There are no shortage of tools to gauge the social impact of business. There were more than 150 different measures at the last count. But the social impact assessment landscape is missing a platform that allows the company and stakeholders, including the public, to share information in a truly transparent, comparative manner.
Existing social impact assessments tend to focus too much on ESG and social enterprises, underplaying the role of business activity and related financial, employment and other social impact gains. Their outcomes tend to be pre-prescribed by the investor and orientated to new investing activity rather than measuring broader holistic impact.
There is also too much of a focus on social enterprises when measuring impact.
In an effort to provide greater accessibility and transparency, I’ve been working with Dr Robyn Klingler-Vidra of King’s College London to develop a more holistic approach called the External Rate of Return. Our aim is to develop the ERR platform to be the destination for companies and stakeholders to engage in discussions and assess the impact of companies, and the new activities of those firms around the globe.
ERR is intended for all companies, not just social enterprises or those with ESG departments or investors pursuing an impact investing approach.
A key feature is that the platform would take a more social approach to impact assessments. Rather than being merely a repository of company information or industry best practice, it would directly engage with the public and other key stakeholders, providing a space where ‘social pressure’ can help build more transparent and accountable business activities.
Companies would be encouraged to share their processes and data within five proposed areas: the company, suppliers, customers, society and the environment across a wide range of indicators including employment, gender diversity, the use of renewable materials and innovation. In addition to providing qualitative insights, companies would propose a score out of five for each indicator.
Crucially, the platform would allow the public – and other stakeholders – to comment and provide an alternative score. This would be displayed alongside the company’s own score. This side-by-side comparison of scores would allow the company, the public, its suppliers, customers and other stakeholders to engage in an ongoing conversation about the economic and social impact of the company in an informed, area-specific manner.
The crowdsourcing of impact scoring would add to the viral nature of the assessment method. Rather than yet another assessment method that suggests a ranking, the ERR would be the platform for companies and external stakeholders to share information about the impact of their activities. Above all the ERR will enable an ongoing dialogue across the global community about the myriad ways business activities affect people and places.
Investors, consumers, employees and government need to build an alliance that encourages businesses to focus on their holistic measure of how a business impacts upon society as a whole. The results will surprise many who presume we can live without capitalism, as it shows the relentless contribution that business makes to our everyday life across a range of metrics – but is also able to hold business to account – and this goes for customers as much as shareholders.
Through the radical transparency of the platform, a wide range of users will be able to measure and compare the impact of all types of business ventures in a holistic and consistent manner. Furthermore, through the ERR platform, companies, customers and the public could at large engage in on-going dialogue about the ongoing impact of a business’s activities.
Mark Florman is chairman of LPEQ, an industry body for listed private equity firms, and CEO of the strategic consultancy firm Time Partners. He was CEO of the British Private Equity & Venture Capital Association from 2011 and 2013 and is one of the leading advocates of responsible investing.