socially marketing

Using impact metrics to understand the social sector can take many forms, as seen in these current efforts:

performance measurement: evaluating non-profit effectiveness by measuring their outcomes.

outcomes taxonomy: creating a master list of non-profit outcomes to be used as a sector-wide standard for comparison.

social capital: broadening the definition of capital to capture environmental and other social values.

socialmarkets depends on all these trends, and also pushes them a little further into unknown territory.  This is especially true for the social capital model, like when we mix up ‘regular’ dollars (e.g. a donation to a charity) and social dollars (e.g. the SROI a donation produces).

The name socialmarkets itself goes a long way towards explaining what we do: applying the market model to the social sector.  We believe there are potential benefits to applying economic market principles to the non-profit sector, which is after all, itself an economy.

We do not believe that markets and non-profits are a match made in heaven, and our goal is not to force one onto the other.  Rather, our goal is to explore the boundaries of where the market and social sectors can come together constructively, and where they can’t.

This exploration includes stretching some of the classical market vocabulary.  Take ‘currency‘, for example.  Currency is the very foundation of modern economies, offering a neat method of assigning value to things, and of facilitating their exchange.  Dollars, euros, rubles and the like comprise the hard currencies that make traditional economies go around.

socialmarkets suggests an economy based on the soft currency of SROI (Social Return on Investment.)  Social currency is no good for shopping at the mall, but is excellent for capturing and communicating the social value of non-profit work.

Currency actually flows quite naturally in socialmarkets, but price does not - even though the two terms seem closely related.  We capture the value that non-profits add to society, in the form of social currency - which is not quite the same as coming up with a price.  This distinction illustrates how social markets don’t always mesh neatly with traditional ones.

Traditional economic markets depend on a neat line between profit-maximizing producers and penny-pinching consumers, to guide the market’s invisible hand towards a compromise called ‘price’.

Social markets are more complicated.  The line between the producers and consumers of social capital are fuzzy, and the currency that flows between them is more nuanced than plain dollars.

We are so used to traditional ‘prices’ that we forget how fickle they actually are.  From real estate on a global scale, to a cup of coffee on our own corner, prices often move along surprising trajectories.  There is an entire field of economics devoted to studying (and ironically, rationalizing) the irrational behaviour of prices.

This helps remind us that the price of any thing is just a snapshot of how people value that thing… which suggests a useful definition for social return of any given outcome: a snapshot of how valuable people believe the outcome to be.

When we have more experience with social markets we should be able to make better sense of how price - and other economic jargon - translates into the social economy.  For starters, we can recognize that the boundaries between social and economic currency aren’t all that well-defined in the first place.

Among the many social networks that have sprung up on the web, xigi.net is one of our faves.  Xigi’s target audience is social capitalists, and its mission is to strengthen the connections (especially investments) between the capital market and social service sectors… or as xigi puts it:  “to increase the flow of capital to good.”

Xigi is taking its mission to the next level by coordinating the first-ever Social Capital Markets Conference (SoCap08) in San Francisco later this year.  SoCap08 explains itself like this:

“‘Doing well by doing good’ is becoming the mantra of a new generation of social entrepreneurs and investors. (SoCap08) will bring together these catalytic changemakers - the entrepreneurs who want to change the world and the capital that wants to make it happen.”

I’m excited about this conference, for many reasons.  For starters, it will be great to talk face-to-face with others working in social capital, both to see what they’re up to and to spread the socialmarkets gospel.

On a deeper level, I’m excited about what this conference means for the social capital market space as a whole.  It’s further confirmation of the momentum behind new models of both capitalism and philanthropy - and for what is possible at their intersection.

The idea of directing even a marginally larger slice of the market’s vast resources into the social sector is a mighty powerful one.   I’d love to not just see it happen - I’d love to help make it happen.

I have no doubt ‘08 is just the beginning of a long run of SoCaps.  We will be there to see for ourselves, and it would be great to see you there if you will too.  If not, you can at least follow the action from the SoCap08 site or any of its live (and semi-live) coverage - perhaps even from right here at the socialmarkets blog!

