Return on Investment in Corporate Responsibility : Measuring the Social, Economic, and Environmental Value of Sustainable Business [1 ed.] 9781787562493, 9781787562523
In today's climate, companies must be economically successful and at the same time take social responsibility. Auth
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RETURN ON INVESTMENT IN CORPORATE RESPONSIBILITY Measuring the Social, Economic, and Environmental Value of Sustainable Business
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RETURN ON INVESTMENT IN CORPORATE RESPONSIBILITY Measuring the Social, Economic, and Environmental Value of Sustainable Business BY
CESAR SÁENZ ESAN University, Lima, Peru
United Kingdom North America Japan India Malaysia China
Emerald Publishing Limited Howard House, Wagon Lane, Bingley BD16 1WA, UK First edition 2018 Copyright r 2018 Emerald Publishing Limited Reprints and permissions service Contact: [email protected] No part of this book may be reproduced, stored in a retrieval system, transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without either the prior written permission of the publisher or a licence permitting restricted copying issued in the UK by The Copyright Licensing Agency and in the USA by The Copyright Clearance Center. Any opinions expressed in the chapters are those of the authors. Whilst Emerald makes every effort to ensure the quality and accuracy of its content, Emerald makes no representation implied or otherwise, as to the chapters’ suitability and application and disclaims any warranties, express or implied, to their use. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-78756-252-3 (Print) ISBN: 978-1-78756-249-3 (Online) ISBN: 978-1-78756-251-6 (Epub)
ISOQAR certified Management System, awarded to Emerald for adherence to Environmental standard ISO 14001:2004. Certificate Number 1985 ISO 14001
CONTENTS List of Figures
ix
List of Tables
xi
About the Author
xiii
1. Introduction
1
2. Understanding the Philosophy of the SROIM Model: Marriage Case 2.1. 2.2. 2.3. 2.4.
Awareness-raising Stage: Falling in Love Marriage Stage Children Stage Grandparents Stage
3. The SROIM Model 3.1. 3.2.
15
SROIM’s First Objective: Visualization of the Impacts SROIM’s Second Objective: Calculation of SROIM
4. The SROIM Model in Detail 4.1.
5 5 7 9 10
First Objective: Visualize the Real Impacts 4.1.1. Social Network 4.1.2. Sustainability Indicators
v
17 20 25 25 25 32
Contents
vi
4.1.3.
4.2.
Life Cycle of the Target Beneficiary 4.1.4. Stakeholders versus Impacts Matrix Second Objective: Calculation of SROI 4.2.1. Collection of Information 4.2.2. Isolation of the Intervention 4.2.3. Calculation of the Monetary Value 4.2.4. Social Cash Flow 4.2.5. Calculation of SROIM
5. Case Studies 5.1.
5.2.
5.3.
5.4. 5.5.
UBER 5.1.1. 5.1.2. 5.1.3.
Background Entry of UBER Application of the SROIM Model Health and Nutrition 5.2.1. Productive Agricultural Development 5.2.2. Social Development 5.2.3. Nutritional Reinforcement 5.2.4. Organic Vegetable Gardens 5.2.5. Training in Nutrition, Hygiene, and Health 5.2.6. Non-institutional Births 5.2.7. Application of the SROIM Model Nutrition 5.2.8. Valuation Education 5.3.1. Application of the SROIM Model in Education Productive Project Environment
38 44 48 49 50 56 65 69 73 73 73 74 77 87 90 90 91 92 92 92 93 97 113 118 120 134
Contents
vii
6. Integrating the Social Programs 6.1.
Integration Matrix of the Social Inclusion Programs
141 142
References
147
Annexes
149
Index
165
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LIST OF FIGURES Chapter 2 Figure 2.1.
Awareness-raising Stage: Falling-in-Love Stage. . . . . . . . . . . . . . . . . .
7
Figure 2.2.
Implementation Stage: Marriage. . . . . .
8
Figure 2.3.
Use Stage: Marriage with Children.. . . .
10
Figure 2.4.
Final Stage: Grandparents. . . . . . . . .
11
Figure 2.5.
The Life Cycle of the Marriage: Awareness, Implementation, Use, and End Stages. . .
12
Figure 3.1.
SROIM Model: Summarized. . . . . . . .
16
Figure 3.2.
SROIM Model: Objectives.. . . . . . . .
17
Figure 3.3.
SROIM Model Visualize Real Impact: Social Network, Sustainability Indicators, and Life Cycle. . . . . . . . . . . . . .
19
Figure 4.1.
Stakeholders of an Organization. . . . . .
27
Figure 4.2.
Social Network of an Intervention. . . . .
30
Figure 4.3.
Social Network in the Courtship Stage (Awareness-raising). . . . . . . . . . . .
31
Figure 4.4.
Typology of Indicators. . . . . . . . . . .
33
Figure 4.5.
Interrelationship between the Sustainability Indicators. . . . . . . . . . . . . . . . .
36
Chapter 3
Chapter 4
ix
x
List of Figures
Figure 4.6.
Life Cycle of the Target Beneficiary. . . . .
39
Figure 4.7.
Kevin and Sabrina’s Life Cycle and Its Impact on Sabrina’s Parents. . . . . . . .
42
Kevin and Sabrina’s Life Cycle and Its Impact on the Bride’s Friends. . . . . . . .
43
Life Cycle of the Target Beneficiary: Summary. . . . . . . . . . . . . . . . .
44
Figure 4.10. Control Group. . . . . . . . . . . . . .
51
Figure 4.11. Trend Line. . . . . . . . . . . . . . . .
52
Figure 4.8. Figure 4.9.
Chapter 5 Figure 5.1.
Situation before the Entry of Uber. . . . . .
Figure 5.2.
Stage of Awareness-raising: Uber Case.. .
78 79
Figure 5.3.
Stage of Implementation: Uber Case. . . .
79
Figure 5.4.
Stage of USE: Uber Case. . . . . . . . .
80
Figure 5.5.
FINAL Stage: Uber. . . . . . . . . . . .
81
Figure 5.6.
All Stages: Uber Case. . . . . . . . . . .
82
Figure 5.7.
Nutrition Case: Visualize Real Impact of the Intervention (All of the Stages). . . . . . .
Figure 5.8.
95 Social Network: Case of Education. . . . 120
Figure 5.9.
Social Network: Productive Case.. . . . . 128
Figure 5.10. Social Network, Sustainability, and Life Cycle Indicators of the Target Beneficiary. . 136
LIST OF TABLES Chapter 3 Table 3.1.
Stakeholders versus Impacts Matrix. . . . .
21
Stakeholders versus Impact Matrix (Case: Marriage). . . . . . . . . . . . . . . .
46
Stakeholders versus Impacts Matrix: Uber Case. . . . . . . . . . . . . . . . . . .
83
Comparison of Income and Expenses of Uber and Traditional Taxi. . . . . . . . .
84
Information of Comparison of Uber Service versus Traditional Taxi. . . . . . . . . . .
84
Calculation of SROIM: Uber Case (Thousands of $). . . . . . . . . . . . .
88
Stakeholders versus Impacts Matrix: Case of Health and Nutrition.. . . . . . . . . . .
98
Chapter 4 Table 4.1. Chapter 5 Table 5.1. Table 5.2. Table 5.3. Table 5.4. Table 5.5. Table 5.6.
Attribution: Case of Nutrition. . . . . . . .
100
Table 5.7.
SROIM = 0: Analysis of the Investment Nutrition. . . . . . . . . . . . . . . . . . .
103
Analysis of the Distribution of Project Management and Its Impacts. . . . . . .
104
Cash Flow and SROIM: Nutrition. . . . .
114
Table 5.10. Matrix: Stakeholders versus Indicators.. . .
121
Table 5.8. Table 5.9.
xi
xii
List of Tables
Table 5.11. Attribution: Case of Education. . . . . . .
123
Table 5.12. Calculation of SROIM: Education (Thousands of $). . . . . . . . . . . . .
124
Table 5.13. Stakeholders versus Indicators Matrix. . . .
129
Table 5.14. Cash Flow and SROIM: Productive Project.
132
Table 5.15. Stakeholders versus Impacts Matrix: Environment.. . . . . . . . . . . . . . .
137
Table 5.16. Cash Flow and SROIM: Environment. . . .
139
Chapter 6 Table 6.1.
Integration Matrix of the Social Inclusion Programs. . . . . . . . . . . . . . . . .
143
ABOUT THE AUTHOR Cesar Sáenz is Professor of the Department of Administration at ESAN University. He holds a PhD from ESADE and a MBA from ESAN University, and with student exchange in Rotterdam School of Management, Erasmus University of Holland, a Degree in Mechanical Engineering from the National University of Engineering. He teaches courses on Corporate Social Responsibility and Strategic Planning. His research interests focus in the area of business ethics and corporate social responsibility, and he has published also in the fields of social conflict management.
xiii
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CHAPTER 1 INTRODUCTION
Corporate social responsibility has emerged over several decades, for the purpose of improving the image of organizations with their social actors (interested parties or stakeholders), as well as to demonstrate the social sensitivity of businesses and their creation of shared value; however, companies increasingly face the challenge of measuring this shared value of their interventions in the social environment in which they operate. If they successfully achieve this, they will have taken a huge step that will allow them to consolidate permanent sustainability and social responsibility policies. Companies currently inform the impacts of their social responsibility projects through their annual sustainability reports or statements. These reports are presented with management or scope indicators, such as for an educational project, the presented indicators are the number of training sessions provided to the teachers of educational institutions, the number of books delivered to the children, etc., and the same occurs in health projects, where they tend to mention indicators such as the number of training sessions held for the families, the number of nutritional reinforcements 1
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delivered to the mothers and children, etc. The problems with these management indicators are the following: • They do not show the impacts generated in the beneficiaries, and much less the change generated in other actors directly or indirectly affected in this type of intervention. This does not help to communicate the social value generated by the company to its community. • They do not help to make social investment decisions. The executives who approve these investments are unable to see the multiplier effect of this social investment. Many of these executives manage financial indicators that help them make investment decisions and require the knowledge of financial indicators such as the return on investment to decide where to invest. If executives know the return on investment of a social project, they will have better judgment to decide where to invest and achieve a greater social impact from their investments. The above does not mean that companies do not generate impacts with their social investments; on the contrary, companies are sure that they achieve a positive impact with these investments for many actors of their community and they also perceive that these actors obtain a profit as a result of their participation in these investments. In other words, the impact is in the field; it is present in many actors, but, until now, companies do not have a simple and objective tool that enables them to recognize said actors and their impacts, as well as calculate the social return on investment. To cover this gap, the Social Return on Investment Management (SROIM) model is presented, which is a tool that enables social responsibility projects to be measured in a simple and systematic manner, and which is able to identify
Introduction
3
the real impact and measure the social return on investment of these projects. SROIM will help companies improve the communication of the results of their social responsibility projects, and in that way demonstrate the value creation shared with their community. In other words, the first objective is to know the real impact of the social responsibility projects and the second objective is to determine their economic contribution through the social return on investment. Additionally, SROIM has the following benefits for companies: demonstrates that its projects are win-win, improves the perception of the community with regard to the help received, improves the institutional image, validates the social investment with the results obtained, and improves the selection of social programs. The objective of this book is to provide the necessary knowledge to measure the results of the social responsibility projects with the SROIM model. Therefore, the book has been divided in the following manner: In Chapter 2 the philosophy on which SROIM is based is described briefly, using the story of Marriage as an example. In Chapter 3 the SROIM model is presented, where the two main objectives of the SROIM are described, which are the visualization of the impacts and the calculation of SROIM. In Chapter 4 how to achieve the first objective of SROIM is detailed: the visualization of the impacts; in other words, the main tools to be used are described, such as the social network, the sustainability indicators, and the life cycle of the target beneficiary. To illustrate the use of these tools, the Marriage project is used, which will enable these tools to be understood more easily. In Chapter 5 shows how to achieve the second objective of SROIM, that is, the calculation of SROIM, which involves
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Return on Investment in Corporate Responsibility
the gathering of information, the insulation of the intervention, the calculation of the monetary value and the social cash flow. In all cases, various examples are shown to understand the concepts behind this stage. In Chapter 6 provides a series of application cases of the SROIM model in social responsibility projects in various aspects such as health, education, productive projects, and environmental project. In these cases, the development of all the stages of the SROIM model are presented. Finally, in Chapter 7, the integration of the social programs is shown by means of the transversal impact indicators. This will provide organizations with an executive control matrix of their interventions. It is hoped that this book complies with helping the various professionals to measure social responsibility projects in a simple and objective manner, thereby communicating these results better.
CHAPTER 2 UNDERSTANDING THE PHILOSOPHY OF THE SROIM MODEL: MARRIAGE CASE
To understand the SROIM model in a simple manner, we develop the example of the marriage between Kevin and Sabrina. This story is divided into four stages: falling in love, marriage, children, and grandparent stages.
2.1. AWARENESS-RAISING STAGE: FALLING IN LOVE Kevin is a young, single, 25-year-old professional, who works in a well-known company and has a great future ahead. Kevin’s company provides him with various labor benefits which cover health, accidents, etc. Kevin is invited to attend his best friend’s birthday party. After being at the party for some time, he notices a young 17-year-old girl entering the party. She is Sabrina who is just out of high school and has big dreams of beginning a
5
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Return on Investment in Corporate Responsibility
university career. She has a younger 9-year-old brother and they live with their parents. Kevin was impressed by Sabrina’s beauty, and for some reason he thought the following: “I feel that I have to meet her and that if I don’t, I may regret it for the rest of my life.” This is how Kevin was able to introduce himself and, with much finesse, caught Sabrina’s attention. Since then, they began to date for several days, and then weeks. At Sabrina’s home, her parents noticed changes in her and found out about Kevin. This relationship seemed serious; however, her parents were worried because they thought that she was too young to fall in love. Moreover, the plans for their daughter were to study for a career first, and love would happen later. Her younger brother was occasionally invited to accompany the couple to amusement areas, and sometimes received tips from Kevin, making him happy about his sister’s relationship with Kevin. This relationship provoked some jealousy toward Kevin among Sabrina’s friends, since they could not go out with Sabrina as much as before. Furthermore, Sabrina used to have many suitors who when became aware of this relationship felt discouraged and stayed away from her. In this entire falling-in-love process, during their dates, Kevin and Sabrina went to many restaurants, discotheques, among others, and this group of suppliers of goods and services benefitted from greater sales and income. Moreover, the environment also suffered impacts, since the couple consumed products which led to the generation of waste and emission of greenhouse gases (such as CO2 or carbon monoxide). This stage of the story is displayed in Figure 2.1. Note the couple with the different stakeholders, as well as the benefits and social costs of this stage of the story.
