The document discusses methods for quantifying and valuing social impacts. It provides examples of calculating a social return on investment (SROI) ratio to compare the social value created by an initiative or investment to the value of the resources invested. An SROI ratio of $10 for every $1 invested in community schools indicates that investment generates $10 of social value. The document also discusses challenges in quantifying impacts and attribution, but provides rules for reasonable measurement of formerly "unmeasurable" impacts through indicators and considering attribution issues.

1. The New Metrics of Sustainable Business 2013
Best-in-Class in Methodologies for Putting a
Monetary Value on Social Impact
Bea Boccalandro, Georgetown University
Witold Henisz, The Wharton School, University of Pennsylvania
Lise Laurin, EarthShift

2. Evaluating the social, economic and
environmental consequences that flow from
your activities.
Creating the business case
for societal impacts
Lise Laurin
llaurin@earthshift.com
830 Taft Road • Huntington, VT 05462 • Phone (802) 434-3326 Fax (802) 329-2214 • www.earthshift.com
Copyright EarthShift LLC – All Rights Reserved

3. What happens when you
choose product B?
• Product A has higher GHG impacts than Product B?
• Product A has higher particulate emissions than
Product B?
• Product A has higher child labor than Product B?
Product B
Product A
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4. What happens to the children
making Product A?
• In India, child labor raids force children back to poor
families where there is nothing to eat. They get sent
out to “hidden” jobs where there is even less
oversight of how they are treated.
http://articles.chicagotribune.com/2008-0418/news/0804170692_1_child-labor-working-children-india
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5. Results of choosing products made
without child labor
• After the Child Labor Deterrence Act was introduced
in the US, many children in South Asia resorted to
jobs such as "stone-crushing, street hustling, and
prostitution." UNICEF's 1997 State of the World's Children study found
these alternative jobs "more hazardous and exploitative than garment
production."[31]
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6. Consider the consequences of
your metrics carefully!
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7. Why include societal costs and
benefits in an ROI?
• Reduce risk!
• Improve employee and community relations=higher
productivity and license to operate
• Improve return to investors
• The process improves buy-in
• Optimize the decision
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8. Valuation systems for societal
impacts
• Quantitative vs Qualitative
• Cost-benefit by stakeholder vs Cost-benefit only to the
investor
• Consider only culturally-insensitive issues (e.g., health &
safety impacts, direct cost implications) vs consideration
of many or all societal issues
• Include only guaranteed costs and
benefits vs include uncertainty
• Use standardized costing methods vs
allow stakeholders input into costs
• Use averaged valuation vs stakeholder
specific valuation vs stochastic
valuation
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9. Common Principles
•
•
•
•
•
•
•
Involve stakeholders
Understand what changes
Value the things that matter
Only include what is material
Do not over-claim
Be transparent
Verify the result
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10. What has changed
in the last 14 years?
• Better definition of the process—how do you go about doing
an assessment?
• More guidance on valuation—more data available on
costs/benefits for common social (and environmental) issues
• Reduced cost to perform an assessment—through online
tools and the incorporation of social networking in the tools
• Inclusion of uncertainty—tools with sophisticated Monte
Carlo analysis and cascading probability capability
• Analysis by
stakeholder
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11. S-ROI
How do you do it?
Define the goal
and scope
Do traditional
ROI analysis
Do a Life Cycle
Assessment
Identify
stakeholders
Bring
stakeholders or
their representatives on board,
get buy in
Streamline
the analysis
Hold workshop
- Identify
stakeholders
- Identify potential
risks and
opportunities
- identify costs and
benefits
Conduct
impact
assessment
Interpretation
/Feedback to
decisionmaking loop
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12. Cogen from woody biomass by
stakeholder
} Higher raw material costs
tourism
less pollution
additional revenues from forest
residue
risk that preferred bedding (sawdust) will be used in
cogen
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13. For more information, contact:
llaurin@earthshift.com
(802) 434-3326 x 102
For more information
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14. NEWMONT
GHANA
FV TOOL
PROJECT
Witold Henisz, Deloitte & Touche Professor of Management,
The Wharton School, University of Pennsylvania

15. Introduction to the FV Tool (www.fvtool.com)
Estimates expected net present values (NPV) of local investments
 Answers two critical questions:
“what” is the right portfolio of sustainability investments?
“what” is the financial return they will likely bring?
 Supports alignment across finance, risk, operations, social, HR
15

