Social Innovation

What is social capital value and how do we measure it?

Players of Norway and Scotland greet before their soccer match at the 12th Homeless World Cup soccer tournament in Santiago October 19, 2014. Some 52 teams, including 12 women teams, took part in the tournament which start on Sunday until October 26th. Participants of the tournament are either asylum seekers, homeless or in drug or alcohol rehabilitation. REUTERS/Ivan Alvarado (CHILE - Tags: SPORT SOCCER SOCIETY) - RTR4ARAX

Players of Norway and Scotland greet before their soccer match at the Homeless World Cup in Santiago. Image: REUTERS/Ivan Alvarado

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The Homeless World Cup uses football as a tool for getting homeless people off the streets. It operates in 74 different countries, then organizes an annual tournament. It is a simple idea that has had a huge impact.

Research carried out by ProSocial Valuation and Performance Research showed the Homeless World Cup generated social capital value of a staggering $364 million last year, and that is a conservative estimate.

But what is social capital value? Simply put, it is a way to measure the impact of projects, such as the Homeless World Cup, in a language that governments, corporations and the media can understand.

There’s been a zeitgeist shift within our culture: from Milton Friedman’s shareholder capitalism, where the goal of a business is to maximise profits for shareholders as a reward for investing in the company; to stakeholder capitalism, which accounts for the needs of the larger ecosystem in which businesses operate.

Evidence of this shift toward good can be seen on Wall Street, Main Street and Madison Avenue.

• The rise of Benefit (B) Corporations. Launched in 2006, more than 2,500 companies have become certified B Corps: for-profit companies certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency.

• Impact investing – financing with the intent of generating positive social impact alongside financial return – hitting the mainstream.

• The shift from cause-marketing, which links donation to a non-profit to buying something; to advocacy branding, which rewards people for doing something, such as volunteering.

• The explosion of crowdfunding, which has democratised philanthropy, allowing people to support projects with modest contributions, spurring funding of social enterprises worldwide.

• New models such as the social bond initiated in 2016 by Starbucks to support a stable of ethical coffee growers.

Clearly, two of the biggest trends impacting business today are social media and social responsibility, or social opportunity. While often treated as two separate strands, these are inextricably linked.

In a world where what you do with your time and influence is a large part of how much influence people want to give you, a strong social good idea becomes a rallying cry for the entire organisation.

Sociability is not about superficial conversations. Done right, it opens doors through which people can enter and play a role in your organisation. Increasingly, organisations of all types – public, private and non-profit teams, entertainers, Fortune 500 companies, start-ups, social entrepreneurs – are grounding their strategy for value creation in social purpose.

As the world shrinks and our connectivity increases, some of the most important values in business are not “what I can get out of others”, but “what I can give, how I can be of service, and what opportunities can I create in which we can all win”.

For decades, price, quality, and convenience have been the principal drivers of consumer purchasing decisions. Today, those drivers are competing with another important motivator: social capital. Individuals and corporations are turning attention to social good in response to new forms of communication and access to information that cast a spotlight on the values people, organisations and businesses reflect.

Opening the black box on good

Yet, for all the momentum around good and all the good being done, current approaches to valuing what is good are broken. Primary problems include:

• Measuring outputs rather than outcomes.

• Rewarding compliance rather than innovation.

• A lack of transparency.

• A lack of a universal currency to ascertain the amount of social capital created.

In sum, there is no tool to aid decisions on what to sponsor, where to donate, where to volunteer and which organisation to advocate for – decisions that determine which initiatives and movements will survive and thrive and which will not.

So we set out to transform the space, applying the transformative power of big data and big insights to social good programs. We are known for the frames we developed to value and measure sponsorship return on investment (ROI). This time around rather than assessing social good investments through the lens of what it produced for brands and rights-holders, we would look at value through the lens of the beneficiaries and society at large.

We call this social capital, using the term broadly to refer to all kinds of good, from support of cultural heritage and STEM education, to hunger relief and environmental sustainability. The vehicle we devised to measure it is ProSocial Valuation (PSV). PSV is:

• Agnostic. From cultural heritage to homelessness, we value social capital of all types.

• Transparent. We are explicit about what is valued, the value assigned and how we reach our conclusions.

• Data-driven. Each assignment of value is supported by primary research.

• Universal. PSV introduces a universally understood unit of impact for measuring social capital, enabling comparisons across categories and initiatives.

• Actionable. More than a tool for justification, PSV leads to improvements in effectiveness and efficiencies.

Equipped with these founding principles, we put together a team of thought leading researchers, marketers, social scientists, valuation experts, mathematicians, partnership specialists and designers.

How we calculate social capital

Step one, we define the inputs, the types of social capital created.

Step two, we model the outputs, or values, for each type of social capital created.

Third, based on primary research, we assess and incorporate the outcomes achieved.

Fourth, we account for velocity. Every city, country and region is valued using a weighted index that accounts for population, social media influence and soft power – the ability to persuade by attraction and persuasion rather than by coercion or force. This calculation is based on the market or markets in which the programme is held.

But, not everything that counts can be counted, and not everything that can be counted counts. The inability to measure innovation, for example, tends to favour risk-averse initiatives, which are rarely the most effective route to solving big social problems. And so, by researching hundreds of programs in more than 40 countries, we identified the six intangible qualities that most influence value and have the power to advance substantial and sustainable progress and social capital. These are:

1) Audacity. Envisioning big and bold solutions like tackling chronic problems over temporary ones, addressing underlying causes rather than merely treating symptoms.

2) Connectivity. Deeply engaging with the communities being served and creating buy-in among the many constituencies who can affect the outcomes.

3) Capacity. Using data to understand trends, predict behaviour and improve.

4) Ingenuity. Disrupting entrenched approaches with innovative solutions.

5) Tenacity. Leveraging the time, relationships, sweat and resources required to persevere.

6) Diversity. Generating revenue and support from multiple sources.

To establish ranges for these intangibles, we turn to financial markets, analysing the average share of intangible assets on the balance sheets of publicly traded companies on the world’s major stock exchanges – NYC, London, Tokyo, Shanghai, Bombay, Euronext (Amsterdam), Deutsche Boerse (Frankfurt) and BM&F Bovespa (Sao Paulo). The companies on these exchanges cover over 50% of total global market capitalisation.

We assess each intangible by its rank and weight relative to the other five, its individual score and its contribution to outcomes.

We add together the value of the outcomes, velocity and intangibles to arrive at the total social capital value created.

Sixth and finally, we divide this sum by the budget to arrive at a figure for social ROI.

A good revolution

Professor Sinan Aral of the MIT Sloan School of Management has said: “Revolutions in science have often been preceded by revolutions in measurement.”

Now that we can quantify the relevance of social goods like health and wellness, cultural capital and STEM education in a way consumers, investors, employees, governments and all stakeholders understand, we can use market forces to engage companies and investors to create more investment in more good, creating even more social and economic value.

ProSocial Valuation responds to the increasing pressure from donors and investors for concrete measures of success and radical transparency.

It creates a new vocabulary for non-profits, foundations, businesses and governments to engage with stakeholders around social good using economically valuable measures.

These new measures show the true value of organisations like the Homeless World Cup. When we understand their immense value, investment will surely follow and then society will undoubtedly benefit. We want a better world and certainly a world without homelessness.

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