socially marketing

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.

The social capital marketplace that socialmarkets advocates is a relatively new idea, but is clearly gaining traction - and visibility.

We were delighted to see this article in the Financial Times by Sean Stannard-Stockton (who also runs the excellent blog at Tactical Philanthropy) describing a future where social capital markets are the norm, not the exception, across the nonprofit sector.

His vision offers a model of nonprofit funding that closely mimics today’s for-profit financial markets, perhaps more closely than even we would have guessed. It includes the somewhat hyperbolic story of a nonprofit that defaults on a billion dollar bond issue, shocking the social capital marketplace and tightening credit across the sector.

While such a story may exaggerate the point, it certainly illustrates the potential power of the social capital market model. It also reminds us that such a market is subject to both the rewards and the risks inherent in its successful implementation.

Here are a few more features of this proposed future which resonated particularly strongly with us:

• Turning the tables: Google, IBM and Exxon don’t have to explicitly lobby for investors. There are plenty of third-party agencies offering potential investors both the data they need to make an informed decision and the mechanism to invest once they do. Nonprofits can reap the same benefit from similar tools in their own sector, allowing donation dollars to come looking for them rather than the other way around. Music to our ears, as well as to the legions of nonprofit staff who spend way too much of their time scrambling for financial support.

• Not your father’s marketplace: The social capital marketplace will inevitably differentiate itself from the financial marketplace it is modeled upon, a direct result of the people behind the market. The fortunes being sought by social capitalists go beyond the simple dollars of their finance counterparts, including the human, environmental and spiritual enrichment that defines multi-bottom-line accounting. The common goal of greater social impact will motivate both donors and nonprofits to share their experiences and related information, forming the tight community that keeps the social capital markets humming.