Understanding the Philosophy of the SROIM Model
7
Figure 2.1. Awareness-raising Stage: Falling-in-Love Stage. AWARENESS RAISING: FALLING IN LOVE Environment
Parents
Younger brother Workplace Friends Suppliers of goods and services
Social costs • Kevin: investment • Environment: waste generation, emission of CO2
Suitors
Social benefits • Kevin and Sabrina: happy, in love, in good physical condition • Suppliers (restaurants, hotels, discotheques, etc.): higher income • Parents: worried, attentive • Younger brother: tips, gifts • Friends: spend less time • Suitors: discouraged
2.2. MARRIAGE STAGE After some time as boyfriend and girlfriend, Kevin decided to ask Sabrina to marry him, and she immediately agreed. This made all the family members happy and they started preparing for the wedding. The wedding involved a major investment by the boyfriend. He had to contract an expert company for organizing all events of the wedding, as well as contract different suppliers of products and services to cover all the needs of the event.
Return on Investment in Corporate Responsibility
8
With regard to Sabrina’s family, her younger brother who had the smallest room in the house was very happy because he could have his sister’s room, whereas her parents were happy seeing their daughter’s happiness. Her old friends were falling away, with only some of them appearing at the wedding, and her old suitors also disappeared. After the wedding, Kevin had to inform his workplace of his marriage, so that he could register his wife as beneficiary, as applicable by law, of the rights of health insurance, family
Figure 2.2. Implementation Stage: Marriage. IMPLEMENTATION: MARRIAGE Environment
Parents
Younger brother Workplace Friends Government
Suppliers of goods and services
Social costs • Workplace: extension of benefits for new family • Kevin: investment • Environment: waste generation, emission of CO2
Social benefits • Kevin and Sabrina: happy, in love, in good physical condition, change in marital status to married • Suppliers (dress, wedding preparation service, etc.): higher income • Parents: happy • Younger brother: happy • Friends: decrease • Government: registration of marriage
Understanding the Philosophy of the SROIM Model
9
allowance, among others. This generated an increase in the labor expenses of Kevin’s employer. The marriage was legally registered in the corresponding government agencies. In addition, once again the environment is impacted by the generation of waste and greenhouse effect gases. This stage is shown in Figure 2.2.
2.3. CHILDREN STAGE The years pass and children arrive with all responsibilities that this stage brings in a traditional family. Kevin and Sabrina dedicate themselves to the family, to their work as parents, trying to bring their children up properly, paying the acquired debts (mortgage, schools, health, etc.), and following the routine to achieve it. This has generated changes in their appearance since they are no longer paying so much attention to staying in good physical condition. Furthermore, marriage with children has led the service suppliers, such as banks, to develop marketing strategies offering house mortgage loans, car loans, loans for their children’s education, which are acquired by Kevin and Sabrina; this generates income for these suppliers. Moreover, Sabrina’s parents, who are now grandparents, are more than happy with their grandchildren, and are dedicated to spoiling them, giving them presents, listening to them, and having a good time with them. The couple’s friends are relatively new, as a result of their relationship with other parents from the children’s school, with family members, and with new neighbors. The children were also registered at Kevin’s work center and in the corresponding governmental entities.
Return on Investment in Corporate Responsibility
10
Figure 2.3. Use Stage: Marriage with Children.
USE: MARRIAGE WITH CHILDREN Environment
Parents
Younger brother Workplace Friends Government
Suppliers of goods and services
Social costs • Workplace: extension of benefits for children • Kevin: investment • Environment: waste generation, emission of CO2
Children
Social benefits • Kevin and Sabrina: dedicated to their parental duties, follow the routine, with debts, out of shape, etc. • Suppliers (banks, schools, amusement centers, etc.): higher income • Parents: happy with their grandchildren • Friends: new friends • Government: registration of children
During all these years, the environment was also impacted by the generation of waste and the emission of greenhouse gasses. This stage is shown in Figure 2.3.
2.4. GRANDPARENTS STAGE Finally, Kevin and Sabrina’s children grew up and had their own children. This converts Kevin and Sabrina into the
Understanding the Philosophy of the SROIM Model
11
happiest grandparents. Their grandchildren receive time, affection, and gifts from them. We can say that Sabrina’s parents are no longer present in this stage since they passed away some years ago. With regard to Kevin and Sabrina’s suppliers, they are few, compared with the previous stage, but enough for a good old age. Now, Kevin and Sabrina enjoy the good friends who are still with them. Also during all these years, the environment was impacted by the generation of waste and the emission of greenhouse gasses. This stage is shown in Figure 2.4.
Figure 2.4. Final Stage: Grandparents. END: GRANDPARENTS Environment Grandchildren
Friends Suppliers of goods and services
Social costs • Kevin: investment • Environment: waste generation, emission of CO2
Children
Social benefits • Kevin and Sabrina: happy with their grandchildren • Suppliers (shopping centers, etc.): higher income • Grandchildren: happy, receive presents • Friends: old friends
12
Figure 2.5. The Life Cycle of the Marriage: Awareness, Implementation, Use, and End Stages. Environment
IMPLEMENTATION: MARRIAGE Environment
Parents
Younger brother Workplace
USE: MARRIAGE WITH CHILDREN Environment
Parents
END: GRANDPARENTS Environment
Parents
Younger brother
Younger brother
Grandchildren
Workplace
Workplace Friends
Friends
Friends
Friends Suppliers of goods and services
Social costs • Kevin: investment • Environment: waste generation, emission of CO2
GovernSuitors
Social benefits • Kevin and Sabrina: happy, in love, in good physical condition • Suppliers (restaurants, hotels, discotheques, etc.): higher income • Parents: worried, attentive • Younger brother: tips, gifts • Friends: spend less time • Suitors: discouraged
ment
Government
Suppliers of goods and services
Social costs • Workplace: extension of benefits for new family • Kevin: investment • Environment: waste generation, emission of CO2
Social benefits • Kevin and Sabrina: happy, in love, in good physical condition, change in marital status to married • Suppliers (dress, wedding preparation service, etc.): higher income • Parents: happy • Younger brother: happy • Friends: decrease • Government: registration of marriage
Suppliers of goods and services
Social costs • Workplace: extension of benefits for children • Kevin: investment • Environment: waste generation, emission of CO2
Children
Social benefits • Kevin and Sabrina: dedicated to their parental duties, follow the routine, with debts, out of shape, etc. • Suppliers (banks, schools, amusement centers, etc.): higher income • Parents: happy with their grandchildren • Friends: new friends • Government: registration of children
Suppliers of goods and services
Social costs • Kevin: investment • Environment: waste generation, emission of CO2
Children
Social benefits • Kevin and Sabrina: happy with their grandchildren • Suppliers (shopping centers, etc.): higher income • Grandchildren: happy, receive presents • Friends: old friends
Return on Investment in Corporate Responsibility
AWARENESS RAISING: FALLING IN LOVE
Understanding the Philosophy of the SROIM Model
13
This entire romantic story has a happy ending, and can be seen as a series of stages lived by the protagonists. The particularity of the stories is that they can be counted stage by stage so as not to lose any details and see them as in a movie, as shown in Figure 2.5. The story of the marriage is told stage by stage. Each stage reflects the fact that the action of the couple has a different impact on the stakeholders, with some tangible (tips, income, investment, labor costs, etc.) or intangible (happiness, joys, disappointments, etc.) benefits. It is also noted that the stakeholders do not always remain in all the stages, some disappear (such as the suitors of the bride, or her friends) and other new ones can appear (new suppliers, friends, children, grandchildren, etc.). Lastly, it is necessary to consider that although they did not directly participate in the couple’s relationship, other stakeholders will be impacted by the results, such as Kevin’s workplace, the government, etc. Finally, the environment will always be a stakeholder to be considered due to the impact that it receives from any human activity.
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CHAPTER 3 THE SROIM MODEL
The SROIM model is a tool that permits the design, identification, measurement, management, and communication of the impacts generated by a social intervention. Figure 3.1 shows the summarized SROIM model. The SROIM model has two main objectives which are as follows: 1. To visualize the real impact of SR projects. Social responsibility programs have more impacts than those that are reported. Many of these impacts are defined by the Logic Framework1 indicators; however, it is known that there are more impact indicators that are not identified, measured, or reported. The SROIM model allows the vision of impacts to be known and expanded. The use of the delivered tools (social network, sustainability indicators, and life cycle of the target beneficiary) leads to the discovery of many additional indicators that help in learning about the real impact of these social responsibility projects. This helps in better management and communication of these impacts.
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Return on Investment in Corporate Responsibility
16
Figure 3.1. SROIM Model: Summarized. I. Visualize real impact 1 2 3
1 2 3
1 2 3
Customers
Employees
Government
Target beneficiary Environment
Shareholders
1 2 3
1 2 3 1 2 3
Community
Social costs
Suppliers
1 2 3
Social benefits
Key: 1. Economic outcomes, 2. Social outcomes, 3. Environmental outcomes
2. To calculate SROIM or the multiplier effect of the investment. Once the real impacts generated by the social responsibility project are known, it will be possible to select those that are most relevant and are possible to be economically valued. In this manner, the multiplier effect of the investment or social return on investment can be determined.
The SROIM Model
17
Figure 3.2. SROIM Model: Objectives. I. Visualize real impact
II. Calculation of SROIM
1 2 3
1 2 3
1 2 3
Customers
Collect information Employees
Government
Isolate intervention
Target beneficiary Shareholders
Environment
1 2 3
1 2 3 1 2 3
Community
Social costs
Suppliers
1 2 3
Convert monetary value
Social cash flow
Social benefits Calculate the SROIM
Key: 1. Economic outcomes, 2. Social outcomes, 3. Environmental outcomes
These objectives are shown in Figure 3.2. Below is a brief description of how the SROIM model is able to fulfill its objectives.
3.1. SROIM’S FIRST OBJECTIVE: VISUALIZATION OF THE IMPACTS Since the social intervention processes are deeply intertwined and the impacts can be modified throughout the life cycle of
18
Return on Investment in Corporate Responsibility
the target beneficiary, among the groups of stakeholders and the different types of impacts, it is important to remain attentive to the entire system that surrounds the undertaking.2 In order to achieve the first objective of the SROIM, visualize all the impacts, that is, work on the part of “visualizing the real impact” of the SROIM, which delivers the following analysis tools: • social network; • sustainability indicators; • life cycle of the target beneficiary; and • stakeholders versus indicators matrix. Below is a brief description of these tools: • Social network. This network allows the identification of the actors who directly and indirectly participate in the intervention. Based on the analysis of actors, it is possible to determine the actors who are related to or intervene in these projects. For this, the actors who are involved with the impact investor and the target beneficiary are analyzed, generating a social network of the intervention. • Sustainability indicators. These indicators are the impacts generated by the actors of the social network, which can be economic, social, and/or environmental. • Life cycle of the target beneficiary. When a social intervention is carried out, there is a life cycle for the target beneficiaries. The SROIM model delivers a life cycle model for the target beneficiaries which consists of three stages: awareness-raising, implementation, and use and end of the life cycle. The SROIM model is shown in Figure 3.3.
1 2 3
1 2
1 2
1 2
3
3
3
Employees
1 2 3
1 2 3
Customers
Employees
Government
Awarenessraising Shareholders
1 2 3
1 2 3 1 2 3
Suppliers
Government
Shareholders
1 2 3
1 2 3
1 2 3
1 2 3
Suppliers
1 2 3
Social cost
1 2 3 Suppliers
Shareholders
Environment
1 2 3
1 2 3
1 2 3
1 2 3
Community
Suppliers
1 2 3
Social benefits
19
Key: 1. Economic outcomes, 2. Social outcomes, 3. Environmental outcomes
Environment
1 2 3 1 2 3
Government
End
Shareholders
Community
1 2 3
Customers
Employees
Government
Use Environment
Community
3
1 2 3
1 2 3
Customers
Employees
Implementation Environment
Community
1 2 3
1 2 3
Customers
1 2
The SROIM Model
Figure 3.3. SROIM Model Visualize Real Impact: Social Network, Sustainability Indicators, and Life Cycle.
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Return on Investment in Corporate Responsibility
• Stakeholders versus impacts matrix. With the analysis of the three previous tools, it is possible to have a systematization of the analyzed information. This systematization is presented by means of the ImpactsStakeholders Matrix, which summarizes all the analyzed actors, that is, the impacts identified in the stages of the life cycle of the target beneficiary. This matrix is an executive tool that permits the visualization of the real impact of the intervention. See Table 3.1.
3.2. SROIM’S SECOND OBJECTIVE: CALCULATION OF SROIM Once the real impact of the project is known, the calculation of SROIM can be carried out. In other words, determine the multiplier effect of the investment or social return on investment. For this calculation, the following stages will be used: 1. collection of information; 2. isolation of the intervention; 3. conversion into monetary value; and 4. cash flow. Below is a brief description of these stages: 1. Collection of information. This process serves to validate the information obtained in the impact visualization process. The collection of information must be carried out from each of the actors identified in the social network. The information is usually collected by means of in-depth interviews, surveys, observations, focus groups, etc. 2. Isolation of the intervention. In many cases, many actors participate in an intervention or social investment project.
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Table 3.1. Stakeholders versus Impacts Matrix.
Social outcomes Education Health Organizational
Economic outcomes Savings Profits etc.
Environmental outcomes Water Soil Waste etc.
Stakeholder 4
Stakeholder 3
Stakeholder 2
Impact investor
Social network impact investor
Stakeholder N
Stakeholder 4
Stakeholder 3
Stakeholder 2
Stakeholder 1
Sustainable outcomes
Target beneficiary
Social network target beneficiary
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In other words, the impact investor makes alliances with other organizations such as the beneficiary families, the local municipality, ministries, teaching centers, among others. The benefits generated by the intervention are due to the investment of all these actors and not exclusively of the impact investor. As a result, and in order to carry out a more realistic calculation of SROIM, it is necessary to identify what part of the benefits can be attributed to the impact investor. For this, it is necessary to isolate the intervention. 3. Conversion into monetary value. There are impact indicators that can be easily valued in currency (dollars or other type) by means of simple valuation techniques such as market prices; however, other recoverable indicators may exist with more complex valuation techniques such as contingent value, hedonic prices, or travel costs. 4. Social cash flow. In the event that future benefits generated by the intervention are expected, it is necessary to carry out a social cash flow. In other words, said cash flow must have the participation of the actors who will continue to obtain these benefits for many more years, as well as the investments estimated to be made to achieve said benefits. To carry out the discount of the future benefits and investments, it is necessary to bring them to present value by means of a discount rate. For this, the discount rate of the social projects of each country is considered. Annex 1 shows social discount rates for different countries. 5. Calculate SROIM. In order to calculate SROIM, it is necessary for both the benefits and the investments to be updated values.
