Transcript No Slide Title

Social Impact Assessment
and Building Your SROI
GSVC Prep Day
Columbia Business School
Rick Larson
Adjunct Associate Professor
Columbia Business School
Director, Sustainable Ventures
The Conservation Fund
[email protected]
Grateful acknowledgement: Cathy Clark
“Metrics must be
understandable,
inexpensive, and
most importantly,
useful.”
– Acumen Fund
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Every Social Entrepreneur Faces Impact
Questions:
• What social impacts is your venture aiming to achieve?
• What is the relationship between these impacts and the
activities of your venture?
• How well is your venture achieving them? What are you learning
about how to improve this?
• Can you afford to regularly produce these impacts?
• How much value is being created for society as a result?
• How do you communicate all this in compelling, cost-effective ways
to the right people at the right time?
• How can the venture’s social impact improve its financial
performance and sustainability?
3
What Methods Do People Use for Social
Impact Assessment?
for-profit
nonprofit
Mature
Early stage
SVN
best practices
Social
Responsibility
Process
Methods
Impact
Methods
Mature
New Profit
Balanced REDF
Scorecard OASIS
Acumen
Scorecard/ BACO
B Corporations
UN Global
Compact
CERES
Principles
AtKisson
Model
AA 1000 GRI
ISO 14001
Balanced
Scorecard
Benefit-CostTheory of
analysis Change
REDF
SROI
GSVC
SROI
World Bank
PSIA
Taken from: Double Bottom Line Methods Catalog,
available at: www.riseproject.org
© Copyright 2003, Double Bottom Line Project: Clark, Rosenzweig, Long and Olsen
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GSVC Defines 3 Steps
Define
Quantify
Monetize
1. DEFINE social value proposition:
Theory of Change
2. QUANTIFY how you’ll track social value:
Impact Value Chain: top three social
output indicators
3. MONETIZE intended social value:
Social Return on Investment (SROI)
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Examples: Focused Theory of Change
Define
Quantify
Monetize
IF…THEN…
2003 GSVC winners:
• Tarsian and Blinkley: If Afghani refugee women are sewing
clothing for the high margin fashion markets in the US,
their quality of life and that of their families will improve.
• Developing Power: If power is provided at low costs to rural
areas in developing countries, both family income and
community quality of life will improve.
• Bronx Charter School: If a charter school integrates arts
education into the curriculum for lower income Bronx
children, educational achievement in arts and other areas
will improve.
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Step 2:
Quantify top 3 social indicators
Define
Quantify
Monetize
Identify your top indicators of social value
• These are outputs you can measure directly as
part of your business operations.
• They should relate in a compelling way to the
ultimate desired social outcomes of the venture.
• We call them “indicators” or “social outputs.”
• GSVC requires that you specify the 3 most
important.
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Impact Value Chain
Inputs
Activities
Outputs
Outcomes
What is
put into
the
venture
Venture’s
primary
activities to
produce
financial
and social
value
Results
that can be
measured
by the
venture =
“social
indicators”
Changes
(increases or
decreases) to
social systems
Based on Clark, Rosenzweig, Long and Olsen, 2003.
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Goal
Alignment
How well
outcomes
align with
intended
goals;
activity
and goal
adjustment
Impact = differential change
Inputs
Activities
Outputs
Outcomes
What is
put into
the
venture
Venture’s
primary
activities
Results
that can be
measured
Changes to
social systems
Essential!!!
What would
have
happened
anyway
= IMPACT
Based on Clark, Rosenzweig, Long and Olsen, 2003.
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Goal
Alignment
Activity
and goal
adjustment
Define
Quantify
Monetize
Stonyfield Farm Example
Benefits
Outputs
Economic
Development
• Amount paid to
small dairy farmers
per gallon of milk
• Increasing or stabilizing
small dairy farm industry in
Northeast US
•Savings in
environmental
emissions from
manufacturing
•Decreasing CO2 emissions in
Vermont
Environment
Health
•Ratio of organic,
pesticide-free yogurt
produced to nonorganic
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Outcomes
•Increasing percentage of
total yogurt sold in US that is
organic.
•Lower pesticide traces in
childrens’ bodies.
Pacific Community Ventures Example
Benefits
Economic
Development:
Job Creation
Job Quality
Job
Transferability
Outputs
•Number of jobs
created in lowincome zip-codes
Define
Quantify
Monetize
Outcomes
•Increased employment of
people previously
unemployed or
underemployed
•Numbers of living
wage level salaries
and benefits for
those jobs
•Increasing employee asset
accumulation and economic
stability
•Turnover stats and
surveys of why
employees leave the
business
•Increasing number of
employees who get better
jobs after this one
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Steps in calculation of SROI
Define
Quantify
Monetize
1. Quantify outputs/outcomes where possible
2. Translate into economic equivalent where
possible using proxies
3. Develop social cash flow projection
4. Subtract outputs/outcomes that would have
happened anyway (refer to proxy data)
5. Where outcome is qualitative, discuss what it
is and how you will know it’s happening
6. Cite your sources and assumptions clearly
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Example: Developing Power
Define
Theory of Change (focused):
• Developing Power’s value proposition is to break the
cycles of poverty in Brazil through electricity and capacity
building. The primary benefits from access to electricity
include improved education, human health, communication
and entertainment, comfort, protection, convenience, and
productivity.