16. FV Investment Scenarios
Scenario B :
Scenario A:
•
Health: expanding mitigation
for broader population
•
Health: mitigation only
for workers & community
•
Water & Sanitation:
expanding mitigation for
broader population
•
Water & Sanitation:
mitigation only for
workers & community
Difference
between Scenario
A and B

17. Value Driver Examples
More Conciliatory Land Acquisition Process:
$2.87 per square foot less than expected leading to $230,000 savings.
 Four months faster than expected leading to $700,000 more revenue.
Malaria Eradication:
Reduction from 3,195 cases of malaria to 0
3 days of absence from work or $120 of lost productivity
Savings of $30 worth of treatment
Additional lost work an productivity for family illness
Higher recruitment and retention costs for most skilled workers
$850,000, two-year program
Distributed bed nets, instructed and monitored use
Sprayed insecticide & improved drainage to eliminate breeding pools.

18. Indirect Value Protection Based on Six Project Risks
• Roadblocks that disrupted production which were expected to
occur once every other year, last one week and cost a fixed $3m
plus one week of lost revenue.
• Serious complaints which are expected to occur 12 times per year
with an expected average cost of $50,000.
• Exploration protests which were expected to occur every other
year, last two weeks and cost $5m plus two weeks of lost revenue.
• Fines and legal judgments which were expected to occur every
third year with an average cost of $3m.
• Water protests which were expected to occur every other year with
an average cost of $200,000
• The risk of expropriation which was estimated at a 1 in 1,000
probability in any given year.
18

19. FVTOOL, Value Protection

20. Occurrences
FVTOOL, Monte Carlo Simulation
Value in Billions
20

21. FVTOOL, NPV of sustainability
Dashboard - Total Sustainability Value Added
For $2billion CAPEX project, sustainability investments returned
as much as $187 million of NPV.
21

22. Key Findings of FV Ahafo Pilot and
Developments over Last 9 Months
• Value creation swamped by value protection
• Estimates of latter mostly qualitative in FVTOOL
• Need better quantification of stakeholder preferences
within FVTOOL
• Who wants what how badly?
• Who has power?
• Who influences whom?
• Jan 2013 add-on incorporates stakeholder influence into
risk mitigation consequence but how to sequence
stakeholder mapping & analysis and financial valuation?
• Cross-functional conversations and collaboration swamped
value of npv calculation
22

23. Notable Quotes: Sustainability Team
When we first heard of it, those of us on
the social side were happy to get
something that would help Finance
understand us. We are more confident in
costing the programs that we do. This
puts us in a much better position with
finance. In previous meetings, other
departments had figures and we had to
talk to explain. Now we are putting figures
to our words just like other departments.
The change within the ESR team is
marked. What are these risks that
we are trying to mitigate? Are their
costs justified in terms or risk
mitigation? Previously program
owners were not connecting the
dots to risk mitigation or value
creation. Now we challenge the
numbers. Previously, we had no
framework to evaluate. People are
now trying to highlight the value of
their initiatives for the business not
just for stakeholders.

24. Notable Quotes: Finance Team
My biggest surprise was that it is possible
for the ESR team to have a conversation in
financial terms. Every conversation I had
with them before, … they never could
articulate their assumptions and
acknowledge costs and benefits. Now they
can and do. They have their act together
and can explain a business case …
Previously, they were not able to see their
business case. … Finance and
[Environment and Social Responsibility]
are now working together much better
than before. Just those changes alone
justify the effort put into the pilot.
Ebenezer Kyere-Buabeng , Finance
Newmont Ghana Gold
In the last business planning
meeting, I saw a huge
improvement in SR's presentation
of budget and supported by data of
the business benefits of SR
programs. The meeting went very
smoothly compared to previous
meetings.
Lester Ampong, Senior Business
Planning Analyst, Newmont Ghana
Gold

25. Notable Quotes: Group Executive
Quantifying the net present value
of sustainability initiatives at
Newmont’s Ahafo mine in Ghana
had finally allowed the company to
get “Beyond NPV.”
Nick Cotts,
Group Executive, ESR

26. The social bottom line: Social Return on Investment
(SROI) ratio or Net Present Value (NPV)
Bea Boccalandro
bea@veraworks.com
www.veraworks.com
717-414-2885 (US)
The New Metrics of Sustainable
Business Conference
September 25, 2013

27. Definition: SROI ratio (and NPV)
• Similar to the ROI, the Social Return on Investment (SROI)
ratio is a monetary comparison of the value of the results and
the value of the investment, only in this case the return is
societal, not financial.
• Formula:
SROI ratio =
Social impact, monetized and adjusted for inflation & other
_______________________________________________________________________________________________________________
Investment, monetized
• Net Present Value (NPV) is similar: Social impact, monetized
and adjusted for inflation & other – investment, monetized