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The SROIM formula is as follows:
SROIM ¼
Benefits Investment : Investment
NOTES 1. Logic Framework: This is a tool to facilitate the conceptualization, design, execution, and evaluation process of projects. Its emphasis is centered on orientation by objectives, the orientation toward beneficiary groups, and facilitating participation and communication between the stakeholders. 2. United Nations Environment Program (2009).
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CHAPTER 4 THE SROIM MODEL IN DETAIL
In this chapter we explain, in detail, how to achieve the two objectives of the SROIM model.
4.1. FIRST OBJECTIVE: VISUALIZE THE REAL IMPACTS To be able to visualize the real impact of a business, program, or project, we review the following concepts: social network, sustainability indicators, life cycle, and stakeholders versus impacts matrix.
4.1.1. Social Network To determine how the social network is formed, we will begin with the concept of stakeholder. 4.1.1.1. Stakeholders Stakeholders consist of those groups and individuals who are affected by an aspect of the activities of the organization and 25
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those who have or may have some interest in or can affect the organization. Freeman (1984) defined stakeholders as any group or individual who can affect or be affected by the achievement of the objective of the company. On the other hand, Carroll (1989) indicated that a stakeholder is an individual or group who claims to have one or more kinds of interests in a company. Freeman and Reed (1983) considered as stakeholders the employees, clients, community, and financial entities. They also considered others, such as suppliers, non-governmental organizations, competitors, government, mass media, public in general, the natural environment, business partners, academic, future generations, and past generations. In the stakeholders’ model, the company explicitly recognizes that its activities affect and/or can affect the environment in which it operates, and it can also be affected by said environment. Therefore, in addition to the inputs of shareholders, employees, and suppliers, this model also recognizes other involved parties: the government, the community, and the environment. Then, it is likely that the decision making of the company affects and/or may be affected by one or more of these stakeholders. Therefore, a two-way process is recognized between the company and its stakeholders. Although this model offers equal importance to all the stakeholders, the limitation of resources and time means that a hierarchy or prioritization must be carried out. Figure 4.1 shows the stakeholders of an organization. Next, we define each of the stakeholders: • Shareholders. These are those who have some power over the decisions of the organization, and this power can be economic, political, hierarchical, formal, or informal. This actor has, in many cases, power to decide the destination
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Figure 4.1. Stakeholders of an Organization.
Government Supplier
Environment
Organization Client
Community
Collaborator
Shareholder
of the project; in other words, it has the resources to accept or reject the project. • Government. This is the group of government entities that participate or have some relationship with the project. These entities can include ministries, Congress of the Republic, regional governments, municipalities, health centers, regulatory entities, ombudsman, among many others. • Clients. These are the people who acquire a service or product from the organization. • Community. This is a group of people (or agents) who share common elements, such as a language, customs, values, tasks, vision of the world, age, geographical location, social status, roles, etc. A company determines its membership of a community by its geographical location
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and the impact that it can have on it. A community can be represented by grassroots organizations, such as glass of milk committees, defense fronts, merchant associations, neighborhood associations, mothers’ clubs, irrigation associations, among others. • Suppliers. These are a person or a company who supplies products and/or services to an organization. • Collaborator. These are the workers of an organization. This includes all the people who maintain a subordinate relationship with the organization. • Environment. This is the scope within which an organization operates, including elements such as water, air, soil, waste, flora, fauna, among others. Below we will define some important concepts for forming a social network: • Impact investor (interventor). This is the individual or organization that designs, plans, and executes the project or social intervention. • Target beneficiary (intervenido). This is the target individual, organization, or beneficiaries of the project (families, farmers, teachers, entrepreneurs, children, women, etc.). • Intervention. This is the social investment program or project (education, productive, health, environmental, social inclusion, citizen participation, etc.). 4.1.1.2. Formation of the Social Network Rowley (1997) considers that the affectation of the companies upon other organizations and the responses of the latter will depend on the network of stakeholders. The network will also act as a governing mechanism, forcing to take joint actions to prevent individual opportunism.
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We will call social network the network of actors formed in a project considering the actors of the impact investor and the target beneficiary. These actors can be related in various ways (economic, social, and environmental). This relationship can have positive and/or negative impacts on the actors. Businesses, projects, or programs have two main actors: the company and the clients or beneficiaries. In turn, both actors have stakeholders that are impacted by an intervention that forms a social network. The steps to form the social network are: 1. Identify the stakeholders of the impact investor (before and after the intervention). 2. Identify the stakeholders of the target beneficiary (before and after the intervention). 3. Combine both analyses. Figure 4.2 shows the result of this analysis. Example: Marriage Case. To understand the social network concept, let us go back to the case of the marriage between Kevin and Sabrina. As the story begins, Kevin (impact investor) was the one who was impressed by Sabrina (target beneficiary) and decided to court her (intervention). In each stage of this long marriage process, social networks were formed, for example, in the awareness-raising or courtship stage, we have: • The social network of the impact investor (Kevin) was the workplace, suppliers, and environment. • The social network of the target beneficiary (Sabrina) was parents, younger brother, friends, suitors, suppliers, and environment.
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Figure 4.2. Social Network of an Intervention.
Supplier
Client
Collaborator
Environment
Government Supplier
Environment
Target beneficiary
Impact investor Community
Client
Shareholder
Source: Compiled by author. Based on Rowley (1997) and Freeman and Reed (1983).
Collaborator
Community
Shareholder
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Government
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• Both social networks combine to deliver what is indicated in Figure 4.3. It is assumed that for Kevin, the shareholder is his workplace and for Sabrina the shareholders are her parents. On the other hand, both interact with the environment; therefore, it is important to consider the environment as an additional stakeholder. In the same manner, we can say that during this stage, both consume goods and services; thus, we can consider the suppliers as an additional stakeholder. Furthermore, Sabrina has many friends and suitors who can be considered as elements of the stakeholder community. Lastly, we can consider Sabrina’s younger brother as her collaborator. The social network of the previous figure consists only of
Figure 4.3. Social Network in the Courtship Stage (Awareness-raising). AWARENESS-RAISING: FALLING IN LOVE Environment
Shareholders: parents Collaborator: younger brother
Shareholder: workplace
Clients
Clients
Community Government
Community: suitors, friends
Suppliers of goods and services Government
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the continuous line circles. The discontinuous line circles are not part of the social networks; they are only shown to illustrate that it is not necessary for all the stakeholders to appear. The same occurs in the other stages. See Figures 2.22.4.
4.1.2. Sustainability Indicators Before we begin the discussion on sustainability indicators, we provide a brief review regarding the typology of indicators of any intervention. 4.1.2.1. Typologies of Indicators The classification of performance indicators is very varied; there are authors who establish typologies of indicators that comprise six or more categories, incorporating the dimensions of evaluation of the efficiency, effectiveness, economy, quality, and also the attributes of said measurements such as “equity,” “scope,” “technology,” etc. Regardless of the above, and considering the objective of the performance indicators, we will address the following typology below: • inputs; • activities; • outputs; and • outcomes. These are shown in Figure 4.4. • Input indicators. These indicators quantify the physical and human and/or financial resources used in the production of the goods and services. These are generally
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Figure 4.4. Typology of Indicators. Inputs
Resources Investment Equipment Personnel Others
Activities
Outputs
Measurable unit Service or product delivered Number of people trained Number of families benefited
Outcomes Changes in the conditions of the individuals Obtaining jobs Higher income Saving of inputs etc.
measured in terms of allocated expenses, number of professionals, quantity of work hours used or available to develop a work, workdays consumed, etc. These indicators are very useful in showing how many resources are necessary for the final achievement of a product or service, but on their own they do not show whether the final objective is fulfilled or not. • Activity or process indicators. These refer to those indicators that measure the performance of the activities related to the execution or the way in which the work is carried out to produce goods and services, such as purchase procedures (days of delay of the purchase process) or technological processes (the number of hours of the offline systems attributable to the support team). These indicators are useful for the performance evaluation in environments where the products or results are more complex to measure, such as investigation, cultural activities, etc. • Output indicators. These indicators show in a quantitative manner the goods and services produced and provided by a public entity or a governmental action. It is the result of
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a specific combination of inputs for which said products are directly related with them. On its own, an output indicator (for example, the number of vaccinations carried out, number of houses built, number of inspections, etc.) does not indicate the achievement of the objectives or of the resources invested in the generation of said products. • Outcome indicators. These indicators measure the results at the level of the last objective expected with the delivery of the goods and services. The information delivered refers, for example, to the improvement in the conditions of the target population, and which are exclusively attributable to said goods. Traditionally, the input and output indicators are most commonly used in social projects. Some of the reasons are related to the fact that such indicators are not as complex to build as the outcome indicators. Typology of the Outcomes or Impacts. In addition to the indicator typology, there is a new typology of the impact or outcome indicators. Below, we mention this outcome typology: 1. The desirable versus undesirable impacts. The undesirable impacts are negative effects of a project for an individual or social system. The determination of whether an impact is positive or negative depends on how the project is seen by the various actors. Some projects can be positive for some actors but negative for certain others of the social network. 2. Direct and indirect impacts. A change in one part of a system frequently initiates a chain reaction of indirect consequences originating from the direct impacts of the project. Direct impacts are the changes in an actor or individual that occur in immediate response to the social project.
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The indirect impacts are the changes in an actor or individual, which occur because of the direct consequences of the project. There are impacts of the impacts. Example, the training of an individual generates obtaining a job (direct impact); this generates economic income, which allows him to buy a house in the long term (indirect impact). 3. Anticipated impacts versus non-anticipated impacts. Anticipated impacts are changes brought by the project and that are recognized and sought, while non-anticipated impacts are changes that have not been sought. A social network is like a set of marbles together, and moving any of them inevitably moves the others to a new position. This interdependence is not always understood in the social projects. The non-anticipated impacts represent a lack of understanding of how the project functions and of the external and internal forces that work in the social network. This uncertainty motivates the search of information regarding the impacts of the project, especially through interpersonal relationships with the actors of the social network. Individuals, in particular, seek to reduce the uncertainty of the desired impacts of a project. On the other hand, the concept of sustainable development is the development that satisfies the needs of the present without committing to the capacity of future generations to satisfy their own needs. Sustainable development refers to the integration of the challenges of an elevated quality of life, health, and prosperity with social justice and the maintenance of the earth’s capacity to conserve life in all of its diversity. These social, economic, and environmental challenges are interdependent and reinforce each other (International Standard Organization, 2010a, 2010b).
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Now that we are aware of the various typologies of indicators, we will review the concept of sustainability indicators applied by the SROIM. 4.1.2.2. Sustainability Indicators When a social intervention is carried out, it is very likely that it can have the three types of impacts: social, economic, and environmental; therefore, it is necessary to think about these impacts systematically. For example, an intervention to improve the health of a family member (social impact) can improve the economy of this family, because now it has a greater productivity (economic focus) and can reduce contamination (environmental impact). The social, economic, and environmental impacts are interrelated, and it is necessary to think systemically to identify them. This interrelationship is shown in Figure 4.5. These interactions among the social, economic, and environmental aspects take place in a natural manner (see Figure 3.3). In another example, if there is an environmental
Figure 4.5. Interrelationship between the Sustainability Indicators.
Economic
Social
Environmental
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problem (for example, contamination of water), this can have social consequences (for example, on health) and economic consequences (for example, in the reduction of farmers’ productivity). Sustainable social interventions are initiatives that are at the micro level and are able to contribute to human wellbeing, environmental sustainability, and economic development (UNEP, 2009). It is useful to rely on the already established indicators to communicate the impacts of a venture on external stakeholders. The examples of social, environmental, and economic impacts include the Development Objectives of the Millennium (United Nations, 2008), the Global Reporting Initiative (GRI, 2000) organization, or the global compact. In other words, sustainability impacts are related and our work is to determine how this relationship is presented; for this, it is necessary to have specialized information of the subject to be discussed. The SROIM model uses this thinking to determine the impact indicators (social, environmental, and economic) which would be generated with the intervention. For this, it is necessary to have the participation of the experts. Let us see some additional examples to explain this interaction: • If the main objective of a social intervention is to improve the health of children with acute respiratory diseases (social objective), it is possible that this intervention will have economic and environmental impacts. This intervention involves the installation of a better stove in the home of these poor families. It has been verified that these improved stoves are more efficient in combustion, emit less CO2 into the environment, and save firewood up to 40%. Therefore, the families save in the purchase of firewood
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(economic impact) and the environment is benefited by the reduction in CO2 emission (environmental impact). • If an intervention has an environmental objective, for example, the reforestation of a determined area, it is very likely that economic and social impacts are also generated. Reforestation (environmental impact) increases the value of the nearby land and houses, and it provides wood for the use of the families (economic impact). In addition, reforestation provides a recreation space for the families; it improves the quality of life (social impact). • If the objective of an intervention is to increase the income of the families of poor farmers (economic indicator), it could have social and environmental impact indicators. For example, if the intervention involves good water management and the use of organic fertilizers, there would be relevant environmental impacts; furthermore, the increase in income of the families improves the health and education of the children (social impacts).
