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Apr 15, 2015

Knowing the Impact of Our Social Enterprises

The number of social enterprises in Central Ohio is surging.  This year the Center for Social Enterprise Development has been compiling a list of all the companies in Central Ohio which consider themselves to be social enterprises.  The list is ever-changing, but presently includes over 50 businesses.  Over the course of the year we will be publishing  profiles of each company with ways you can support them by giving them your business, investing in them, or volunteering.

Most of these businesses are in the early start-up phase and they are rightly concentrating on getting their businesses going.  If these businesses are to thrive and attract business and investment capital, they will also need to demonstrate their social impact in ways that are objective, measurable, and understandable.

Many social enterprises were created to generate profits to support a nonprofit.  Transferring profits is a means but not an impact.  The impact is what the nonprofit can achieve by using those profits.  While measuring impact has a cost, it is the impact that compels us to give our business to a social enterprise rather than to a competitor.  Since the financial return to investing in a social enterprise can at times be below-market, impact is also “extra return” that justifies shifting some of our investments to social enterprises from conventional start-ups.

While impact can be subjective, a lot of work has been done to identify acceptable measures of impact.  The most extensive catalogue of accepted impact measures is IRIS  “managed by the Global Impact Investing Network (GIIN), a nonprofit organization dedicated to increasing the scale and effectiveness of impact investing. The GIIN offers IRIS as a free public good to support transparency, credibility, and accountability in impact measurement practices across the impact investing industry.”  JP Morgan is one of the founding sponsors of GIIN.

IRIS was designed by impact investors for their use in assessing the social return on their investments.  It draws on standards established by various authorities.  Final decisions for inclusion in the catalog are reached after rigorous consultation with leaders in the field and stakeholders.
IRIS metrics are organized by the type of social enterprise, such as health, early stage, disadvantaged employees, land conservation, or small and growing businesses.  For example, approved metrics for enterprises with a health impact have multiple measures addressing how health is delivered, what services are being delivered, and who is being impacted.

The most relevant metrics for the emerging set of Columbus social enterprises may be the social impact measures used by Toniic (sic), a global network of impact investors focusing on early stage social enterprises.  Toniic has approved fourteen measures which they believe are appropriate for early stage social enterprises.  In addition Toniic provides two free e-guides, one for individuals considering investing in or supporting start-up social enterprises and one on impact measurement.

Using these investor-approved measures, our emerging social enterprises can confidently articulate both a financial return on investment and a social return on investment which will demonstrate their value to our community and merit our support.

Allen J. Proctor

President & CEO, Center for Social Enterprise Development.