28. SROI ratio =
Social impact, monetized and adjusted for inflation & other
_______________________________________________________________________________________________________________
Investment, monetized

29. SROI ratio =
impact
Social impact, monetized and adjusted for inflation & other
_______________________________________________________________________________________________________________
monetized
Investment, monetized

30. Measure impact????
Monetize it????

31. How can we communicate the societal value
of our corporate social responsibility?????

32. Example 1: Our presence is associated with twice
the societal benefits of the average company

33. Example 2: Every $1 invested in community
schools generates $10 of value to society
Source: “Measuring Social Return
on Investment for Community Schools”
by The Finance Project, 2013.

34. What is the societal value of reuniting one
homeless child with her family?????

35. ExampleIn3: Every $1 the Operation Come reuniting
2010, investment in invested in
Home Reunite Program (not including inhomeless youth with families generates $56 of
kind contributions by Greyhound Canada)
was approximately $53,000 - averaging
value to society
about $750 per
reunion. Assuming that 75% of the 72
reunites were succssful for at least one The Operation Come Home
Source: “MEASURING RETURN,
year, this would represent an annual
Reunite Program” by MeasuredOutcome, 2012.
savings of between $1.6 and $3m.2

36. Can the amount of
joy we experience at
any one time be
measured?
Can the value of
reuniting one homeless
child with her family be
calculated?
They already
have!

37. Rely on indicators
• There is no direct way to hold many important concepts,
like happiness, to a measurement tool.
• However, there are excellent indirect measures for
happiness and for virtually all social sector outcomes, no
matter how abstract.
• The lynchpin to measuring abstract outcomes is the
“indicator.”
• An indicator is a measurable gauge of something not
directly measurable.

38. Three rules for measuring (formerly)
“unmeasurable” societal impact
1. Make a reasonable investment in measurement

39. UL Safety Ambassador Program Value Creation Model
Inputs
Key Activities
Impacts
Youth are more:
Annual Paid Staff
240 hours
Annual Volunteer
# of Employees
156
# of Employee Hours 780
# of Children Reached 3900
Annual Costs
Rewards
Reproduction
Replacement kit
Total
$1,500.
$3,500.
$10,000.
$15,000.
Per Event
Per Child
$96.
$3.80
Paid Staff
Work with
schools, community
event planners, camp
leaders, youth group
advocates to plan safety
educational events
Work with employee to
plan safety educational
events
Coordinate employee
volunteers with safety
educational events
Volunteer Staff
Work with
schools, community
event planners, camp
leaders, youth group
advocates to plan safety
educational events
Set-up event, deliver
safety lessons, pack up
event
• Inspired to be more safety conscious
• Aware of safety issues and engaged in safe behaviors
• Likely to influence their caregivers to “look for the UL Mark”
Employee volunteers have greater:
• Morale, pride in company and
knowledge of company’s positive
traits
• Confidence in company’s future
resulting in loyalty toward
company and professional pride
• Communication skills
• Awareness of company’s mission
• Sense of personal
accomplishment
• Retention
• Engagement
• Productivity
• Advocacy for
company’s mission
Parents, community members and other external
stakeholders involved with Safety Ambassadors have:
• Stronger view of UL brand
• Awareness of products bearing
UL Mark
• Safety consciousness
• UL labeled product
purchases
• Advocates for UL Mark

40. Image: Bay Journal

41. Find a few good indicators for a few good outcomes
not
Find a perfect indicator for every outcome

42. Three rules for measuring (formerly)
“unmeasurable” societal impact
1. Make a reasonable investment in measurement
2. Find a few good indicators for a few good outcomes

45. We should aspire to the attribution problem.
PS: If we are lucky enough to have this
problem, we can manage it using “dead
weighting.”

46. Three rules for measuring (formerly)
“unmeasurable” societal impact
1. Make a reasonable investment in measurement
2. Find a few good indicators for a few good outcomes
3. Consider yourself lucky if you have the attribution problem

47. SROI ratio =
impact ✔
Social impact, monetized and adjusted for inflation & other
_______________________________________________________________________________________________________________
monetized
Investment, monetized

48. Monetizing the value of societal impact
Good news! We live in a hyper-monetized world. There are
many places to find valuation data for societal impacts:
• What would it cost to create that impact?
• What societal costs does that impact avoid?
• What do taxpayers pay to generate this impact?
• What is the market value?

49. Examples of what SROI ratios can do