4.1.3. Life Cycle of the Target Beneficiary The target beneficiary is the beneficiary of the social project and is the one who receives the goods and services in a direct manner to improve his/her initial situation and be able to achieve social, environmental, or economic development. In order for this to occur, the target beneficiary undergoes a “process of change of conduct” from the moment when he/ she receives the news of the social project until the impacts generated by the said social project. The majority of the social projects (interventions) seek a change of conduct of the target beneficiary, who undergoes a
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Figure 4.6. Life Cycle of the Target Beneficiary. Awarenessraising
Implementation
Use
End
Source: Compiled by author based on Bandura (1977); Porchaska and others (1992); Rogers (1995).
process to adopt the said intervention (Bandura, 1977; Porchaska, DiClemente, & Norcross, 1992; Rogers, 1995). As we have mentioned, the SROIM model helps to identify, measure, and manage the impacts of the social interventions; therefore, it is important to know the life cycle of the target beneficiaries since they are the ones who bear the impact generated by the intervention. The life cycle of the target beneficiary is shown in Figure 4.6. We describe below the phases of this life cycle of the target beneficiary: 1. Awareness-raising. This consists of: • Knowledge. Occurs when the target beneficiary is exposed to the existence of an innovation and has an understanding of how it works. This can include training and/or information. • Persuasion. Occurs when the target beneficiary forms a favorable or unfavorable attitude toward the innovation. This can be achieved, for example, with internships, attendance at meetings, conferences, talks, etc. — Learning. Occurs when the target beneficiary learns the concepts and practices of the intervention. This can be verified with an exam or test as part of the training.
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2. Implementation. This is the moment when the target beneficiary implements what has been learned in the training with the respective inputs. For example, in the event that these inputs are provided to him by the impact investor (machinery, seeds, infrastructure, medicines, etc.) the implementation is the moment when these inputs are installed or delivered to the target beneficiary. 3. Use. This is the moment when the target beneficiary begins to use the inputs that were delivered to him/her. Thus, it begins to have the expected changes with social, economic, and/or environmental impacts. 4. End of the cycle. Occurs when the target beneficiary concludes with the use and practices of the intervention. Once the life cycle of the target beneficiary is identified, it should be known how the other actors of the social network have been impacted in each stage of this life cycle. To illustrate the management of the life cycle of the target beneficiary, we will carry out this exercise with the project: Marriage. As we have stated earlier, we use this example, given the ease of understanding of the processes experienced by all of the related actors. 4.1.3.1. Example: Marriage Case between Kevin and Sabrina According to the life cycle of the target beneficiary, the bride goes through the following phases: 1. Awareness-raising falling in love. In this stage, she becomes aware of the intentions of Kevin, who carries out various activities to make her fall in love and to persuade Sabrina to accept his proposal. She accepts the relationship and learns the advantages and disadvantages represented by this proposal of love (intervention).
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2. Implementation marriage. The marriage takes place in this stage, and the following new needs appear: housing, new goods and services, and they learn to acquire new customs and responsibilities. 3. Use children. Changes generated by the intervention (marriage) appear in this stage. One of the main changes is the arrival of children, which changes the order of the priorities. Therefore, they not only have to learn to be parents, assume new responsibilities, and have additional expenses, but they also have new motivations, joys, and other benefits. 4. End of the life cycle grandparents. In this stage, after several years, Kevin and Sabrina become grandparents, which represents new joys, learning, expenses, etc. We can conclude that the life cycle of Sabrina and her marriage may last more than 50 years, from when she was young until she becomes a grandmother. The SROIM model indicates that we must also learn how the other actors are impacted, who participate in this project during the life cycle of the target beneficiary. Let us begin with the bride’s parents and see how they are impacted in their daughter’s life cycle. See Figure 4.7. According to the life cycle of the target beneficiary, the bride’s parents pass through the following phases: 1. Awareness-raising falling in love. In this stage, the bride’s parents become aware of their daughter’s relationship; they become alert and begin asking questions regarding the boyfriend and his intentions. 2. Implementation marriage. In this stage, the parents have accepted the relationship and can only resign themselves to seeing their daughter married. Furthermore, they
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Figure 4.7. Kevin and Sabrina’s Life Cycle and Its Impact on Sabrina’s Parents. Kevin and Sabrina in the stage of falling in love
Awareness – raising
Kevin and Sabrina Kevin and at the wedding Sabrina have children
Implementation – wedding
Use – children
Kevin and Sabrina are grandparents
End Time: 30 years
How do Sabrina’s parents feel? Jealous Attentive Worried
Resigned
Happy with their grandchildren
The years passed and Sabrina’s parents died
find that they have new family relationships with the groom’s family, and their family is expanded by this relationship. 3. Use children. In this stage, Kevin and Sabrina have children who will be with them until they are sufficiently adult to carry on with their own lives, and Sabrina’s parents become grandparents. This brings them joy, and they spoil their grandchildren with love and presents. 4. End when Kevin and Sabrina become grandparents. In this stage, the children of Kevin and Sabrina already have their own family; it is very likely that Sabrina’s parents will not participate in this stage. We can estimate that Sabrina’s parents would have passed through all these stages in 30 years. We can continue analyzing other stakeholders. For example, let us study Sabrina’s friends who know her from before the marriage. Let us analyze how they are impacted in each stage of the life cycle of the bride. See Figure 4.8.
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Figure 4.8. Kevin and Sabrina’s Life Cycle and Its Impact on the Bride’s Friends. Implementation – wedding
Awareness – raising
Use – children
End
Time: 2 years How do Sabrina’s friends feel? Relegated They no longer spend as much time with Sabrina
They decide not to continue with the friendship and they abandon it
According to the life cycle of the target beneficiary, the bride’s friends pass through the following phases: 1. Awareness-raising falling in love. In this stage, the bride’s friends become aware of this relationship. Due to this relationship, they no longer spend time with Sabrina, and they feel relegated by Kevin. 2. Implementation marriage. In this stage, the bride’s friends disappear. We can infer that the participation of the bride’s friends will only be for a two-year period. Similarly, it is possible to analyze other stakeholders who are impacted in this project, such as the workplace, suppliers, etc. In conclusion, the SROIM model uses the life cycle (of the target beneficiary) to know the impacts generated in each actor in each stage of this life cycle. This helps to identify the impacts generated by the intervention.
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Figure 4.9. Life Cycle of the Target Beneficiary: Summary. Awareness – raising
Implementation – wedding
Use – children
Kevin and Sabrina
Time: 50 years
Parents of Sabrina Friends
End
Time: 30 years Time: 2 years
Other stakeholders
Time: X years
4.1.3.2. Summary of the Life Cycle of the Target Beneficiary Having concluded the analysis of the life cycle of the target beneficiary, it is possible to express it in a single table and to know about all the actors who participate in this life cycle, its periodicity, and how they are impacted. Figure 4.9 presents the summary analyzing the life cycles of Sabrina, her parents, and friends. This figure shows how, during Sabrina’s life cycle, some of her stakeholders, such as her parents, accompany her for a long time, while other stakeholders, such as her friends, only accompany her for a short period. This analysis will be important for the calculation of the social return on the investment.
4.1.4. Stakeholders versus Impacts Matrix The following step is to order these impacts into a matrix so that we can see all the events of the intervention.
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4.1.4.1. The Relevant Stakeholders of the Social Network The prioritization of actors begins in this stage, that is, selecting only the relevant actors. In other words, it is not required for all the actors identified in the social network to appear in the SROIM analysis. The actors should be prioritized based on the following criteria: relevance of the actor in the intervention, availability of information, willingness of the actor to provide the required information, scope of the study, quantity of available resources, among others. The actors of the social network are located in the first line of the matrix; that is, the target beneficiary and its relevant actors are located first of all, and then the impact investor and its relevant actors. With regard to the location of the actor “Environment,” it is different. Since this actor, in general, is impacted by the others, we locate it in the column of impact indicators. See Table 4.1 for the marriage case. 4.1.4.2. Sustainability Indicators • Economic indicators. Those that involve an increase or reduction in economic variables such as additional income, generation of employment, savings, avoided costs, availability of natural resources, availability of time, capitalization of assets, among others. • Social indicators. These indicators can be conveniently divided, depending on the objective of the intervention, into sub-aspects such as education, health, organization, human rights, among others. • Environmental indicators. These indicators indicate the changes generated (affectation and/or improvement) by the environmental intervention in the following aspects: water, soil, air, flora, fauna, waste, among others.
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Table 4.1. Stakeholders versus Impact Matrix (Case: Marriage). Sustainability Indicators
Social Network of the
Social
Target Beneficiary
Network of the Impact
Workplace
Kevin
Government
Suppliers
Environment
Friends
Parents
Sabrina Economic Investment
X
X
Income Increased expenses Gifts Work costs
X X
X X
X X
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Investor
X
marriage, children Social New responsibilities
X
Fewer friends
X
Learning
X
Joys
X
X
X X X
Doubts
X
States of alert
X
Resignation Good physical
X
X
X
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Registration of the
X X
X
condition Change of civil status
X
Environment Waste generation
X
Emission of CO2
X
47
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See Table 4.1 for the marriage case. 4.1.4.3. Life Cycle of the Target Beneficiary The indicators that result from the analysis of the life cycle of the target beneficiary, for each actor, can be ordered in a matrix in a systematic manner. See Table 4.1. 4.1.4.4. Advantages of the Stakeholders versus Impacts Matrix • It permits the visualization of the real impact of the intervention; that is, it includes the relevant actors and how they have been impacted by the intervention. Therefore, this matrix becomes an executive tool for decision-making. • It facilitates the identification of impacts on the actors during the life cycle. In other words, since the impact indicators are located in the first column of the matrix, it can help identify the impacts generated in all the actors. • It permits the identification of the tangible and intangible indicators. Within the tangible indicators, it will be possible to identify those with the possibility of providing monetary value. With these valued indicators, we will calculate the social return of the intervention.
4.2. SECOND OBJECTIVE: CALCULATION OF SROI As has been seen in the previous stage, real visualization of impacts of the SROIM model, and the analysis of the intervention, for design and/or measurement, is generally carried out by off-site survey, that is, through experts and secondary information. This is a good approximation of the real impacts that occur in the intervention.
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However, this continues to be theoretical; in other words, the information identified in the matrix (impact indicators, the social network, and the life cycle of the target beneficiary) must be validated in the field. In order to do this, it is necessary to proceed with the following step, collection of information.
4.2.1. Collection of Information For the validation work of what has been analyzed up to now, it is necessary to collect primary and/or secondary information. • Primary information is that which the researcher obtains directly from reality, collecting it with his own instruments. • Secondary information is written records that also proceed from a contact with the practice, but that have already been selected and processed by other researchers. Various information-collection methods are used to gather information, including: • surveys; • interviews; • observation; and • focus groups. To learn more regarding these information-collection techniques, see Annex 3.
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4.2.2. Isolation of the Intervention The first evaluation question that needs to be resolved with the quantitative estimate of the impact of an intervention is “what would have been the situation of the beneficiaries if they had not participated in the intervention or had not been exposed to the program being evaluated?” This is a question that applies to any type of intervention and its study permits the analysis of the expected and unexpected effects that the intervention is generating in the beneficiaries. This is denominated “Isolation.” Since we seek the social return on investment of the impact investor, it is necessary to formulate the second question: How many of these benefits or impacts generated by the intervention correspond to the investment made by the impact investor? In other words, how many of these benefits are attributable to the impact investor? This is called “Attribution.” These ideas can be represented through the following equation: Impact attributable to the impact investor ¼ Isolation × Attribution
1. Isolation: What would have happened anyway without the intervention? It is a measure of what would have happened if the intervention had not existed. Isolation ¼ With the project Without the project where • “With the project” are the living conditions that the individual achieved when he participated in the program.
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• “Without the project” represents the living conditions that the individual would have reached in the absence of the program. 4.2.2.1. Isolation Methods There are various methods to isolate the intervention, but we will only explain the two main ones: 1. Control Group. The impact must be estimated through a systematic comparison between population groups who receive the benefits of the intervention (treatment groups) and non-beneficiary groups (control groups), which are similar in the most relevant aspects. As an example, let us assume an intervention of development of capacities of entrepreneurial women. A selection of the control and experimental groups is carried out. The effectiveness of the intervention is measured with the annual income of each group. For the case of the control group, it is observed that there is an annual increase in its income of 500 dollars per month, while for the experimental group it is 2,000 dollars. We can state that the intervention has contributed 2,000 500 = 1,500 dollars. See Figure 4.10.
Figure 4.10. Control Group. Control group (no intervention)
Increase in net income = 500
Mothers
Mothers Increase in net income = 2,000
Experimental group (with intervention)
Mothers
Mothers
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2. Trend Line. The impact can also be estimated by comparing the group of beneficiaries at different moments in time, which can be reflected in a trend line. That line is projected to the future using previous information. When the intervention is carried out, the variable studied with the intervention should be compared with the projection of this line (without the intervention). Any difference between these values can be attributed to the intervention. Figure 4.11 shows the trend line of the annual income of a farmer. In year 5, he receives an intervention that consists of the development of capacities and the installation of technified irrigation. In year 6, the measurement of income is carried out, which totals 2,500 dollars. If we consider that in year 5, the income was 1,200 dollars and that if this intervention had not existed, in year 6, income would have been 1,800 dollars. Therefore, the impact of the intervention is 2,500 1,800 = 700.
Figure 4.11. Trend Line.
Intervention Annual income US$
c
2,500 1,800 1,200
b
a
Years 0
1
2
3
4
5
6
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1. Attribution: In a situation where the social benefits are the result of the activities of various organizations, the attribution is the measurement of how many of these benefits correspond to an organization in particular (Lingane & Olsen, 2004). This attribution can be expressed as the percentage of its investment with regard to the total investment made by all of the actors. As in any business, the benefits are distributed in proportion to the investment made by the partners; thus, to know what part of the benefits are attributable to the impact investor, it is necessary to affect these benefits by the attribution of the impact investor. The implementation of social interventions is due to the participation of various actors such as: • The impact investor, who designs and implements the intervention with an assigned investment. • The target beneficiary, who participates in the training sessions, makes time and infrastructure investments, and in some cases money as a counterpart. • The government (municipality, public health centers, public teaching centers, etc.), which can provide facilities for the training session, support personnel, specialists, machinery, and money. • International organisms and other organizations, which, in some form, participate in the project. In order to determine the attribution of the impact investor, it is necessary to know its investment percentage with regard to the total investment of the project. Attribution of the impact investor ¼ Investment of the impact investor × 100% Total investment of all the actors
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2. Examples: • Participation of two actors. For a productive agricultural intervention that involves training and delivery of seeds to the farmers, the following is included: Calculation of Isolation: — Income of the farmers before the project: 1,000 dollars per year. — Income of the farmers after the project: 1,500 dollars per year. Isolation ¼ 1; 500 1; 000 ¼ 500 How much of these 500 dollars are attributable to the investment of the impact investor? Calculation of the Attribution: Impact investor: 15,000 dollars. Target beneficiary: 3,264.1 Total investment = 15,000 + 3,264 = 18,264 dollars. Attribution of the impact investor = 15,000/18,264 = 82.13%. Impact ¼ Isolation × Attribution
Impact attributed to the impact investor ¼ 500 × 0:823 ¼ 411 • Participation of three actors. The objective of the program is to increase the knowledge level of the children. One of the impacts of this program is to avoid 50 children repeating the school year.
