What gets measured gets valued (as well as improved upon).  Tracking and evaluating the social return on investment (SROI) is today’s Plastics. It’s the future of sustainability–nay–the future of business. Period.

While stakeholder demand for sustainability and the impact of companies’ actions grows, evaluation methodologies and criteria still resemble the Wild West.  There’s no standard metric and there are dueling points of view on how to capture the impact of a social action. So with the disclaimer that it’s tricky to capture the total impact of your efforts, you’d be a lousy businessperson if you didn’t try.

Why measure social impact and outcomes:

• It improves your program management and makes your program planning and management more effective;
• You have a clearer grasp of the impact of your work (is the impact greater or less than you judged it to be?);
• You can communication of the total value of your work to internal (employees) and external (consumers, investors, suppliers, community) stakeholders; and
• More attention is paid to the social, environmental and economic value that your business creates.

As you set your sustainability goals and strategy, think about inputs, outputs, outcomes and impacts. I took this process and these definitions from a New Economics report on measuring social impact. It’s a helpful framework to think about measurement and outcome when you are creating, and later managing and evaluating, your sustainability initiatives.

• Inputs: resources invested in your activity
  
• Outputs: direct and tangible products from the activity, i.e., people trained, trees planted, products sold
• Outcomes: changes to people resulting from the activity, i.e., a new job, increased income, improved nutrition
• Impact = outcomes less an estimate of what would have happened anyway

Tools to measure SROI:

1. Mission Measurement helps companies, foundations, and governments track their efforts to effect social change and make them better at it.
2. True Impact has services and online tools to quantify financial, social, and environmental impacts to build support among your key stakeholders, guide investment and increase ROI.  The tools and services are focused on sustainability (social and environmental), grants and volunteerism.
3. AngelPoints‘ tools and services help companies measure the impact of their CSR and sustainability programs. AngelPoints is a leader in tracking and measuring employee volunteer involvement and giving, but it also helps companies manage waste and carbon reduction efforts.
4. Proving and Improving is an impact toolkit for social enterprises, nonprofits and volunteer organizations to measure and communicate their impact.
5. ISIS Accelerator is a suite of tools including a sustainability Compass and Stratesphere, which guides you through strategic planning, management and evaluation.
6. SROI Excel Model from REDF provides instructions on calculating the SROI of your social purpose enterprise. If you’re a social enterprise who can’t spend on consultants, give this a go.

These are just some of the of tools that aim to capture sustainability impacts. The Foundation Center has a terrific list of additional methodologies and and tools that help companies gauge specific specific outcomes like social return on an investment in a microfinance institution or (KaBOOM’s) the impact assessment of a project on local neighborhoods.

We’ve heard from entrepreneurs before on this blog about the importance of building a network that can support and guide your social enterprise. While he was developing Energy Inside, Veer Gidwaney “networked pretty aggressively over a couple of years,” and Teju Ravilochan who co-founded the Unreasonable Institute “went to where the action was.”

Conferences can be a black hole of time and money or they can deliver you your big break. To help you prepare for scenario number two I asked David Wilcox to share the tactics he uses at the four to five conferences he attends each month. Through his company, ReachScale, David unites companies with social enterprises that can be scaled to create a significant impact in the companies’ interest area. He attends conferences to make these connections and create new programs based on the latest trends and information.

Listen to our conversation or right-click and save for the MP3.

Download audio file (Cause-Capitalism_David-Wilcox.mp3)

Key Points:

Preparation

• Determine whether your idea or opportunity is of interest or value to the people with whom you’re trying to connect. If it is, then be confident when you approach people to talk about it.
• Look at the speaker list before the conference. Do you know anyone in the speakers’ companies or networks? Do you share a specific interest with any speakers? David spends several hours researching speakers before each conference.

Participation

• It’s all about participation, not promotion.  Think up interesting questions to ask the speakers and panelists. This gives you access to the speakers in a new way because it turns you into a participant. David gets 5-15 business cards at a conference just from people who liked the questions he asked.
• Learn to focus on talking about your idea or the issue, not yourself or your company. This means couching what you want to present in trends and opportunities.
• Introduce yourself to the speakers and exchange cards before the session starts to avoid the post-session queue for the speaker’s attention.
• Avoid office work at the conference and stay out of the hallways and off your phone as much as possible. Attend as many sessions as you can.

If you have a company looking for an innovative way to develop employee skills and grow brand awareness and stakeholder engagement or you are a social entrepreneur, connect with David on LinkedIn.  You can see the conferences he’s attended and where he’s headed on the lower right-hand bar of his site.

In between profiteering and starry-eyed do-gooding is a place where values can incur value.  This is the place of Human Impact + Profit (HIP), a methodology created by R. Paul Herman that aims to help investors and businesses make money while solving key human needs.  Companies that deliver human impact and profit can gain a magic combination of higher revenue, lower costs, optimal taxes and higher investment demand.

I invited Paul to Cause Capitalism to talk about how investors can use the HIP methodology to guide their investment decisions, as well as how entrepreneurs can apply it to create businesses that seek to deliver human impact and profit for shareholders.

Click the player to listen to my conversation with Paul or right-click and save for the MP3.

Paul’s new book,  The HIP Investor: Make Bigger Profits by Building a Better World, shares how to perform a quantitative assessment of your company’s HIP potential, analyzes the products, metrics and decision-making practices of the most and least HIP companies in the S&P 500 and provides questions and tools to help you build a solid HIP portfolio across all asset types.

The HIP methodology uses 30 indicators to gauge a company’s output in the categories of health, wealth, earth, equality and trust (inspired by Maslow’s hierarchy of needs) and to measure how each can drive financial value.  This approach prioritizes measurable results over policies and philosophies.

