Photo: Loren Joseph
Intuitively, social initiatives create value and social good —whether it’s from increasing equality and improving well-being to reducing carbon footprints and saving an endangered species.
The ProSocial Valuation Service introduces a consistent and credible accounting of the value created by programs, organizations and partnerships designed to benefit civil society, and delivers information to better inform decisions.
The outcomes, and the values of the outcomes, are specific to the context, activity, and the stakeholders involved with the program being valued. But PSV’s methodology is consistent, proven and aligned with principles underlying social accounting and audit, sustainability reporting, cost benefit analysis, financial accounting and evaluation practice.
When creating the methodology to measure social good, we created a process and an algorithm.
Then we defined a new way of thinking about value.
One that recognizes that investments in good should be based on evidence-backed outcomes.
One that swaps judgments based on instinct or gut feeling for real data and outcomes, so opportunities can be compared like-for-like.
Our mathematical grounding, and use of primary research and transparency around the numbers, resonates equally with C-suite executives, impact investors, strategic philanthropists, foundation decision makers and elected officials.
Heart + Smart in Social Good
We use a seven-step process to get to the heart of value.
Step One: Inputs. The starting point of the ProSocial Valuation is identifying the type(s) of social capital created. These inputs are as varied as the missions behind the world’s five million-plus nonprofits and NGOs.
Step Two: Outputs. This combines primary research and crunching reams of raw data. For example, the social good created by reducing reoffending among prisoners is greater than the mere savings of fewer prison bed days, and may include benefits like safer communities and reunited families.
Step Three: Outcomes. These take many forms such as behavior changes, attitude shifts, capacity building and neighborhood development. For each verifiable outcome we plug in the associated numbers and values. And because not all good efforts lead to good impact, we account for the negative too. For example, Toms Shoes assumed that providing free shoes would improve the overall quality of life for people receiving them. However, in-kind donations replaced local markets and hurt the economy of the community served.
Step Four: Velocity. Every city, country and region in the world has a preassigned value based on a weighted index of population, social media influence and soft power—the ability to persuade by attraction and persuasion rather than by coercion or force.
Step Five: Intangibles. The saying goes that not everything that counts can be counted, and not everything that can be counted counts. It is something we must consider when conducting ProSocial Valuations. For example, the difficulty measuring a concept such as innovation tends to favor risk-averse initiatives—which are rarely the most effective route to solving big social problems.
To account for these drivers of substantial social progress and predictors of scalability, we reviewed case studies of nonprofits from more than 40 countries, identifying six intangibles shared by those that outperformed others in their category.
Audacity: Big bold solutions—ones that tackle chronic problems over temporary ones and address underlying causes rather than merely treating symptoms—create more value.
Connectivity: Engaging with the communities being served—and creating buy-in among the many constituencies who can affect the outcomes—creates more value than top-down programs.
Capacity: Organizations that use data to understand trends, predict behavior and improve can create more social capital than those which operate by gut and instinct.
The other three intangibles that drive value are ingenuity (disrupting entrenched approaches with innovative solutions), tenacity (leveraging the time, relationships and resources required to persevere) and diversity (generating revenue from multiple sources).
To convert the intangible scores into currency we turned to the financial markets. Analyzing the average share of intangible assets on the balance sheets of publicly-traded companies on the world’s major stock exchanges—New York, London, Tokyo, Shanghai, Bombay, Euronext (Amsterdam), Deutsche Boerse (Frankfurt) and BM&F Bovespa (São Paulo)—each intangible is assigned a pre-defined weight. The weightings for each of the six intangibles vary but a perfect score on each adds up to 100. Our unique ProSocial algorithm then calculates the value of each intangible by multiplying its pre-assigned weight by its individual score and velocity.
Step Six: Social Capital. We add the outcomes, velocity and intangibles to arrive at the value of social capital created. This is a dollar value representation of the primary effects of the program on people and planet.
Step Seven: Return On Purpose. Dividing the social capital created by the budget and all other non-financial costs results in the full-picture assessment of value.