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The annual cost for a parent to send his child to school is 120 dollars. For all the parents it is: Total cost = 120 × 50 = 6,000 dollars. Calculation of Isolation: — Without the intervention, these 50 parents would have had to spend 6,000 (negative) dollars again for their children to study the same school year. — With the intervention, this expense is no longer necessary (equal to 0); that is, they do not have to spend for their children to study the same school year. Isolation ¼ 0 ð6;000Þ ¼ 6;000 Calculation of the Attribution: — Impact investor (mining company): 10,000 dollars. — Target beneficiaries (teachers and principals): 1,500 dollars. — Local Educational Management Unit: 200 dollars. Total investment = 10,000 + 1,500 + 200 = 11,700 dollars. Attribution of the impact investor = 10,000/11,700 = 85.4%. Impact ¼ Isolation × Attribution
Impact attributed to the impact investor ¼ 6;000 × 0:854 ¼ 5;128 dollars:
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4.2.3. Calculation of the Monetary Value As we remember, there are two types of result indicators generated by a social intervention, which are the Outputs and the Outcomes. As a result, the calculation of the monetary value must be carried out in both result indicators. 1. Initial Benefit (Outputs). This occurs in the implementation stage of the intervention. From the perspective of the impact investor, the outputs imply the physical and human, and/or financial resources used in the intervention. These outputs are generally the goods and services delivered to the beneficiaries, for example: training of the families, delivery of seeds, improved stoves, nutritional reinforcement, among others. The economic value of these outputs is exactly the same as the investment made in them. In other words, it involves all the resources or inputs (number of professionals, quantity of work hours used or available to carry out a work, workdays consumed, outputs, etc.). In conclusion, the outputs are the goods delivered to the beneficiaries because of the investment made. From the point of view of the target beneficiary, the outputs are the initial benefits received by the impact investor. In other words, the target beneficiary receives the goods and/or services and because of them, they become beneficiaries. This occurs in the implementation stage of the intervention. That is, the beneficiaries receive the goods and services, but still do not use them, or produce them. This type of analysis will enable the investment to be located, that is, which actors have it and how they have been impacted.
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Monetary Value of the Initial Benefits This calculation is simple if we consider the following: Initial Benefits ðtarget beneficiaryÞ ¼ Outputs ðimpact investorÞ ¼ Input ðimpact investorÞ
• We are in the implementation stage. • The investment of the impact investor (negative) is received by the target beneficiaries or direct beneficiaries (positive). In other words, up to that moment only the transfer of the investment of one actor (impact investor) to another (target beneficiaries) is analyzed. • The total investment of the intervention is considered. • The valuation indicates who the actors are and how they have benefited from this investment. Example: A brewery invests $20,000 to train agricultural families to improve their productivity. Impact investor: • Brewery. • Investment = 20,000 (Input). • Service delivered = Training (Output). Target beneficiary: • Farmers. Initial Benefit: Acquisition of knowledge. Valuation = +20,000 (positive for the target beneficiaries or beneficiaries). Until this moment of the intervention there has been NO social change; in other words, this occurs
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immediately after the training (the change will be produced when the acquired knowledge is applied). Example: A mining company invests $50,000 for the installation of improved kitchen stoves in the homes of the poor families within its area of influence. Impact investor: • Mining Company. • Investment = 50,000 (Input). • Service delivered = Improved kitchen stoves (Output). Target beneficiary: • Families. Initial benefit = Capitalization of the home. Valuation = +50,000 (positive for the target beneficiaries or beneficiaries). Example: A fishing company invests $10,000 to deliver nutritional reinforcement to the pregnant mothers and children under 5 years old with nutritional problems. Impact investor: • Fishing Company. Investment = 10,000. Service delivered = Nutritional reinforcement (Output). Target beneficiaries: • Mothers Initial Benefits: Nutritional reinforcement = +4,000 (Benefit).
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• Children Initial Benefit: Nutritional reinforcement = +6,000 (Benefit). This type of analysis will enable the investment to be located, that is, which actors have it and how they have been impacted. These calculations should be reflected in the valuation of the Impacts versus Stakeholders Indicators Matrix. 2. Monetary Value of the Outcomes. After determining the valuations of the initial benefits with the outputs, this should be followed by the valuation of the outcomes, which are the changes in the conditions of the target beneficiaries. The valuation must be annualized. These outcomes can be tangible or intangible. • Valuation techniques of tangible impacts. Market price. In general, it is ideal to have available information originating from well-established markets. It estimates the economic value of conventional or nonconventional products and services, which are traded in the markets. The advantage of the method is that the prices, quantities, and costs are relatively easy to obtain. However, many times the market data are only available for a limited number of goods and services. Let us see some examples of conventional and nonconventional market prices: — Higher income. There are social interventions, the objective of which is to improve the family income; in these cases, the improvement in income is related to the improvement in the productivity of their products (agricultural, handicrafts, fishing products, dairy products,
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among others) which will be commercialized. These products have established market prices. — Price of acquisition of knowledge. To value this concept, it is necessary to understand that education, in general, can be considered a business; in other words, parents make a payment (investment) to the teaching center and what their children receive is knowledge (benefit). As a result, knowledge acquisition can be valued by the investment made to acquire it. This value can vary according to the geographical area of the intervention or the educational system (public or private). — Value of free advertising. When a social intervention is carried out, it is possible that the relevant actors, such as the impact investor, target beneficiary, and community, may be mentioned in various advertising media (television report, newspapers, magazine articles, radios, etc.). In the event that this advertising has not been paid by the impact investor, it can be considered as free advertising, that is, the mass media mentions the actors in a voluntary manner. The value of this free advertising can be determined by consulting the various media regarding their costs. — Social value of time. Work time can be determined using the value of the labor salary in the market (in case it exists). In cases where there is no social value of work or non-work time, studies carried out by public or international entities can be used. — Value of a ton of CO2. The reduction in CO2 emissions because of a reduction in the use of private vehicles, reduction in the use of fuel, etc. This reduction in emissions can be valued based on the price of a ton of CO2 in the existing carbon market or the carbon credits that
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result from what is established in the flexibility mechanisms of the Kyoto protocol. — Value of human life. Since some forms of contamination influence health up to the point of endangering survival, analysts must consider valuation of life. Avoiding the subject does not contribute to solving socio-environmental problems. The government, companies, and individuals routinely make decisions that can be modeled by an assignment of monetary exchange value to changes in the probability of damage or death. The contracting of life insurance, for example, reveals the willingness to pay, which values the individual perception of the probability of premature death. On the other hand, some government institutions can deliver value of life according to sectors; for example, in the United States the statistical value of life is 7 million dollars, for the United Kingdom and Australia it is 4.2 million dollars, for Japan it is 9.7 million dollars (Viscusi & Aldy, 2003), etc. The statistical value of life is understood as the willingness to pay shown by an average person (statistical person) to adopt measures that reduce the risk of serious or fatal impact on his/ her life. As can be concluded, many variables such as the value of non-work time, the price of a ton of CO2, and the value of human life do have a market price at present; however, they did not always have this market price, that is, at some moment they were considered intangible. This is occurring with many variables that are currently intangible; in other words, with the passing of time their valuation becomes possible.2 In order to carry out this valuation, the techniques described below are used.
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• Valuation techniques of intangibles. There will be many other cases, however, in which there is no market for the mentioned good, especially those that are related to the increase in mortality or morbidity rates or to the deterioration of ecosystems, to mention two especially evident examples. The non-existence of markets for determined goods presents a problem, but not an insurmountable one. A synthetic description of the methods includes the following: — Replacement cost. The economic value of the goods or services is estimated as the financial cost of its restitution or the substitution of its services by means of a technology created by human beings (the function of treatment of wastewater from a wetland could be estimated based on the construction and functioning cost of a wastewater treatment station). — Avoided cost. This permits the value of implicit well-being loss in any negative externality to be estimated as the cost that would have been necessary to incur if the affected good or service was not provided or was provided in deficient conditions (property damage avoided by the lower frequency and intensity of floods or health costs avoided thanks to the function of treatment of the contamination of the wetlands water). — Methods based on the production function. These are employed in those situations in which the provision of an environmental good or service (clean water or air, for example) is determined for the production of goods and services, modifying, for example, the exploitation income (an improvement in the water quality increased the catches in a fishing bank and, therefore, the income of the fishermen), or for the production of profit.
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— Travel cost. This is a technique that attempts to deduce value based on the observed behavior of the visitors to a place, through the total expense incurred for the visit (money and time assigned to the visit) and in this way derive a demand curve for the services offered by the site. The total benefit obtained by the visitors can be calculated based on this demand curve. The cost method of travel is generally used to estimate the value of recreational places, such as public parks and nature reserves. They can be used to estimate the willingness to pay for ecological tourism or the tariff to visit a national park. — Hedonic prices. These have been widely used to analyze the contribution of the different attributes (characteristics) to real estate prices. The basic premise lies in the fact that the value of a property reflects a flow of benefits and that it is possible to isolate the value of the environmental characteristic or recreational opportunity of the good. A house in a neighborhood with low air pollution, for example, would be sold at a higher value than a similar house in a neighborhood with a high level of air pollution. It is likely that the hedonic price technique will serve to value some environmental functions in terms of their impact on the value of the land, on the assumption that these functions are reflected in land prices. When we apply this technique to the case of housing, this approximation is generally referred to as approximation of the value of the property, and when applied to the data regarding salaries, it is generally referred to as approximation of differential salary. — Contingent value. This attempts to discover the willingness to pay or the compensation required from a person for the variation in the conditions of its environment (a contingent value survey will allow, in theory, the
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approximation of this value directly asking for the monetary amount that a surveyed party, facing a hypothetical situation, would be willing to receive or disburse). — Transfer of results. This consists of employing the monetary value to analyze that it has been empirically determined in a concrete location (study of origin) to the context of the study that is being carried out (study of destination). — Willingness to pay (WTP). This is a so-called stated preference technique. Basically this method aims at measuring the willingness of individuals to pay for environmental services, nature protection, etc. Most critical point with this method is the way in which it is explained what exactly has to be valued by the respondents and realistic monetary choices. A limitation is the “income restraint” (poor people will be less willing to pay, so average income levels influence outcomes of the studies). An advantage is that it can be used to valuate difficult-to-measure nonuser values or the value of nontraded goods and services. — Prevention costs. Applying preventive measures can be a way to mitigate negative effects of economic developments on nature. The costs thereof can be regarded as the value of the protected area or species. Examples of such measures can be other, longer routes of road (to prevent cutting off part of a natural area), a tunnel, passages for animals. — Opportunity costs method. The opportunity cost of a resource is the value of the next-highest-valued alternative use of that resource. For a natural area this may be agricultural use, use as a road, and in some cases economic development (industry, housing). The opportunity costs of nature, thus, will depend largely on location and (for
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agriculture) fertility. In the Netherlands, natural area is valuated at about $20,000 per ha, agricultural land costs $30,00040,000, industrial $100,000$200,000 and housing $2,000,000$5,000,000 per ha.
4.2.4. Social Cash Flow Social cash flow is a key tool for analyzing the benefits of an intervention. For others to be able to use it, it is necessary to know the assumptions or data on which each cash flow is based, with the main objective being to show that the intervention is feasible or that it provides sufficient social profitability. The social cash flow is that which uses all the relevant information regarding the projected benefits and the necessary investments, whether operating investments or expenses, and states when the financing will be required. 1. Social benefits. The social benefits of an intervention correspond to the various impacts of each actor of the social network. These impacts can be economic, social, and environmental. For the analysis of the social benefits, the following considerations must be taken into account. • Initial benefits. Each activity of the intervention has a period for its implementation. This period involves awareness-raising, training, and implementation. This can take months or years. Moreover, the benefits of these activities have a later start. It is necessary to know or estimate when these benefits begin. For example, the installation of improved kitchen stoves for 150 benefitted families can last an entire year. Therefore, these impacts will begin the following
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year. The impacts of this installation can be savings of firewood and reduction in CO2 emissions. Another example can be the installation of drip irrigation for the families of farmers who sow Avocado seedlings. The impacts can be: — Capitalization of their land, that is, with the availability of water, their land will appreciate in value. This can occur immediately, in the year following the installation of the land. — Savings in the use of fertilizers. Beginning of the benefit: the year following the installation. — Time savings (daily wages). Beginning of the benefit: the year following the installation. — Improved productivity. This depends on the agricultural product. For example, in the case of avocado, this may occur two years after the installation of the seedlings, which are irrigated by this system. As can be concluded, it is necessary to establish when the benefits or impacts of each activity begin. Both the beginning of the activities of the intervention and the beginning of the benefits must be reflected in the social cash flow. In general, it is considered that the beginning of the benefits should be after the beginning of the activities of the intervention. • Conclusion of the impacts. Each activity will have a period of duration of the impacts. The determination of this period must be based on technical and specialized information of this activity. Consulting the experts regarding this period should be considered. For example, if the activity is the installation of improved kitchen stoves in the homes of the families, the impacts are
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saving of firewood, reduction in CO2 emissions, among others. The question is: How long will these impacts last? Can it be assumed that these impacts will last the time during which the said improved kitchen stove is in good condition (for example 10 years)? The expert in this activity must base his response on previous experiences and/or secondary information regarding the duration of an improved kitchen stove. These expected benefits and their time of duration must be reflected in the social cash flow. 2. Cash outflows. Cash outflows include all the investments that must be made at the moment of carrying out the initial investment as well as during the operation of the intervention or project. The typical areas of expenditure for an intervention range from previous studies, purchase of equipment, obtaining premises and adapting them, legal constitution expenses, contracting and training of personnel, etc. to the operation of the business itself, with the purchase of raw material or supplies, payments of services, fuel and maintenance of equipment, personnel, uniforms and food, promotion and sales, administrative and general expenses, insurance, etc. Each cash movement must be recorded in the period that it corresponds to, since expenses must generally be incurred before achieving the generation of income. In both cases, it refers to the movement of money (when it is paid or collected) and not necessarily to the moment in which the raw material is used or the sale is made. In the social cash flow, it is normal in the beginning for the investor or impact investor to have negative values, and for the beneficiaries or target beneficiaries these same values to be positive. In other words, it must be verified
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that what is invested by the impact investor is what is received by the target beneficiaries in the same period of time. This is equivalent to SROIM = 0. 3. Steps for the cash flow: • Define the investments in time. Some interventions have a period of more than one year; therefore, the amount of the investment must be identified in the respective period. • Identify the direct beneficiaries of said investments. These amounts must coincide with those of the previous step and in the same period of time. Until here we have SROIM = 0. • Project the benefits (impacts) for each actor. Establish the estimates of these variables for the following years, but order them in a coherent manner at the moment when these benefits begin and end. • Establish the cash flow. Analyze the dependencies between the benefits and investments. Evaluate the coherence of the results and be aware of how all the variables of the project are interconnected. • Calculate the total annual social benefits for the entire projected horizon. • Calculate the current value of the social benefits. For this, use the official social discount rate of the country.3 See Annex 1. • Calculate the current value of the investments. Use the same social discount rate of the previous step. • Calculate SROIM.
