Saturday, April 26, 2008

Dr. Yunus and Social Business

Dear Colleagues

It is great that Dr. Yunus has put Social Business on the front page of newspapers, into TV news stories and much more into the mainstream of economic discussion. Dr. Yunus's accomplishment in building microcredit in Bangladesh and being recognized for this with a Nobel Peace Prize was remarkable ... and now broadening the development dialog to include social business is another incredible important move.

But as Dr. Yunus recognizes, talking about social business and actually being a social business are not one and the same. He points out that the system of accountancy and the analysis that is done in modern capitalist society assumes that people are very one dimensional ... that everything is about profit and stockholder value. In fact, this is far from the case, and almost everyone is very much more complex and value much more than monetary wealth. But the accountancy metrics being used do not reflect what is needed to assess performance of a social business ... or even to validate that the enterprise is, in fact, a social business.

The development of Community Impact Accountancy (CIA) originated with work done on the analysis of relief and development sector performance in the 1980s. CIA takes the basic logic of GAAP style corporate accounting, but uses the community as the consolidating entity, and uses social value as a component of the entity's balance sheet. This system will serve very well to provide performance metrics for social business and can be used in Dr. Yunus's vision of a Social Business stock market.

The CIA system has the potential for universal application as a means for the public to start holding economic entities accountable for their impact on society ... with CIA the public can now be heard as a stakeholder that matters.

Observations about this are welcomed.


Peter Burgess

Monday, April 7, 2008

What is a social business?

Dear Colleagues

There is a lot of discussion around the question "What is a social business?"

Most of this discussion is inconclusive, in large part because the issues are usually being talked about in something of a vacuum. There is a need for metrics, and the needed metrics are usually not available.

In fact, the metrics that might describe social business are not well defined, and to the extent that they exist at all are rarely applied in practical situations. With this lack of metrics ... the discussion tends to generalities.

Tr-Ac-Net is in the process of developing a system of Social Benefit Accountancy (SBA) which can be applied to a social business situation and will help to determine what is a social business and what is not. Part of the value of SBA is that it helps to give some capacity for nuance ... because what might be a valuable social business in one context may simply be wasting money in another setting, and all sorts of subtle variances that change the character of the entity.

At some level, the goal is to have an ability to document what something IS ... and then separately decide what to call it. It is likely that there will be a very wide range of characteristics that are both subtle in difference and important in difference ... all covering a range of types of social business ... and some not being social business at all. But the driver of this is going to be what the entity IS, before it gets a name.


Peter Burgess