

In some ways it comes back to why should social and community enterprises regularly report on their performance and their impact on people, the environment and on the society in which they exist.  They do not have to.  So why do they?

Often social enterprises will say they are doing it in order to market what they do and to be able promote and ‘sell’ what they can provide – ‘selling’ it to investors or funders and other stakeholders.  This is quite legitimate and to be applauded but I would argue should not be the sole reason to report on social impact.

The last few decades have shown a huge and pervading expansion and emphasis on ‘marketing’.  Entrepreneurs starting out or wanting to expand will come up with a ‘product’ and then spend an inordinate amount of time, resources and energy to try and sell that product in the market.  Arguably, organisations with a central social objective should by definition not need to spend as much on this, as they should be responding to a social need and through their activities provide for that need to those that benefit from their work.

The area where social impact reporting and marketing meets manifests itself in Corporate Social Responsibility (CRS) reporting.  It is admirable and to be encouraged that businesses report more holistically and include the positive impact that they are having on the environment, on people and on the wider culture.  But this is basically philanthropy.  Their core business, if you like, is to maximise profit for their owners or founders.  They also have wider impacts but they remain secondary to their core purpose.

Social enterprises, on the other hand should be reporting regularly on their core business with is positive social change.  Social enterprises should be assessed and judged on how well they are achieving their central purpose and the impact they are having.

Social impact reporting should not only be used for marketing but also to contribute to planning, to the management of the whole organisations, to review what has worked and what has not, to understanding priorities, to involve processes that listen to stakeholders, to understand costs and outcomes of differing strategies, and so on.  It is about reporting and accounting and not just a way of providing marketing information.

Social Accounting and Audit takes organisations through a process that asks for a regular review of the mission, values and objectives alongside an analysis of stakeholders (all those individuals and organisations that can affect an organisation and are affected by it).  It requires an ‘impact map’ identifying outputs and outcomes to emerge from the activities of an organisation.  This is followed by collection of quantitative and qualitative data that is brought together in an annual set of draft social accounts.  The social accounts should seek to accurately reflect the performance and impact of the organisation during the past year.  This ‘account’ then is subject to an independent audit and the revised draft becomes the social report.  The process runs parallel to the financial accounting and audit process.

A social report for social and community enterprises is about proving what your organisation has achieved – backing up the claims with evidence; improving as an organisation as inevitably decisions on the future will be based around hard facts; and finally, and this is of increasing importance, about being accountable to all stakeholders.

It is important to recognise that the audit checks the thoroughness and veracity of reporting and does not pass judgement.  The judgement about performance and impact is left to stakeholders and the report should be openly disclosed to them.  They then make a judgement about the organisation.

Some organisations going through regular social accounting and audit consider the final report as of huge importance.  I would argue that going through the process is equally important.

It would be a mistake to think of social impact reporting only in terms of how it can be used to market the organisation.

The quote from Chomsky at the start of this blog reflects the cynicism around marketing – claiming that it is only about businesses trying to persuading people to spend their money.

Social and community enterprises are more about responsibly and regularly reporting on how they have effected change that contributes to benefits for people and the wider society.   In social reporting what an organisation says it does should be as close as possible to what it actually does.

Telling people about what an organisation does is one thing; but doing this in order to sell more and more products and services is another…

…and never the twain should meet…

Alan Kay

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

Should we put a financial figure on all the impacts made by a social enterprise?

In Jonathan Coe’s book ‘Number 11 or Tales that Witness Madness’ one of the characters joins the ‘Institute for Quality Valuation’ that is intent on putting a financial value on practically anything and everything.  The character is describing society in general when they say…

“We are dealing with people who have no notion at all that something is important unless you can put a price on it.  So rather than have them dismiss…well, human emotion, altogether, as something completely worthless, I think it’s better if someone like me comes along and tries to help them out.  Makes some sort of case for the defence.  Se we’ve coined a new term – ‘hedonic value’ that might refer to, say, the feeling you get when you look at a beautiful stretch of coastline. And we try to prove that this feeling is actually worth a few thousand pounds…”

This is, of course, fiction and other characters in the book are skeptical at the idea of putting financial value on all things.  But it is surprising how in a relatively short period of time the seemingly accepted way of assessing social impact for organisations with a central social purpose is to convert all their social outcomes into a financial figure.

