How do you demonstrate social value on the balance sheet?

For many entrepreneurs and social entrepreneurs the potential positive impact on the world is as important are providing a healthy financial return for the investors.

Often the definition of healthy return needs to be understood in the context of the social, environmental or civic goals of the enterprise. Healthy return is not "maximized" returns. The values of the founders/owners impact issues ranging from material and vendor sourcing, to hiring, and the donations of time and money. All of this will have a direct impact of the traditional financial bottom line.

Regular financial reporting to stakeholders provides a feedback on the financial goals. It provides a literal bottom line of evaluation. What creative ways are there to demonstrate the "double bottom line" -- and reflect the positive return on the values investment to stakeholders?

This reminds me of Bhutan's Gross National Happiness (as opposed to Gross National Product ). A method that is put forward in the field of economics to measure such impacts is the Genuine Progress Indicator. While this doesn't perfectly fill the bill here, it does suggest a methodology. The first thing you would have to do is to define the impacts you wish to measure. Next, you would have to weight them. Your "social balance sheet" could then be constructed with an explanation of the means used to develop the figures. I would think a "social income statement" would be even more meaningful because while the former would describe a point in time, the latter would show the impact over time.

There are several methods available when it comes to measuring and reporting the amount of social impact your business made.

One of the most famous method is called "Social Return On Investment ". It's about measuring the effect your activity and production has on a group of beneficiaries by means of asking them which aspects of their life did materially change (change in revenue, or in behavior). You then ask them how much they value this change compared to material goods or services with known market value or you value this change by estimating the cost savings it allowed. You can then put a number on the change you make. In the end, you compare the cost of your business line with the valuation you got of your production and you get a ratio : the Social Return On Investment.

I tried to implement it on one of my social actions because one of the corporate philanthropists which supported this action asked for it. The SROI ratio you get at the end is not as much important as the (marketing and social) lessons you learn from beneficiaries when implementing the method.