The Credibility of Social Enterprise Requires Better Data

The core identity of social enterprises is their social impact.  Supporting the creation of impactful social enterprises is the mission of the Center for Social Enterprise Development.  To jumpstart that creation the Center is bringing to Columbus two successful programs.  From Nashville, SE Catalyst starts its 8-month immersion program this month to support five local nonprofits to bring their social enterprise concepts to launch.  Participating in the program are Boys and Girls Clubs, Community Shares, Educational Service Center of Central Ohio, Gladden Community House, and IMPACT Community Action.  From Cleveland, SEA Change starts its 12-week accelerator program in April and is currently accepting applications for up to 15 participants.

If Columbus is to become The Social Enterprise City, we need a core set of individuals to take the lead in providing startup capital to social entrepreneurs that emerge from these programs.  Institutional capital is moving quickly into impact investing in social enterprise, but I doubt that it will create social impact in our community.  I conclude this because institutional investors focus primarily on financial return.  The Global Impact Investing Network produced its first benchmark for financial returns from institutional investing in social enterprises.  Their benchmark approach presents two problems to our community.  First, it did not consider start-up or angel investing, which is what our community’s social enterprises most need.  Second, it concluded that market returns were possible and especially so from investments in third-world social enterprises.  This focus will perpetuate the current flow of most impact investment to outside the United States, continuing the starvation of our local social enterprises.  This focus also runs the risk of degrading impact investing into a financial decision to invest in conventional companies which are socially responsible and produce market-rate returns but which produce no direct social impact.

To maintain the significance of social enterprise and its emphasis on creating social impact that is profitable, we need to be able to measure social impact and collect data to counter the use of only financial benchmarks to define “good investment.”  To move our community forward, the Center is partnering with Measurement Resources Company to introduce rigorous social impact measurement to local nonprofits and social enterprises.  Sheri Chaney Jones, its president, will speak at our March networking event and she will lead a Center workshop April 20 on measuring social impact.  In addition, the Center and Measurement Resources are running a pilot with OSU Fisher College to see how well Six Sigma standard measures can be extended to include social impact measures as criteria for evaluating process improvements.

Ms. Jones’ research has shown that organizations that regularly measure results and incorporate that information into decision-making display greater operational efficiencies, higher revenues, and superior performance over organizations that do not.  Moreover, she found that nonprofits which have strong measurement cultures are better able to focus on measures that support their mission priorities and to align with funders that focus on similar measures of mission success.

By developing the skills and culture needed to regularly produce measures of social impact, social enterprises will be better able to have their social impact replace financial, market-rate returns as the decisive factors that will attract investors.

Meet our local social enterprises by clicking on their names in our online directory.  The highlighted organizations have impact profiles.  Want to help them produce better and more accurate measures?  Contact me at info@cincohio.com.  Want to see all their activity, check out our Facebook page.

Allen Proctor, President & CEO, Center for Social Enterprise Development

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