A large multinational corporation vs. a community cooperative helping women start their own business: Which one has more value? Which one makes more money? Which one is changing peoples’ lives for the better? We have a sense that social enterprises and nonprofit organizations do good. Still, we struggle to define and measure their benefits to society. The concept of “social value” attempts to address this. Let’s talk about where this term comes from and what it means.
- Economic value
- Social value
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Economic value
Value is relative. What I value might be different from what you value. One person’s trash is another person’s treasure, right?
Early economists like Adam Smith tried to universally define value. For Smith, value was determined by the time required to produce a thing. Something that takes a long time to produce should be highly valuable.
Nowadays economists talk about “marginal theory of value” and “willingness to pay.” In the simplest economic terms, value is the benefit you get for what you pay.
- I paid $100 for my tennis shoes, but they lasted me for 10 years. They are valued at 10 years’ worth of shoe purchases.
Businesses and investments measure economic value in clearly measured, monetary terms. How do you know if an investment or business is valuable? Simple: monetary return on investment.
Social Value
For other types of organizations, returns are not measured in profitability. Public, nonprofit, third sector, and social enterprise organizations produce social outcomes that are difficult to quantify.
How much is a protected forest worth? What about anti-racism efforts, gender equality advocacy, cultural preservation, animal rights, or a public toilet?
These things have immense value to the people that use or participate in them. Returns may not be profitability, but they could be things like:
- Inclusion
- Improved quality of life
- A more just society
- Clean water
This is where social value exists and where many organizations justify their work. (Emerson, 2000) Understanding positive impact is the key to recognizing the contribution that nonprofit and social enterprises make.
Nonprofits and social enterprises may not produce the same economic value that a corporation does, but their social value is enormous.
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What’s your social value?
The idea of social value comes from economics. Returns on investment that nonprofits and social enterprises create are not always monetary. Archer Impact can help you define and measure your impact. Contact us for a free consultation.
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