In the beginning of the interview I confessed to Paul that I thought socially responsible investing (SRI) did outperform traditional investing.  The short answer is that SRI tends to lag behind traditional investing in up markets but can provide better cushion in down markets.  Paul explained why this is:

“The SRI approach focuses on negative screening, which means that companies that are perceived as negative or have products with perceived negative impact are kicked out of your investment universe.  This increases the risk of your portfolio and has tended to depress the return.  The second thing that happens with socially responsible investing is that those who do it focus on policy evaluations and operating practices.  But these factors don’t actually correlate with better financial performance.  [The HIP methodology] focuses on quantifiable results–what are the true outcomes in the categories of health, wealth, earth, equality and trust?  And how do these outcomes drive financial value?  When you do this, you find that sustainability factors, the metrics of results, actually can drive financial performance in a way that can beat traditional investment.”

About R. Paul Herman
Paul created the HIP methodology and founded HIP Investor Inc., an investment advisor, to help investors realize higher Human Impact + Profit.  He advises investors and manages portfolios (including the HIP 100 Index) using the HIP Scorecard featured in Fast Company magazine and in The HIP Investor book (John Wiley & Sons 2010).

Paul was part of the team that designed the sustainability scorecard for Walmart, which is now part of the Sustainability Consortium.  He has worked with social enterprises Ashoka and Omidyar Network, and consulted with McKinsey & Co.  He is a member of Investors’ Circle and an advisor to Net Impact.  Paul earned a degree from the Wharton School.  Paul has been quoted in the Wall Street Journal, Fortune, Forbes, BusinessWeek, and on CNN and CNBC.  Grameen Bank founder Muhammad Yunus called the HIP Scorecard “a new yardstick for business” in his book, Creating a World without Poverty: Social Business and the Future of Capitalism.

Like this interview?  You can thank Paul on Twitter like this and follow him at @HIPInvestor.

Part of building a successful business is being able to let other people tell you how to do it better.  Companies that set up mechanisms to learn from their employees, particularly those at the base of the company who do automated work and aren’t brought into weekly meetings to voice their say, see economic gain and happier employees.

Great Little Box, a packaging company in Canada, realized that the people executing the orders and deliveries were responsible for the bulk of what the company did and for nearly all of its public perception in terms of accuracy, timeliness and general customer experience. The company began offering financial incentives for catching errors in work orders, encouraging employees to pay more attention and to take action when they found an inaccuracy.  A tangential program offered employees up to CAN$2,500 when his or her idea to cut costs was implemented.  As a result of this Idea Recognition Program, the company was able to cut costs by CAN$25,000, ten times the amount it invested in the reward.  This example was taken from the recent study, Profit at the Bottom of the Ladder.

Here’s another option. A developer I used to work with started a program where the development team would spend a half day per month shadowing other employees.  By observing how other employees did their work, the developers were often able to code up shortcuts to automate or streamline tasks, which boosted company productivity considerably and shrank the knowledge gap between departments.

Grassroots isn’t just a term for political activism or nonprofit fundraising.  Amy Skoczlas Cole, who directs eBay’s Green Team, commits to getting employee feedback on the company’s goals from the beginning. “Don’t let big decisions get made without employee consultation and consideration.  While major decisions happen at the executive level, eBay’s sustainability efforts have been much more grassroots in nature.”  A simple note here: ask your employees what they think when there’s still time for their response to have an impact.

This point is often overlooked.  Your do-gooding and good deeding aren’t a substitute for marketing.  Customers can’t love you for what you do if they don’t know you.  At this point you might be thinking:

But Wait!  One of the benefits of a social mission is the visibility it brings to my company.  I’ve even heard–from this very site–that social responsiblity programs can be funded with the marketing budget because they’ll bring publicity.

The whole truth is that a social mission helps, but doesn’t cover it. Even Stonyfield Farm, a virtuoso of guerilla marketing tactics, put effort into its marketing to build its brand 17 years ago.  Here are some ideas you can use to brand your company without robbing your social programs.

Put a face on it
Choose a spokesperson from your company who cultivates his or her expertise in the field.  World of Good did this well. Co-founder Priya Haji speaks* on social enterprise and fair trade and has become the public face of the company.  Zappos’ Tony Hsieh is another great example; while turning Zappos into a marvelous company, Tony talked about how he was doing it, creating an ethos around Zappos that MBA students, employees and customers love.

It doesn’t start with conference keynotes or articles for Inc.  Connect with a community on Twitter that cares about your issue–free trade, landfill diversion, employee empowerment or cupcakes.  Solicit people’s opinions, share what you’re doing and promote their work and thoughts.  This (just basic networking) shapes you as a connector and leader in the space.  Set up search terms that help you flag conversations like ‘recycled paper’ For New Leaf Paper, for example.

Blog (there’s a reason I’m not the first person to tell you that blogging is effective)
Whether you commit to blogging three days per week, once a week or twice monthly, be consistent.  You don’t need to fill your blog with grand ideas.  Sharing how you are building your company and talking about other people, companies, tools or trends in your sector is enough.  37signals’ blog Signal vs. Noise covers design, business, experience, simplicity, the web and culture.  It’s a daily read for the tech community.

Tap your community
Richard Seireeni calls this the Gort Cloud–an abstract network of trendspotters, advocacy groups, business alliances, certifying organizations and social networks.  Seventh Generation, Tesla Motors and Stonyfield Farm used the Gort Cloud as a partial replacement for traditional marketing.

This list is far from complete.  What other tactics have you used or seen other businesses use successfully?

* An excellent podcast from Priya Haji from Stanford Social Innovations.