This week’s Newseek has an article entitled “A Stock Exchange for Do-Gooders” about one of the pioneering forays into a social stock exchange. BVS&A, the self-proclaimed “Social and Environmental Stock Exchange” launched in Brazil way back in 2003 with the full support of Bovespa, the actual Brazilian stock exchange.

We are always happy to see positive publicity for social capital markets, especially in such mainstream a venue as Newsweek. BVS&A strongly advocates for corporate donations and has the explicit support of the world’s largest CSR (Corporate Social Responsibility) organization, the United Nations Global Compact.

BVS&A reports nearly $6 million in contributions to date. While they differ from socialmarkets in execution, BVS&A’s founding principles have many similarities to ours - some strikingly so, as highlighted by its founder Celso Grecco in the Newseek article:

• the marketplace needs to “make informed decisions about which projects to fund”
• investments in philanthropic enterprises yield profits in the form of “social dividends“
• BVS&A offers features that “intelligent investors crave: order and transparency“
• BVS&A is a “pioneer in the field called ‘social marketing‘” (our personal fave)

The social capital driving socialmarkets and similar agencies is only as real as you make it. It is not hard to sell the idea of value in educating our youth, housing our homeless or cleaning up our environment, but it is not easy to translate that value into concrete terms.

The concepts and even the vocabulary we use to describe social capital is largely borrowed from “real” capital markets, which makes the translation easier. This suggests an accounting system that mirrors, but is separate from the ledgers that define the bottom line at all but the most avant-garde organizations.

I don’t know if we will ever see (or even need to see) this separation disappear entirely, but I do know that less of it is more better - and that the winds of change are blowing in that direction. Carla Dearing (disclosure note: she is CEO of our fiscal sponsor GivingNet) talks about this on PhilanthroMedia.org, which in turn references this recent Fortune article on how the carbon trading market is helping farmers literally turn manure into money.

Carbon trading is perhaps my favourite example of the ‘new accounting’, where the scope of the bottom line is growing. Not long ago it would have been downright silly to include greenhouse gas emissions in your business plan, let alone on your balance sheet. Now, an increasingly viable carbon trading market has turned silly into savvy, and is drawing in participants from the public, private and nonprofit sectors.

This leap from social to “real” capital is just the tip of the iceberg, and arguably an arbitrary tip at that. Increasing alarm about global warming combined with an increasingly desperate search for new energy sources and myriad other factors to make carbon trading a reality.

But every social ill and issue has its own unique DNA, and is potentially just waiting for the perfect storm of political, social and economic trends to take them off the back burner. I can’t wait to see what market response is induced from a perceived crisis of illiteracy, homelessness or similarly sticky social problem.

I know that social capital markets are not for everyone. I’ve listened to and spoken with many of its detractors in both real and virtual space, and usually find such conversations constructive. But once in a while I’m bumfuzzled by arguments from seemingly reasonable people that slide right off the rational rails.

Yesterday I was directed to this recent review of social capital markets (SCM) on the Gift Hub blog. I found it far more instructive than constructive, at least as an example of the anti-SCM sentiment that borders on the zealous.

In a quite short post, Gift Hub finds space to liken social capital markets to alchemy, and conjures up both William Blake and Jesus to fuel the fire. I find this and similar discounts of SCM both heavy-handed and surprising. SCM’s approach to philanthropy is new and different, but it’s not evil, and can play nicely with others - which begs the question: why can’t we all just get along?

Decisions of charitable giving are as complex as the humans behind them, and as unlikely to be black or white. There are countless considerations behind these decisions, and social capital is one potentially valuable piece of that puzzle.

Even stepping out of the gray, I acknowledge someone could use social capital as the only basis for their selection of charity, just as they might follow only their heart, minister or Ouija board. Giving to charity, which is for now and the foreseeable future a voluntary enterprise, has room for all the above.

Social capital markets is not alchemy or voodoo, but rather a thoughtful model for incorporating some market science into the art of giving. It raises the visibility of social benefits that are often difficult to see, and presents those benefits in familiar, easily understood terms. It is a supplement to, not a substitute for, the grand carnival that is charitable giving.

The social sector above all others is a place where intolerance should not be tolerated. I dunno about Blake, but I believe Jesus would second that emotion.