Social Outcome: improved productivity
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Quantify
Social outcome: improved productivity
• If no proven results from venture’s operations exist, research outside
“proxy data”
• Ex. source of proxy data for Developing Power: “Rural Electrification
and Development in the Phillippines: Measuring the Social and
Economic Benefits,” The World Bank, 2002.
• The World Bank study indicates that with electricity, small businesses
in the Phillippines typically operate two more hours per day compared
to businesses without electricity.
Output unit for productivity :
2 increased hours of operation per day
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Monetize – value per unit of social value
• Developing Power took the information from the study,
adjusted it for average income its region (Bahia, Brazil),
and estimated a business could potentially increase its
income by $34 per month per household by gaining access
to electricity.
Economic value per output unit of productivity:
$34 per month
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Completing an SROI calculation
• Armed with the valuation per unit of social value, develop
social cash flow projection.
– Use a 10-year time horizon for your projections (recommended
this year for the sake of consistency).
• Subtract outcomes that would have happened anyway
(refer again to proxy data).
• Discount to social NPV using the appropriate discount rate.
(Suggestion: 10%)
• Subtract cost of providing service
• Calculate return ratio: SROI or SIRR
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Example: Developing Power’s SROI
Developing Power expects to
electrify 91,000 households over 15
years, resulting in an SNPV of $93
million and an SROI of $3.20.
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Estimate risk and a discount rate
• Social value creation has a measure of risk with a
corresponding cost of capital.
• Depending on the social focus of your plan, the cost
of public or charitable funds that would otherwise
have been used to achieve the same impact may
be a useful reference
• Use your own judgment! State assumptions and
rationale.
• 10 year time horizon recommended
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SROI tips
•
When an outcome does not show up in the social cash flow projection, discuss
what it is and how you will know it’s happening.
•
Do not measure benefits based solely on the market valuation of the perceived
benefit.
– Ex.: A manufacturer counted revenue generated from the recovery of waste gas as the
social value. Instead, it should try to quantify the environmental value gained from
reduced emissions.
– Ex.: A coffee producer counted the value of their sustainable farming practices to be the
extra $.50 per bag of coffee that consumers were willing to pay. They should have
monetized the drivers of social outcomes such as reduced hunger, illness, and
increased wages to farmers.
•
Include both positive and negative impacts.
•
In any quantification, include only impacts that are clearly and directly attributable
to the venture and easily quantifiable.
Based on Lingane and Olsen, “Social Return on Investment: Standard Guidelines,” September, 2003.
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Putting it All Together:
Social Impact Assessment tips
The goal is to make a compelling case about actual value creation, NOT
to achieve the largest number.
• Show how you will track performance and calculate impact over time.
• Where are your risks and biggest challenges, are they reflected in your
social impact figures?
• What are your biggest causal assumptions? How will you test them?
• How does your growth plan impact your SROI?
• Who is your competition (the industry standard) and how do you
compare?
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Case study: Windows of Opportunity
Windows of Opportunity (WoO)
• A lead-safe window replacement business that protects
children from lead poisoning while providing an
employment training program to youth ages 17 to 24
who are at risk of chronic unemployment.
• For-profit subsidiary of Baltimore nonprofit,
CLEARCorps
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Windows of Opportunity
• What is Windows of Opportunity’s Theory of
Change?
• What could key outcomes be?
• What key outputs, social indicators, could WoO
measure?
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WoO Outputs and Outcomes
Benefits
Outputs
Windows of
Opportunity
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Outcomes
WoO
Theory of Change:
If lead windows in inner cities are replaced by welltrained high risk youth, communities will be healthier and
employed youth will have greater educational and
vocational opportunity.
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WoO Outputs and Outcomes
Outputs
Benefits
Health
Number
of windows
replaced
Education
Number
of children
in client homes
Windows of
Opportunity
Jobs
Wealth
Jobs
and salaries
attained by workforce
after WoO
Amount
saved per
household
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Define
Quantify
Monetize
Outcomes
•Less lead in blood of
resident children
•Higher test scores for
childen in WoO client
housing
•More hiring and higher
income for workforce in
next positions
•Increased monthly
savings due to lower
energy costs
Which are inputs, outputs, outcomes?