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4.2.5. Calculation of SROIM
SROIM ¼
Current Value ðBenefitsÞ Current Value ðInvestmentÞ Current Value ðInvestmentÞ
Let us see some examples of SROIM values and their interpretation: SROIM = 0.3 This means that for every dollar of investment, an amount of 30% has been generated over the investment in the identified social network. In other words, if the investment was 10,000 dollars, there is 30% or 3,000 additional dollars on the investment. SROIM = 0 This can have two meanings: The generated benefits are equal to the investment made, that is, there are no changes in conduct or application of what is received. For example, let us assume that a municipality decides to invest in the construction of a pedestrian bridge due to the constant traffic accidents that occur in a determined main avenue. Let us also assume that the public does not use this pedestrian bridge for various reasons (it is too far, laziness to go up and down the stairs, lack of awareness of the risks of crossing the street, among others). The impact investor is the local municipality, which invests 15,000 dollars. The target beneficiaries are the citizens of the local community, who receive this infrastructure valued at 15,000 dollars. At this moment, the SROIM is zero.
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SROIM ¼
15;000 ðCommunityÞ 15;000 ðMunicipalityÞ ¼0 15;000
Zero sum, in other words, what one actor invests (Municipality, negative) the other receives (Community, positive) but until that moment it does not produce changes in behavior. Another example is that of the intervention involving the training of farmers to improve their productivity. Impact investor: mining company which invests 10,000 dollars in this training. Target beneficiary: farmers who receive the training. At this moment, the SROIM is zero.
SROIM ¼
10;000 ðFarmersÞ 10;000 ðMining CompanyÞ ¼0 10;000
Zero sum, in other words, what one actor invests (Mining Company), another actor receives (farmers). It is the moment of the delivery of the training. SROIM = 1 The benefits (damages) affect the target beneficiaries. For example, consider the case of the pedestrian bridge in the previous example. Let us assume that this pedestrian bridge is used by criminals to assault the people who use it; in other words, the pedestrian bridge becomes detrimental for those who use it. In this case, the citizens perceive this bridge as something negative for their safety. SROIM = 200 This SROIM value is extremely high. It occurs when the target beneficiaries receive many benefits and the investment
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is low. For example, in some marginal neighborhoods of the city there are families living in houses located in the hills. In order for them to carry out their daily activities, these people (men, women, and children) have to walk down the hills, running the risk of accidents, getting dirty, and delays. The investment in the construction of stairs is low cost, but there are great benefits for the families, such as greater safety, appreciation in the value of their houses, they no longer get their shoes or clothes dirty, etc. Another example can be seen in JaipurKnee, an artificial leg for people with amputated legs. This artificial leg is low cost, approximately 20 dollars, but multiple benefits are obtained by the people who use it: possibility of obtaining better jobs, better salaries, better quality of life, etc. To obtain additional information regarding these benefits, see http:// www.d-rev.org/projects/remotion.html
NOTES 1. The calculation is described as follows: • Daily wages invested for the training and implementation: 33. • Value of the daily wages: 8 dollars. • Total value of the daily wages: 33 × 8 = 264 dollars. • Lease of land for sowing: 3,000 dollars. Total investment of the target beneficiary = 3,264 dollars. 2. It is very likely that during the drafting of this text, there exist and may exist many variables that have economic value and that can
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help us to determine the social return on investment. As a result, I leave it as a task for readers to continue the search for the valuation of said impacts. 3. Each country uses a social discount rate for its public investments.
CHAPTER 5 CASE STUDIES
Cases of social interventions in various lines of action, health and nutrition, education, productive, and environment, are presented in this chapter. The cases contain primary information to illustrate the objectives and the beneficiaries. However, to form the social network and determine the impacts on each stage of the life cycle of the target beneficiary, field information should be collected to validate what is shown in the development of each case. As a result, when the social network is formed, those stakeholders emerge who do not appear in the case description. These stakeholders appear during the collection of information.
5.1. UBER 5.1.1. Background In many cities, the taxi services are informal, that is, the vehicle owners usually rent them to the drivers so that they can provide the service in return for a percentage or fixed 73
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amount. Moreover, the taxi drivers are not organized and compete for service. They are forced to look for their clients in the streets, using fuel unnecessarily, generating dense traffic, and working long hours of 12 to 14 hours, with the risk of being assaulted by false passengers. On the other hand, clients have to look for taxis in the streets, wasting time and negotiating the price of the service. Furthermore, complaints about the traditional taxi service have been increasing in recent years, with the most common ones being the refusal to provide service to certain areas, passengers’ doubts regarding the fare charged for the service, dissatisfaction with the cleanliness of the vehicles, abuses or intolerance on the part of the taxi drivers, damaged taximeter, not turning on the taximeter, improper fare charge, expired driving license, compulsory insurance expired, and not carrying a transit license. Safety is also a matter of concern because robberies in taxis can reach 150 per year. The passengers have to carry cash to pay for the taxi service and this is attractive for thieves disguised as taxi drivers. Furthermore, the government authorities do not have clear knowledge of the identity of the drivers, or the owners of the cars traveling around the city.
5.1.2. Entry of Uber Uber is a virtual platform, which defines itself as a database where clients and service providers (taxi drivers) meet virtually, considering itself as a mere intermediary between the two. The clients of the application (hereinafter App) obtain a transport service, which is usually within the same city, at a lower cost than a traditional company could offer them at first as occurs with the traditional transport sector. Uber is an App which, taking advantage of the idea of the sharing economy, considers itself a mere “intermediary” between
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users and drivers. Specifically, this platform is dedicated to connecting the client directly with the service provider and is known worldwide as Uber economy. With regard to the functioning of the Uber App, we must say that it is characterized by the fact that any user, once he has downloaded the corresponding application, can access the virtual platform and contact the nearest driver, requesting taxi service. In principle, for the user or client it is full of facilities, with a low cost, immediate, and effective transport service. To become an Uber driver, the process is quite simple. In the first place, an initial contact is made through the service’s official website, and subsequently, a personal interview is arranged where the future driver is informed about the way of operating and the service that he is expected to provide. As indispensable requirements, the driver must have his own vehicle, the corresponding insurance for his vehicle (less than 10 years old), and, of course, a valid driving license. Subsequently, the denominated “collaboration agreement” is signed, which specifies what are the conditions of the service and the distribution of income which, as we previously advised, is directly administered by the App; finally, a Smartphone is delivered to the drivers, with the Uber application installed, to be able to operate in the market with the corresponding transport service. The work operating system for the drivers is managed through the already installed App, which provides the location from where he must collect the user who has requested the service. The GPS navigator helps in arriving at the specific destination. This mobile device also acts as a “business control” activity, with the capacity to record the hours the driver has been working and “sharing expenses” with the company. The driver is subject to a series of “recommendations” but to be strictly complied with such as being dressed in a professional manner, the radio to be turned off or playing
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jazz, opening the door for the client, having an umbrella ready in case of rain, the vehicle must be clean outside and inside, climate control with an agreeable temperature, no smoking in the vehicle, no visible tattoos, etc. Another principal characteristic with regard to the functioning of Uber refers to the fact that the cost of service is non-negotiable for both parties, as it is directly fixed by Uber and tips are expressly prohibited by the company. For providing the service, Uber obtains 20% of the revenue as earnings for each journey, the remainder being for the driver. The clients pay directly through their credit cards and it is the company which subsequently delivers the proportional part to the driver of the vehicle (the fares which the driver earns are deposited automatically into his bank account each week), acting as a real business and not as a mere intermediary. The driver has great work flexibility, since he can choose when to work, the schedule of his working day, and he even has the ability to reject certain assignments. It is necessary to mention that the Uber driver must pay all of the expenses incurred by the provision of his services, that is, gasoline, insurance including any type of expense in case of accident among others. Uber offers its clients the following facilities: the details of the car that will transport the client (model and license plate), data on the identity of the driver, the location of the driver at the time the journey is requested, in real time, the approximate time of pick-up, the approximate final price of the journey, among others. All of these details improve passenger safety. Upon conclusion of the journey, the App shows the final cost thereof, according to the kilometers traveled and the time taken, and finally, the client proceeds to pay through the App which, in turn, is connected to various forms of payment. The clients of Uber can evaluate the driver once
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they have been the beneficiaries of the service provided. These evaluations, which in principle may lack importance, can condition the income of the drivers and, even, the removal of the driver from the virtual platform in the event that the driver receives negative comments. On the other hand, in some cities, faced with the appearance of Uber, there is a clear pattern of disagreement on the part of traditional taxi companies and their employees. All of them argue that Uber presents unfair competition in view of its low operating costs, since companies providing public transport service and each one of its employees have to pay for policies and quotas for the protection of the drivers and passengers, which does not occur with Uber. In order to defend itself from these accusations, Uber argues that the application does not provide the public transport service, it only performs the role of intermediary.
5.1.3. Application of the SROIM Model 5.1.3.1. First Objective of the SROIM Model: Visualize the Real Impacts First, we analyze the situation before the appearance of Uber, that is, what were the conditions of service of the traditional taxi. This situation is shown in Figure 5.1. In addition to the case information, other unmentioned stakeholders are identified, such as the community, the service station, the environment, and the vehicle owner. In order to make this identification, it is recommended to work with Figure 4.1. This is achieved with the help of experts in the subject. Next, we will simultaneously work with the four tools discussed in Chapter 4: Social Network, Sustainability
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Figure 5.1. Situation before the Entry of Uber.
Client
Owner
Association of taxi drivers
Environment
Driver
Community Service station Social costs Owner Investment Driver Investment Environment Emission of CO2 Community Heavy vehicle traffic Informality Robbery
Social benefits Client Insecurity Time lost looking for taxi High prices Low quality of service Service station Income
Driver Income Long working day Stress Insecurity Owner Income
Indicators, Life Cycle of the Target Beneficiary, and Matrix of Stakeholders versus Indicators. We will start with the awareness-raising stage (Figure 5.2). In this stage, Uber invites the parties interested in working with them in order to inform them of the way of operating and the service that they must provide, as well as the advantages of being part of this service. In this stage, the only participants are the driver, the owner who receives the information, and Uber which makes the investment in order to deliver this information. Next, we will advance to the implementation stage, where the “collaboration agreement” is signed and a smartphone is delivered to the drivers with the Uber application installed (Figure 5.3).
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Figure 5.2. Stage of Awareness-raising: Uber Case. Owner
Uber
Driver
Social costs
Social benefits
Uber Investment
Owner Receives information Driver Receives information
Figure 5.3. Stage of Implementation: Uber Case. Owner Uber
Social costs
Driver
Social benefits
Uber Investment
Owner Training
Owner Investment
Driver Training Receives smartphone
In this stage, the driver receives training on how to treat passengers, to keep his vehicle clean, and to meet other obligations and duties. Furthermore, he receives a smartphone for his work with the company. In addition, both Uber and
Return on Investment in Corporate Responsibility
80
the owner make an investment: Uber makes the investment to obtain more members, and the owner to make his vehicle available to provide the service with Uber. We will now move on to the stage of USE, that is, the moment when the taxi service starts to be provided (Figure 5.4). In this stage, many stakeholders participate, such as Uber, the driver, the owner, the service station, the environment, the association of taxi drivers, the tax administration, and the community.
Figure 5.4. Stage of USE: Uber Case. Client
Tax superintendency
Owner Driver
Environment
Uber Community
Association of taxi drivers
Social costs Uber Investment in the platform (20%) Owner Vehicle (80%)
Service station Social benefits
Driver Training Time saving Fuel saving Higher income Evaluation of performance Flexible hours Better security Smartphone
Client Saving in time of waiting for taxi Saving in service fare Better security
Community Vehicles in good condition Formalization of service Fewer crimes in taxis
Association of taxi drivers Lower income, annoyance
Service station Lower income
Environment Lower emission of CO2 Tax superintendency More tax income
Owner Higher income Savings in machine costs Prolongation of maintenance time
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In order to determine the benefits of each stakeholder, it is necessary to gather information by surveying all of them and/ or consulting experts. Once the information has been gathered, we can establish the benefits for each stakeholder, for example, in the case of drivers, they have greater flexibility of working hours, fuel saving, higher income, rating of their performance, greater safety, training, time saving, and they have a smartphone. In the same way, the benefits of the other stakeholders indicated in Figure 5.4 are identified. Finally, we arrive at the FINAL stage, which, for this case, corresponds to year 10, which is the maximum age limit for a vehicle. In this stage, the vehicle owner and the driver have a lot of experience and have the possibility of continuing to work with Uber or any other similar operator (Figure 5.5). Figure 5.6 shows all stages. To conclude this first part of the SROIM model (visualizing the real impacts), we present the Stakeholders versus Impacts Matrix in Table 5.1.
