Social Venture Sophistry

Here is the fundamental sophistry in social venture talk. When a business does financial good and social bad, we say it has one bottom line, financial. When a business allegedly does financial good and social good we say it has two bottom lines. Now why don't we say that all businesses have two bottom lines and that in many cases the social bottom line is negative? Because if we said that in corporate sponsored media our advertisers would desert us. Until all businesses are measured on both bottom lines the accounting for social benefit is fraudulent, like a business that only accounts for gains, not losses. Surely, this is obvious.  When capitalism has to add a second bottom line, incommensurable with the first, and refuses to net the two, it has already acknowledged the inadequacy of its own conceptual framework. Social Venture accounting is fuzzy math. This conclusion will slowly dawn on the MBAs who will soon run, as I do, naked and raving through the streets.

Comments

[Sean Stannard-Stockton]

All forms of human endeavor produce outcomes. These outcomes can be measured in many ways. How we measure something does not effect the outcome nor does not measuring something mean it doesn't exist (well, except maybe in quantum physics...).

So I agree that all businesses have multiple effects on the world. Choosing to measure only the profit outcome and ignoring other outcomes does not mean those other outcomes are unimportant or don't exist. I think the double (or triple) bottom line debate is really just a debate about what we should measure.

I do think that the measurement of social or environmental outcomes is "fuzzy math", some things are very hard to measure, especially when the things we are measuring is at least somewhat subjective. I think that before we go out measuring these social outcomes we should recognize that we're not going to be able to put exact numbers on them.

Let's using measuring literature as an example. Surly we know that certain books are "better" than others, and that some have a larger impact than others. But we can't measure the outcome to the fifth decimal place. Similarly we should recognize that social outcomes in the for profit/nonprofit sector should and can be measured, but that the units of measurement will be very different from profit measurements and that netting the two will be difficult to do in any exacting way.

But let us not refuse to measure something just because it is difficult.

[Phil]

How would you go about measuring the impact of Halliburton, say, on People, Planet, and Profit? How would you benchmark that? Would you have access to the data, even? Would it situation be sufficiently transparent that you could even characterize it appropriately? Where at Halliburton would you begin your investigation? In the PR Dept? Would their office of General Counsel claim that certain studies of effects on people and planet were under the seal of attorny client privilege? Would you need supoena powers even to get at info not subject to attorney client privilege? How much would be said to be classified top secret under government contracts? When you had found as much info as you could, how would you weigh the various factors? When the PR departments tells you to heavily factor in "spreading democracy and freedom around the globe" is a major plus that outweighs the apparent negatives, how would you factor that into your analysis? And would Heritage Foundation, or some other conservative organization agree? How can you keep these judgements from being not only subjective, but polemical and political?

I agree with your analogy with drama criticism or maybe restaurant rating guides. But there is a difference, in rating a restaurant or a book the subject matter is ready to hand - a meal or a book - in rating a company the most important info is not public. A company poisoning the air or water, for example, will not report that info voluntarily. If they know a particular ingredient in a product is inexpensive but harmful, they may not disclose it.

So, when you come up with the rating, what you have done is to put a premium from the company's standpoint on keeping certain info private, lest if hurt their brand.

Basing ratings on what companies share openly is that the idea? Or does the rating agency hire investigative journalists? Detectives?

Won't we have spin doctors on both sides, and not too much more?

[Sean Stannard-Stockton]

Maybe the thing to do is start with companies that claim they are having a social impact or managing to a double bottom line. While they still might hide info, the more relevant issue would be whether what they said they were doing was actually having a positive impact. I think the relevant measurement would not be the "good" they were doing, but the effectiveness with which they pursued the social mission they set out to tackle. Whether they were advocating the "furthering of democracy" or "human rights", the measurement would be the degree to which they achieved their stated goal.

If a company had no stated social goals, studying their social impact would be purely subjective. Nothing wrong with that, but it would be a different kind of practice then my first example.

[Phil]

OK, interesting. So the first step is simply to evaluate the social goals and impact. Would the firm itself offer its own assessment? Would outside agencies offer opinions? But the whole deal would be blind to the social harms the firm is running up elsewhere? My point is that this could easily be "greenwashing." A firm making clothing in sweat shops in Thailand could provide grants to help aids victims in Burma. In applauding their efforts in Burma, as lifting their social bottom line, do we simply ignore the sweatshops?

Isn't this really "ennabling" behavior, where we are providing corporations with an easy way out, an easy way to window dress the brand? "Up up with People" - Disney sentiments, while the reality of what is being done is much darker and happens off stage, with a tacit agreement that we not talk about it, but emphasize the positive?

"To chase the cape," do you know that expression? On your plan a company would get socially conscious investors to "Chase the cape." Whatever the ills, whatever the negative "externalities," we would always be carefully measuring the success of their tiny symbolic socially aligned token projects. As for the ills, they don't count in the social audit because the company doesn't care about them and has not targetted them for improvement?

I can see how your proposal might help position a firm to provide such greenwashing as a service to corporations, but it won't save the planet.

[Kevin Jones]

the new b corporation rating system can solve part of this, if it gets adopted. it is a new and serious attempt to reconfigure the legal nature of the corporation; the for benefit corporation. and to validate that new legal mechanism http://www.xigi.net/index.php?map=entity&map_en=1000689

[Phil]

Thanks. Blogged it.