NPV1
Number of new crews
Number of seasoned crews
2
Total number of children protected
Increase in f uture earnings per child
Decrease in special education cost per child
Decrease in medical cost per child
Total social benef it per child
Social v alue of lead hazard reduction ef f orts
Number of homes with windows replaced
Av erage annual energy cost sav ings
3
Accrued social v alue of energy sav ings
Number of crewmembers (CM)
Increased f uture earnings per CM
Total social benef it per crewmember
Social v alue of crewmember benef its
Social Costs4
Total Cash Flows
PV of Social Benefits
PV of Social Costs
Social Return on Investment
NPV of Social Return
1
2
3
4
year 1
year 2
2
0
year 3
2
2
year 4
year 5
1
4
1
6
1
7
73
316
377
$8,151
$8,151
$8,151
$4,000
$4,000
$4,000
$1,800
$1,800
$1,800
$13,951
$13,951
$13,951
$22,938,685 $1,018,423 $4,408,516 $5,252,552
535
$8,151
$4,000
$1,800
$13,951
$7,456,810
705
$8,151
$4,000
$1,800
$13,951
$9,828,480
$686,895
73
$188
$13,724
316
$188
$73,132
377
$188
$143,914
535
$188
$244,400
705
$188
$376,846
$118,669
12
$7,390
$7,390
$88,680
12
$7,390
$7,390
$88,680
6
$7,390
$7,390
$44,340
6
$7,390
$7,390
$44,340
6
$7,390
$7,390
$44,340
-$195,000
-$87,000
-$195,000 $1,033,827 $4,570,328 $5,440,806
$23,814,326
-$262,999
$91
$22,387,987
Net present value calculated using a discount rate of 5.5% (municipal bond rate)
Conservative projection based on CLEARCorps experience of 1.5 children per home
Accounts for new homes completed and additional benefits from homes completed in previous years
Social cost is equal to total grants required for WoO to begin and sustain26
operations.
$7,745,550 $10,249,666
WoO inputs, outputs, outcomes
Outputs
NPV
1
Number of new crews
Number of seasoned crews
2
Total number of children protected
Increase in f uture earnings per child
Decrease in special education cost per child
Decrease in medical cost per child
Total social benef it per child
Social v alue of lead hazard reduction ef f orts
Number of homes with windows replaced
Av erage annual energy cost sav ings
3
Accrued social v alue of energy sav ings
Number of crewmembers (CM)
Increased f uture earnings per CM
Total social benef it per crewmember
Social v alue of crewmember benef its
Social Costs4
Total Cash Flows
PV of Social Benefits
PV of Social Costs
Social Return on Investment
NPV of Social Return
1
2
3
4
year 1
year 2
2
0
year 3
year 4
1
7
73
316
377
535
$8,151
$8,151
$8,151
$8,151
Desired
$4,000
$4,000
$4,000
$4,000
Outcomes
$1,800
$1,800
$1,800
$1,800
$13,951
$13,951 Outputs
$13,951
$13,951
$22,938,685 $1,018,423 $4,408,516 $5,252,552
$7,456,810
705
$8,151
$4,000
$1,800
$13,951
$9,828,480
Inputs
$118,669
73
$188
$13,724
316
$188
$73,132
12
$7,390
$7,390
$88,680
12
$7,390
$7,390
$88,680
1
4
year 5
1
6
$686,895
2
2
377
535
$188
$188
$143,914 from
$244,400
Value
705
$188
$376,846
6
$7,390
$7,390
$44,340
6
$7,390
$7,390
$44,340
Proxy6 Data
$7,390
$7,390
$44,340
-$195,000
-$87,000
-$195,000 $1,033,827 $4,570,328 $5,440,806
$23,814,326
-$262,999
$91
$22,387,987
Net present value calculated using a discount rate of 5.5% (municipal bond rate)
Conservative projection based on CLEARCorps experience of 1.5 children per home
Accounts for new homes completed and additional benefits from homes completed in previous years
Social cost is equal to total grants required for WoO to begin and sustain27
operations.
$7,745,550 $10,249,666
Note:
technically
“impact” was
not shown!!
GSVC SIA judging guidelines
1.
Compelling theory of change and strong
relationship between it and the top three
indicators you choose that will drive to
ultimate outcomes
2.
Monetization of social return on investment
using consistent and appropriate logic, clearly
identified sources of value and assumptions,
and thoughtful approach.
3.
A clear and compelling assessment that can be
easily absorbed by judges
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Other advice we give to
GSVC entrants
• Make sure Theory of Change is consistent
with the social impact you predict through
the SROI
• Support your assumptions with actual
data and/or outside sources whenever
possible
• Include both positive and negative
outcomes
• State how venture will monitor return
over time
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Read the winning SROIs from 2009!
• On www.gsvc.org under Resource Library SIA examples.
• Everyone should read Human Service Fellowship. It’s
one of the best GSVC SIA I’ve ever seen.
• http://www.gsvc.org/docs/HumanServiceFellowshipSROIv2
.pdf
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