Social Impact is More than Just a Fad and Evaluation Plays an Integral Part

Social enterprise is trendy. It’s a popular topic of conversation on Twitter.[1] It’s been featured on Shark Tank. And new associations and nonprofits are popping up to help social entrepreneurs succeed.

As evaluators, we work every day to help all kinds of organizations—from large corporations to small nonprofits—to measure their social impact. And through that work, we have uncovered five underlying trends that we believe are contributing to this increased focus on social enterprise:

• Increasing sophistication about what social impact really means. Thanks to years of groundwork laid in the nonprofit sector by earlier generations of evaluators, we no longer equate outputs with social impact. Whether as donors or consumers, we expect the organizations we support to make a significant difference related to their social impact mission.
• A competitive global marketplace and the subsequent need to differentiate. Enterprises are no longer competing with just the store next door or the other leading product. They are competing for customers and loyalty on several dimensions. Many enterprises have made social impact a differentiator to attract and retain customers. A former BP executive estimates that 30 percent of the value in a company can be connected to the good it does in society.
• Unprecedented individual access to information. For every decision we make, consumers can consult both expert analysis and crowd-sourced opinions. With this access to information, it is much easier to factor an enterprise’s social impact into account when choosing among products or services.
• People (and especially Millennials) have heightened expectations about making a social impact in their work and lives. Those expectations have increased with the rise of web-based activism—which is helping to shift the values and behaviors of corporate shareholders and management (as when Microsoft announced in 2013 it would meet regularly with activists). More and more, enterprises are realizing that they must articulate a clear sense of purpose in order to retain customers, employees, and investors.
• New structures support social enterprises. Minnesota’s 2015 adoption of the public benefit structure of incorporation builds on earlier work by B-lab and other organizations to help enterprises define their social impact. Now, enterprises that want to make a social impact have access to networks, advisors, tools, and corporate structures that can help them make a difference. Social investment funds and other financing mechanisms are giving social enterprises a boost by allocating resources based on impact rather than just profit.

Evaluation is not just an add-on to social enterprise – it’s at the heart of it. For more than half a century, nonprofit and public sector organizations have turned to evaluation to measure their contributions toward social goals and articulate progress with funders and supporters.

Now, the for-profit world is experiencing the same need. Without the ability to back up their claims of social impact with authentic, credible information, companies risk exposing themselves to an authenticity gap that can damage their relationships with customers, employees, and investors. Wherever they sit on the spectrum of social values, from Hobby Lobby to Target, companies find they need to back up their particular brand of social impact with action. Think about these two stories:

• Hobby Lobby is well-known for its religious values, and has fought for them in court. However, some employees and community leaders have voiced significant dissatisfaction with the brand, claiming that its sourcing and scheduling practices do not follow these values.
• Target has generally associated itself with progressive values, which is why customers were upset in 2010 when the company’s donation to a conservative political campaign was uncovered. Since then, Target has taken steps to shore up its progressive image with changes to its toy aisles and bathroom policies.

How can evaluation help? The evaluation process can help organizations articulate their social values and determine what impact is realistic and measurable. Then, it can help them align their operations (including sourcing, employment, and giving) with their values. Finally, evaluation can help organizations communicate that information with clients, employees, and investors. 

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