Figure 5.5. FINAL Stage: Uber. Client Owner Uber
Social costs Uber Investment in the platform (20%)
Driver
Social benefits Owner and Driver Training Experience Old vehicle, with possibility of selling it Driver Training Experience
Return on Investment in Corporate Responsibility
82
Figure 5.6. All Stages: Uber Case. Client
Tax superintendence
Owner Driver
Uber
Environment Community
Association of taxi drivers
Service
Awareness – raising
Implementation
Social costs Uber Investment in the platform (20%) Owner Vehicle (80%)
USE
End
Social benefits Driver Training Time saving Fuel saving Higher income Rating of his performance Flexible schedule Greater security Smartphone Community Vehicles in good condition Formalization of the service Fewer taxi crimes Service station Lower income
Client Saving in time waiting for taxi Saving in service tariff Greater security Environment Lower emission of CO2 Tax superintendence Higher tax income Association of taxi drivers Lower income Owner Higher income Saving of machine expenses Prolongation of time of maintenance Old vehicle, with possibility of selling it
In this matrix, we can see all of the involved stakeholders, as well as all of the impacts, both tangible and intangible. With regard to the tangible impacts, only some can be valued and can pass to the stage of SROIM calculation. This will depend on the information available regarding the said impact. If the said information is not available, it cannot be valued and will not form part of the calculation of SROIM.
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$
Tax Superintendence
Driver
$
Association of Taxi Drivers
Owner
$
Client
Uber
Sustainability Indicators
Community
Table 5.1. Stakeholders versus Impacts Matrix: Uber Case.
Economic Fare savings Higher income Lower annual maintenance expense
$ $
$
Training
$
Time saving
$
Fuel saving
$
Social Greater safety
X
Less congestion
X
X X
Malaise due to unfair competition Feedback on performance
X X
Formalization of service Flexible schedules
X
Possibility of loans for purchase of vehicle
X
Reduction in tax evasion
X
X
X
X
Environment Lower CO2 emission
$
Key: $ Impacts that can be valued, only if the information is obtained. X Intangible impacts.
84
Return on Investment in Corporate Responsibility
5.1.3.2. Second Objective of the SROIM Model: Calculation of SROIM Gathering of information: In this stage, information is sought from different sources, for example, web pages of the Uber Company, among other sources. For this case, we will use the information provided in Table 5.2. Moreover, the field information, comparing the service of Uber versus the traditional taxi, in Table 5.3 is also used.
Table 5.2. Comparison of Income and Expenses of Uber and Traditional Taxi.a Uber X Weekly income ($)
%
Traditional Taxi
400
%
250
Expenses (US$) Commission Uber ($) (20%) Payment to car owner ($) Weekly gasoline ($) Weekly profit ($)
80
20
Not applicable
105
26
62.5
25
65
16
75
30
150
38
112.5
45
Source: ahttp://www.elfinanciero.com.mx/empresas/conductores-de-uber-gananmas-que-psicologos-dentistas-y-contadores.html
Table 5.3. Information of Comparison of Uber Service versus Traditional Taxi. Uber X
Traditional Taxi
Number of hours per week
55
55
Number of Uber members
35,000
35,000
Average fare per journey ($)
10
11.5
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Table 5.3. (Continued ) Uber X
Traditional Taxi
Average number of weekly journeys per
40
21.7
member (income/fare) Number of weeks per year Number of annual journeys per member
50
50
2,000
1,087
70,000,000
38,043,478
(number of weekly journeys × weeks per year) Number of annual journeys (35,000 members) (number of members × number of journeys) Total sales (number of journeys × tariff)
700,000,000 437,500,000
Using the information in Table 5.3, the following calculations are made: Uber
Gross income (20% of 700,000,000)
Uber X
Traditional Taxi
DIFFERENCE
140,000,000
Member Gross income (80% of 700,000,000)
560,000,000 437,500,000
122,500,000
183,750,000 109,375,000
74,375,000
Gasoline expense (total sale × 113,750,000 131,250,000 gasoline expense in %)
17,500,000
Owner Gross income (total sale × payment to owner in %) Service station
Net income (gross incomeowner-gasoline)
262,500,000 196,875,000
65,625,000
86
Return on Investment in Corporate Responsibility
With regard to the clients, we can obtain the following saving: Client
Uber X
Average fare per journey ($)
10
Number of journeys per annum
11.5
70,000,000
Saving per journey ($) Total saving ($)
Traditional Taxi
38,043,478
1.5 105,000,000
The environment also benefits with lower emissions of CO2, which can be valued at the market value per ton of CO2: Environment
Uber X
Traditional Taxi
Weekly gasoline expense ($) per member Price liters of gasoline ($) per member Liters of gasoline per week (l) per member
65 0.7
75 0.7
93
107
4,643
5,357
(gasoline expense/price) Liters of gasoline per annum (liters of gasoline per week × 50 weeks) CO2 emission (kilograms/liter gasoline) Annual CO2 emission (kilograms) per
2.3 10,679
2.3 12,321
member (liters of gasoline per annum × emission of CO2) Number of members Annual emission tons of CO2
35,000
35,000
373,750
431,250
(CO2 emission per partner × number of members) Reduction in CO2 emission (tons)
57,500
(traditional taxi minus Uber) Price CO2 ($/ton) Valuation ($)
7.52 432,400
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For the calculation of SROIM, we consider the following: • A period of 10 years is considered, as this is the maximum age for the vehicle to work with Uber. • An annual increase of 10% is expected in the number of members. • A social discount rate of 10% is considered (this may vary according to the country). • The price of gasoline and the value of a ton of CO2 are considered to be constant in this period. See Table 5.4 for the flow of all of the social income. According to the calculations made of the social benefits in the 10 years, we have a SROIM equal to 574. This means that for each monetary unit invested in this business of Uber, there is a multiplier effect of 574, which benefits all of the identified stakeholders.
5.2. HEALTH AND NUTRITION In a community, where there is a low-income population, the operations are developed by a mining company. The mining company, worried about maintaining a good relationship with its community, has created a mining foundation in order to manage the social responsibility projects of the mine. This mining foundation carries out the diagnosis of the basic needs of its community and determines the social projects to be implemented. The foundation wishes to contribute to the economic and social development of the families of its community and for that, it develops a project called: Health and Productive. This project consists of the following principal activities.
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Table 5.4. Calculation of SROIM: Uber Case (Thousands of $). 1
2
3
4
5
6
7
8
9
10
Number of members
35,000
38,500
42,350
46,585
51,244
56,368
62,005
68,205
75,026
82,528
65,625
72,188
79,406
87,347
96,082 105,690 116,259 127,885 140,673 154,740
81,813
89,994
98,993 108,892 119,782 131,760 144,936 159,429 175,372
(increase of 10% per annum) Higher income Training
721
Owner Higher income
74,375
Client Savings
105,000 115,500 127,050 139,755 153,731 169,104 186,014 204,615 225,077 247,585
Environment Lower CO2 emission
432
476
523
576
633
696
696
843
927
1,020
Return on Investment in Corporate Responsibility
Partner
Lower income
17,500 19,250 21,175 23,293 25,622 28,184 31,002 34,103 37,513 41,264
Total social benefits
228,654 250,726 275,798 303,378 333,716 367,087 403,727 444,176 488,593 537,453
Total benefits
45,731
50,145
55,160
60,676
66,743
73,417
80,745
88,835
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97,719 107,491
attributable to Uber (20%) Total present value of social benefits
414,547
Investment
721
SROIM
574
89
Return on Investment in Corporate Responsibility
90
5.2.1. Productive Agricultural Development .
The objective is to improve the productivity of the agricultural products of the target beneficiary farmers, who traditionally sow products for self-supply and with very little surplus for marketing purposes. To achieve this objective, the following activities are carried out: • Training in soil management and handling, seed sowing and irrigation. • Installation of technified irrigation system. • Delivery of agricultural tools in order to improve production.
5.2.2. Social Development 5.2.2.1. Health The community has high rates of malnutrition. The principal causes of malnutrition are respiratory infections (ARIs) and diarrheal disease (ADDs), which are produced by the lack of health standards of the families. The families of this community prepare their food in traditional stoves, using firewood for cooking and allowing the smoke to remain inside the home, thereby causing the family members to suffer from acute respiratory infections (ARIs). The disadvantages of the traditional stoves are: • They emit smoke in the kitchen environment. • Bad taste in meals because of the smoke. • Inadequate position while cooking (back pains). • Danger of burns due to direct contact with fire. • 80% of heat loss as a result of the fire being in the open air.
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• Instability in the support of pots and pans, with the risk of suffering burns. • Soot in the area surrounding the stove. • Unhygienic environment. • Greater use of fuel (firewood, horse manure), increasing the household expense. • Delay in the preparation of meals. To counteract this problem, the project consists of the installation of an improved stove, which permits the smoke to be expelled outside of the cooking environment. Furthermore, it saves 40% of the fuel. It has two burners with the same heat source, promoting the custom of boiling water in one of them. Other advantages of the improved kitchen stove are: • It improves people’s health, expelling smoke outside of the home through a chimney. • It improves the combustion process. • It improves the conditions of cleaning, and it is more comfortable to use during the preparation of food. • It reduces cooking time.
5.2.3. Nutritional Reinforcement • Delivery of pills to rid the members of the family, more than one-year-old, of parasites. • Delivery of vitamins, folic acid, powdered iron (“sparklers”) in daily doses for three months, to children less than 5 years old and expectant mothers to prevent anemia and fetal malformation.
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Return on Investment in Corporate Responsibility
• Delivery of nutritional reinforcement for expectant mothers.
5.2.4. Organic Vegetable Gardens The consumption of vegetables (tomato, squash, cucumber, herbs, spinach, cabbage, lettuce, etc.) is important for the health of children less than 5 years old and prevents malnutrition. Therefore, the project delivers the inputs to enable the beneficiaries to construct organic vegetable gardens, as well as seeds, which provide them with fresh vegetables all year round for self-consumption and sale of the surplus.
5.2.5. Training in Nutrition, Hygiene, and Health The project trains the families in healthy practices, like hand washing before and after going to the toilet, boiling of water, use of a balanced diet for better nutrition.
5.2.6. Non-institutional Births Many communities are located too far from medical care services provided for expectant mothers to give birth to their children. For this reason and other cultural matters, many women prefer to give birth in their homes, with the danger of having a failed birth (according to estimates made by UNICEF, OPS/OMS, and UNFPA, the rate of maternal mortality in the year 2000 was 410 deaths for every 100 thousand live births). Therefore, the project has designed a training plan and a packet of instruments that focus on home delivery. This kit is called “imminent delivery kit” or clean delivery attention kit,
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which permits expectant mothers to be attended to in minimum hygiene conditions, minimizing the risk of infectious diseases.
5.2.7. Application of the SROIM Model Nutrition In the event that there is no explicit information on the case, it is considered that the additional information shown is collected in the field. The mining company has a mining foundation, which carries out its social responsibility activities. The foundation is the impact investor. The investment of the impact investor in the project is $1,000,000 which is spent in the following manner: $450,000 in the first year, $350,000 in the second year, and $200,000 in the third year. • First Objective of the SROIM Model: Visualize the Real Impacts As we have mentioned earlier, the objective is to visualize the real impact of the intervention. For this, the three tools of SROIM are used simultaneously: social network, indicators of sustainability, and life cycle of the target beneficiary. With the project information and the interviews of the impact investors, the main actors surrounding the impact investor and target beneficiary are identified, leaving as a result the social network of the nutrition project. The family is identified as the target beneficiary. There are other actors surrounding the family, which are identified in the below list: • The Family. It is the target beneficiary, and according to the objective of the project, it is the economic and social community. The family is composed of the father, the
94
Return on Investment in Corporate Responsibility
mother, and all of the children. There are various impacts: fuel saving, higher incomes, availability of time, capitalization of assets, among others (Figure 5.6). • Mother. The project carries out a series of activities directly aimed at the mother of the family. These activities include education in healthy practices and nutritional reinforcement. Then, and because the project has activities and specific investment for this actor (mother), it is decided to treat her and represent her as a relevant actor in the social network. The mother participates from the awareness-raising stage or training of the life cycle of the target beneficiary (Figure 5.7). • Child. The project involves a specific investment in nutritional reinforcement. For this reason, it is relevant to represent it in the social network. The child does not participate in the training. This actor appears in the implementation stage of the life cycle of the target beneficiary (Figure 5.7). • Environment. It is impacted by the use of the improved stove. The improved stove reduces the emission of CO2 into the atmosphere. This actor appears in the stage of use in the life cycle of the target beneficiary (Figure 5.7). • Rural Medical Post. It participates in the control and follow up of the families’ health, and in the education of the housewives. The impacts for the Rural Medical Post: it improves its image with the community, complies with its organizational goals, improves its relationship with various actors, among other impacts. This actor appears in the stage of awareness-raising of the life cycle of the target beneficiary (Figure 5.7). • Client. When the family has surpluses from the organic vegetable garden, it sells vegetables to its neighbors or
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Figure 5.7. Nutrition Case: Visualize Real Impact of the Intervention (All of the Stages). Medical post
Client Mother
Mining company
Foundation
Mayor
Awarenessraising/Training
Social costs Mining foundation Investment Families Agricultural areas
Environment
Family Community leader
Implementation
Community
Child
USE/ Production
Closure/ Disposal
Social benefits Families Reduction in mortality Acquires knowledge Better quality of life Nutritional improvement Better relationship with stakeholders Saving of fuel Saving on food purchase Higher income from sale Availabiity of time Saving on medicine Environment Reduction in CO2 emission Reduction in felling of trees
Children Improved health Reduction in repetition of school year Acquires knowledge Reduction in school year desertion Availability of time Client Savings Availability of time Health Nutritional improvement
clients. These clients benefit from the access to new products: they make savings because they obtain the vegetables at lower prices, and they also save time because they do not have to go to distant places for buying vegetables. This actor appears in the stage of use in the life cycle of the target beneficiary (Figure 5.7). • Community Leader. The community leader contacts the members of his community in order to inform them about this health project and recommend that the families
96
Return on Investment in Corporate Responsibility
participate. The leader improves his image with the community, and improves the relationship with various actors, among other impacts (Figure 5.7). Mining Foundation is the impact investor and the actors around the Mining Foundation are as follows. • Mayor. The Mining Foundation contacts the mayor to inform him about the objectives of the project. The mayor is interested in the support from free advertising. The mayor improves his image with the population, achieves organizational goals, among other impacts (Figure 5.7). • Rural Health Post. The foundation contacts the medical personnel of the health post to obtain information on the health situation of the community. It presents the project to the medical personnel and requests their support. The medical personnel of the Post are in agreement and participate with the delivery of control information and the progress in health improvement of the families. The impacts generated in the Health Post are: savings in health services, achievement of goals, improvement of image, etc. (Figure 5.7). • Mining Company. It approves and invests in the project. The impacts on the mining company are: improvement of image, avoided costs, free advertising, etc. (Figure 5.7). • Community Leader. The company contacts the community leader to inform him about the objectives of the project and obtain his support and approval. The community leader receives this project with pleasure and supports increasing awareness about it. The leader improves his image with the community, improves his relationship with various actors, among other impacts (Figure 5.7).