This idea was first introduced into the UK by the new economic foundation who built on and developed pioneering work carried out by the Roberts Enterprise Development Fund in California.  It was referred to as Social Return on Investment or SROI.    This has led in the further development of the ‘social impact industry’ although there is a whole array of other measures which are forming part of that industry – such as ‘value for money’ figures, extending the role of Cost Benefit Analysis, and so on.

But should we really, as a society, be trying to put a financial value on all things? Certainly, to do this has a function.  If you were a policy-maker and trying to decide how to spend restricted financial resources on, say, building more care homes for elderly people or putting the resources into taking care services to people in their own homes, you could then assess the costs, use an ‘impact map’ to identify outcomes, provide them with a financial value and finally work out the most cost effective path.

As a tool to decide on investment, it might work well.  Investors like the idea of providing a more tangible value on things that, although valued, have not traditionally had a financial value put on them.  Very often investors and funders want to know the ‘bang they get for their buck’ – what amount of ‘social value’ comes from their initial investment expressed in pounds and pence.

But my argument is that if this is what is required by investors then investors should be the ones that calculate the social return on their investment.  It does not follow that all social enterprises should be encouraged to measure their success by using an approach that monetises all the outcomes from the social enterprises’ activities.

To go back to Coe’s entertaining book, the same character as before was trying to put a price on the myth (is it a myth?) of the Loch Ness Monster.  Belief in the Monster does contribute to the tourist industry and you can translate the myth into some sort of financial figure.  I would argue that that should be done by people wanting to sustain the myth and support the tourist industry.  We do not put the onus on the Loch ness Monster to carry out an SROI!  They, no doubt, are busy being monstrous…

We at the Social Audit Network (SAN) believe that although looking at the social return arising from an input of resources has a place, it is much more helpful for an organisation with a social purpose to keep an account of their performance and to try as much as possible to demonstrate their impact on people, the environment and the society more generally.  Since the mid-2000s SAN has engaged with SROI colleagues, discussing and considering our different approaches, undertaken research which helped to shape underpinning principles to this whole area of social impact.  However, whilst SROI has its place, for us there are a number of central reasons that make our approaches distinct. I would like to outline them here.

Firstly, context matters.  Where a social or community enterprise is working and with whom, can matter tremendously.  Therefore, within social accounting the contextual information is encouraged – as it provides background and explains more fully the social need being addressed.

Secondly, by requiring to put a financial figure on all outcomes, there is a tendency to see the solution to addressing the social need as financial.  Often people working in the development of communities or in addressing a deficient social need will tell you that putting money into addressing these needs solves only part of the problem. A social need requires social solutions.

Thirdly, social accounting and audit tries to get organisations to address their overall performance against their objectives and does not only ask for the impact an organisation has.  For us, it matters what type of structure and values an organisation espouses – and this should be reported on.

Fourthly, there is a danger in having to put a financial figure on all the outcomes in order to come up with a financial ‘return’.  We believe that not everything can be valued in financial terms and the extensive use of financial proxies (which is often the case using SROI methodology) can lead to spurious claims and begins to move further away for a ‘real’ or tangible ‘return’.

Fifthly, although developing an ‘impact map’ of inputs, outputs and outcomes can be really helpful for a social enterprise to plan its strategy, carrying out an exercise in looking at the social return does not necessarily help the organisation to perform better.  The SROI process is often very specific and focussed – whereas social accounting is more holistic and a broader approach – thus of more directly related to improvement.

Sixthly, the value for an organisation to regularly report on its performance and impact can be hugely beneficial when the organisation does it themselves.  Many exercises in calculating the social return on investment are done by consultants and people outside the organisation.  The real value of not only proving the impact you might be having, is also in improving through learning more about your own organisation and retaining that knowledge.

So where does this leave us?  Certainly, reporting on one’s own organisation in terms of how well the organisation has performed and what kind of impact and degree of social impact one has had, is important.  In the future it will inevitably become a requirement –  particularly for those organisations in receipt of funding or investment.

The argument that SAN has, is that financialising everything is not a desirable avenue to be going down.  A social enterprise should be assessing whether or not it is performing well and what sort of beneficial social change is happening as a result of its activities. But having to stick a financial value on all of that changes seems to us to be crazy.

There are other characters in Coe’s novel who listen to the reasons for monetizing social value and poke fun.  I do not advocate this, but feel that putting a financial value on all the intangibles that make up a life is a diversion.  Instead we should be supporting organisations that improve people’s lives and livelihoods and to report regularly on their performance and impact – more generally…

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

February 2016

 Disclaimer: the views included in the above blog are not necessarily the universal views of the all the members of the Social Audit Network