Mcmillek

--Mcmillek (talk) 21:36, 18 July 2012 (UTC) Social Enterprise and Triple Bottom Line Reporting The term “social entrepreneur,” became popularized in the early 1980’s by Ashoka’s founder Bill Drayton, whose work won him the Universal Peace Award December 12, 2009 (Ashoka, 2009), and Ed Skloot from New Ventures. These men helped nonprofits and social innovators explore new income sources at a time when philanthropic and governmental funding for not-for-profits was becoming more competitive and scarce (Eikenberry and Kluver, 2004).

The general business patterns associated with social entrepreneurial (SE) practice emphasize triple bottom line reporting across social, environmental, and business sectors. There has been a shift in managerial tactics within social enterprise, nonprofit, commercial, and governmental business toward greater accountability and value added reporting (Evraert, 1998). This is due largely to higher expectations among investors, consumers and communities. Greater importance is being placed on transparent business practices with more comprehensive social, environmental and financial accountability.

The Benefit Corporation, "B-Corp" One promising reporting entity, the “B-Corporation,” focuses on rating the SME’s numerically based upon their leadership, environmental friendliness, and consumer and community indices (B-Corporation, 2010). The B-Corporation membership is voluntary with an opt-in certification that helps the consumer devoted to social causes and reporting while turning a profit. The numerical values resulting from a company’s performance must remain above a baseline standard of 80 out of 200 in order to remain in good standing. Though the B-Corporation does not directly disclose which indicators it uses, it grades each company on the broad basis of leadership, community, consumer and environmental values.

Value-Added Accounting Value added statements were used during the 1990’s to quantify volunteer labor and capital in nonprofits (Richmond 1996; Mook 2003). They measured financial value (percentage distribution to stakeholders), and outcome variables (who was affected by the organizational objectives and why), but they failed to influence organizational behavior (Zadek 2007). Value added statements evolved into Richmond’s Social Return on Investment (SROI) framework that monetizes organizational activity, or places a dollar amount on social and market objectives while applying the tools of benefit-cost analysis to assess profitability and success (Richmond 1996; Mook 2003).

The SROI method is rapidly becoming the current state of the art in integrated social accounting because it integrates feedback from the community, employees, consumers, and management into social and environmental impact value. Values are assigned to the indicators in each of these categories forming the numerical equivalent of total return on social benefit. The purpose of employing SROI methods is to capture the qualitative differences that outputs make to those on the receiving end (Clark 2004; Nicholls 2007; NEF 2008).

The SROI formula measures the value of the benefits to relative costs of achieving those benefits (NEF 2008). SROI equals the value of total return on social benefit divided by the total assets (SROI= Net benefits  Net investment). The net income in SROI is equal to the social + financial profit, whereas the net income in ROI is simply the result of the financial profit.

The major difference between traditional financial profitability analysis of return on investment (ROI) and SROI methods is that SROI assessments measure and put financial proxies on outcomes rather than on traditional outputs. The profitability shifts away from purely financial results, as in the case of ROI (a ratio of net income/total assets), to social ROI (a ratio of return on social benefit/total assets). This is valuable because it provides a ratio of SROI performance for a social enterprise company similar to the financial ratios published in the annual reports of larger corporations. Equally as important, the SROI ratio provides organizational feedback in terms of TBL value, accountability, change management and impact assessment that can be transparent to both the company and the public (NEF 2008).

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