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Combining these two analyses, the social network of the intervention is obtained. Given the graphic complexity of the social network, only the impacts on the family, the child, clients, and environment are shown in Figure 5.7. However, in the Stakeholders versus Impacts Matrix presented in Table 5.5, all of the impacts for each stakeholder are shown in detail to determine the real impact of the project. • Second Objective of the SROIM Model: Calculation of SROIM Isolation: As mentioned, isolation has two stages: 1. WITH project less WITHOUT project. This will be seen in the valuation calculations. 2. Attribution. For the calculation of the attribution, we will consider that the investment is made with the participation of only two actors: the Mining Foundation and the beneficiary families. As a result, the investment of the beneficiary families should be calculated. This investment is measured by evaluating all of the contributions of the family for the implementation of the intervention, among which are agricultural areas, daily wages for the implementation, and water for irrigation. Once these contributions have been assessed, the attribution is calculated as shown in Table 5.6.
5.2.8. Valuation The valuation will be carried out according to the following sequence: Valuation of the Outputs. Valuation of the Outcomes.
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Return on Investment in Corporate Responsibility
Table 5.5. Stakeholders versus Impacts Matrix: Case of
Economic Savings
X
Higher income
X
Generation of employment
X
X X X
Access to new products More time available for other
X X
X
X
productive activities Capitalization of assets
X
Avoided costs
X
Organizational Achievement of goals
X
Improvement of image
X
X
Access to greater financing
X
X
Free advertising
X
Community empowerment
X
Organizational development
X
X
X
X
X
X
X
X
X
X
Social Improved quality of life
X
X
X
Nutritional improvement
X
X
X
Perception of improvement in
X
X
X
X
X
status Improvement of corporate image Possibility of regulatory improvement
Company
Mining
Foundation
Mining
Medical Post
Client
Community
Child
Mother
Impact Indicators
Family
Health and Nutrition.
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Medical Post
Mining Foundation
Mining
X
X
X
X
X
stakeholders Improvement of privacy
X
Customer loyalty
X
X
X
Access to new social services
X
X
X
Exercise their rights as citizens
X
X
X
Cultural change in health care
X
X X
(DNI) X
X
X
Health Reduction in morbidity
X
X
X
Reduction in mortality
X
X
X
Saving in transport for medical
X
X
X
X
attention Saving in medicine
X
X
Saving in health services Reduction in deaths due to
X X
X
improvement of sanitation Education Acquisition of new skills
X
X
X
X
Possibility of disseminating acquired knowledge
X
X
X
X
Saving for reduction in repetition X
X
X
X
X X
dropout rate Improved cognitive capacity
X
X
X
of school year Saving reduction in scholastic
X
Company
Client
Child
X
Community
Improved relationship with
Mother
Impact Indicators
Family
Table 5.5. (Continued )
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Return on Investment in Corporate Responsibility
Company
Mining
Foundation
Mining
Medical Post
Client
Community
Child
Mother
Impact Indicators
Family
Table 5.5. (Continued )
Environment Reduction in CO2 emission
X
Reduction in tree felling
X
Table 5.6. Attribution: Case of Nutrition. Target Beneficiary Agricultural area Number of families Number Ha/family Rental $/Ha/annual Number of years Total Agricultural Area $
250 1 500 5 625,000
Daily wage $/Daily wage/family
20
Number of daily wages/family
30
Number of families
250
Total daily wage $
150,000
Water Number of families Payment for water $/month Number of months Total water $
250 10 60 150,000
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Table 5.6. (Continued ) Target Beneficiary Total target beneficiary $
925,000
Impact investor Training $
100,000
Products $
600,000
Health kit Improved stoves Seeds Technified irrigation Others Nutritional reinforcement children
100,000
Nutritional reinforcement women
100,000
Project management
100,000
Total impact investor $
1,000,000
Combined total (impact investor, target beneficiary $)
1,925,000
Attribution: Total interventions/Combined total
52%
5.2.8.1. Valuation of the Outputs (SROIM = 0) The outputs are the measurable management indicators, such as the number of families trained, the number of improved stoves delivered, and the amount of nutritional reinforcement delivered to the women and children. Until now, there are no changes in the conditions of the target beneficiaries. To date, the SROIM = 0, that is, at this moment the target beneficiary receives the improved stove (but is not yet using it), and receives the seeds and the technified irrigation, but is not yet producing, etc.
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Return on Investment in Corporate Responsibility
The valuation of the outputs is simple if we consider the following: • Only the moment of the transfer of the investment from the impact investor to the target beneficiary is analyzed. The investment of the impact investor (negative) is received by the target beneficiaries or direct beneficiaries (positive). • The valuation of the outputs indicates which actors have benefited, and how, with this investment. • Only the total investment of the impact investor is considered. For this, we must ask the following questions: Where is the investment of the impact investor? Who is the impacted beneficiary or stakeholder? How is this stakeholder impacted by this investment? In order to answer these questions, it is necessary to carry out an analysis of the investments of this project. Analysis of the Investment: A social intervention has a budget to cover the principal activities like training for the beneficiary families, delivery of improved stoves, health kit, seeds, technified irrigation, and nutritional reinforcement for women and children. Furthermore, this type of project usually has the line item of project management (may be called differently, such as project supervision and administrative expenses; Table 5.7). In case the investments consider an amount of $100,000 for “Project management,” it is necessary to distribute the said amount among the others. The justification for this distribution is that the purpose of the investment in project management is to achieve compliance of the principal activities
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Table 5.7. SROIM = 0: Analysis of the Investment Nutrition. Impact Investor
$
Training
100,000
Products
600,000
Health kit Improved stoves Seeds Technified irrigation Others Nutritional reinforcement children
100,000
Nutritional reinforcement women
100,000
Project management
100,000
Total impact investor
1,000,000
such as hiring of personnel and providing logistics for the purchase and delivery of the goods and services to the beneficiaries. This distribution has no fixed rule, and depends on each context. We present in Table 5.8 the analysis of the distribution of project management amount of $100,000 among the other activities. For the valuation, we respond to the questions asked. In this way, we value the impacts generated for the various actors at the time when the impact investor delivers the goods and services to the target beneficiary. For example: • The family receives training, the valuation of which is $110,000. The families benefit from the acquisition of knowledge.
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Table 5.8. Analysis of the Distribution of Project Management and Its Impacts. Impact Investor
$
(Investment)
Project
Total ($)
Management
Stakeholder
Impact Indicator
(Beneficiary)
(Outcome)
100,000
10,000
110,000
Family
Acquisition of knowledge
Products:
600,000
60,000
660,000
Family
Capitalization of assets
100,000
15,000
115,000
Children
Nutritional reinforcement
100,000
15,000
115,000
Women
Nutritional reinforcement
900,000
100,000
1,000,000
Health kit Improved stoves Seeds Technified irrigation Others Nutritional reinforcement children Nutritional reinforcement women Total impact investor
Return on Investment in Corporate Responsibility
Training
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• The family receives many products, valued at $660,000. These products result in their homes appreciating in value, that is, capitalization of assets. • The women and children receive nutritional reinforcement. The valuation of these nutritional reinforcements is $115,000 for each one of them. These valuations must be considered in the cash flow which will be examined below. 5.2.8.2. Valuation of the Outcomes After these calculations, we proceed to value the changes generated as a result of the delivery of these services, that is, value the outcome indicators. That is to say, now the families are using the stoves, producing vegetables, harvesting the sowing of the seeds, etc. In order to make these assessments, Isolation must be applied, that is, comparing the impacts With the project and Without the project. Subsequently, the attribution previously calculated must be applied. These valuations are presented in the below tables. Stakeholder: Families. Fuel Savings Note: 30% of the families buy firewood, 70% obtain it themselves (field data) For the families that buy firewood Number of families (30% of 250 families) Amount of firewood per family (month) Amount of firewood per family (year)
75
families
320
kg/family
3,840
kg/year
(320 × 12 months) Cost of firewood ($) Cost of firewood ($) (year) per family
0.5 $/kg 1,920
$/year/family
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Return on Investment in Corporate Responsibility
(Continued ) Fuel Savings Savings of 40% a year per family Total saving of families (30% of 250) $ a year
768 57,600
Attribution
$/year/family $/year
52%
Total
29,922
$/year
More Time Available for Carrying Out Activities For the families that do not buy firewood Number of families (70% of 250 families)
175
families
The time taken by an adult to obtain firewood is 4 hours for 80 kg of firewood, because the extraction sites are further and further away, more than 10 km Amount of firewood per family (year)
3,840
kg/family
1,536
kg/family
77
hours per
(320 × 12 months) (Previous data) Saving of 40% of firewood per year per family (With projectWithout project) Time saving per year per family (With projectWithout project) a
Social value of time (rural, adult, non-work
year/family 1.0 $
related) Total social value of time for the 175 families
13,386
$/year
per year Attribution Total
52% 6,954
$/year
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Higher Income This income is from the Organic Vegetable Garden Net income from agricultural production
200
$/year/family
1,200
$/year/family
1,000
$/year/family
WITHOUT projects (family) Net income from agricultural production WITH project Net income from project (family) (With projectWithout project) Total net income (250 families)
250,000
Attribution Total higher income
$/year
52% 129,870
$/year
Generation of Employment One assistant is considered for every 10 families Number of assistants
25
Annual salary of an assistant without the
assistants
960
$/year
1,500
$/year
540
$/year
13,500
$/year
project (one assistant) Annual salary of an assistant with the project (one assistant) Marginal salary (With projectWithout project) Salary of the 25 assistants Attribution Total
52% 7,013
$/year
Health 30% reduction per annum in respiratory infections in children less than 4 years old (With projectWithout project) Number of cases of ARIs and ADDs attended in Health Center (before the project)
500
cases
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Return on Investment in Corporate Responsibility
(Continued ) Health Reduction 30% Saving in the cost of transport ($10 × case) Cost saving in medicines ($90 × case) Attribution
150
cases
1,500
$/year
13,500
$/year
52%
Total cost of medicine
7,013
Total cost of transport
779
$/year
Health Saving for Repetition of School Year Number of children who no longer repeat the
15
school year (Estimate) (With projectWithout project) Annual cost of education for the family
400
Total of saving or costs avoided by the
6,000
$/year/family $/year
families Attribution Total
52% 3,117
$/year
a
This depends on each country.
Stakeholders: Environment. Reduction in the Emission of CO2 Burning 1 ton of firewood produces (Data
2
Tons CO2
2
Tons firewood
from secondary source) Amount of firewood no longer burnt per family (Data previously calculated) (With projectWithout project)
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(Continued ) Reduction in the Emission of CO2 Tons of CO2 no longer issued per family Tons of CO2 no longer issued by
3
Tons CO2
703
Tons CO2
250 families Price per ton CO2 ($) Price tons CO2 $ (per annum for
7
$
4,919
$
250 families) Attribution Total
52% 2,555
$/year
Reduction in Tree Felling 40% saving of firewood per annum per family (Data
2
tons
384
tons
from secondary source) (With projectWithout project) 40% saving of firewood per annum for 250 families Weight of tree (average)
1
ton
Number of trees not felled
480
trees
Economic value of the tree
200
$
96,000
$
Economic value of tree felling Attribution
52%
Total
49,870
$/year
Absorption of CO2 Absorption of CO2 per average tree
6
kg CO2 year
Total absorption of CO2
3
ton CO2 year
Price ton CO2 ($)
7
$
110
Return on Investment in Corporate Responsibility
(Continued ) Absorption of CO2 Price tons CO2 $ (per annum for 250 families) Attribution Total
20
$
52% 10
$/year
Stakeholders: Government. It was found that in this case, the government also benefits from this intervention, since it is complying with the Millennium Development Goals; therefore, it receives free advertising in the media. This free advertising can be valued at $50,000 for the attribution, which gives us a total of $25,974. Moreover, the government benefits from savings in public spending on Health and Education in this community, and can divert this public spending to other communities. Health Reduction 30% per annum in respiratory infections in children less than 4 years old (With projectWithout project) Number of cases of ARIs and ADDs attended in
500
cases
150
cases
Health Center (year) Reduction 30% Savings in health services ($50 × case) Attribution Total Saving in the cost of medicines ($200 × case) Attribution Total
7,500 52% 3,896
$/year
30,000 52% 15,584
$/year
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(Continued ) Education (With projectWithout project) Number of children who no longer repeat the school
15
year (Estimate) Annual cost of education for the State Total saving for the State Attribution Total
600
$
9,000 52% 4,675
$/year
Stakeholders: Community. Free Advertising The mention of the name of the community is estimated in advertising and National and International Events of interest for this community Total in free advertising (estimated for the first year) Attribution Total
10,000 52% 5,195
$/year
Stakeholders: Mining Foundation. It was found that the Mining Foundation is able to obtain, with the success of this project, more donations from new investors for future projects; furthermore, it obtains free advertising in the media. Higher Income Total reinvestment Mining Foundation
100,000
(10% of the project investment) Attribution Total
52% 51,948 $/year
112
Return on Investment in Corporate Responsibility
Free Advertising The mention of the name of the Mining Foundation is estimated in advertising and National and International Events Total in free advertising (estimated for the first year) Attribution
50,000 52%
Total
25,974 $/year
Stakeholders: Mining Company. Annually, there are claims from the community regarding matters of health, employment, education, etc. These claims are usually expressed by means of roadblocks that jeopardize the mining operation. It is estimated that a standstill costs the mining operation $70,000 per day. According to the statistics, each year there are 6 days of roadblocks in different months. It is estimated that this project can reduce these days by 50%. Furthermore, the mining company also receives free advertising for the project. Avoided Costs. Number of days of standstill before the project
6
Number of days of standstill after the project
3
Avoided costs per day Total avoided costs
70,000 210,000
Attribution Total
52% 109,091
$/year
Free Advertising. Total in free advertising (estimated for the first year) Attribution Total
20,000 52% 10,390
$/year
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Now, with all of the annual valuations, we can draw up the social cash flow of these social benefits (see Table 5.9). The following is considered: the Mining Foundation makes the total investment in three years. In these first three years, the direct beneficiaries of this investment are the families, children, and women. That is, the sum of the benefits of these beneficiaries in the first three years must be equal to the investment of the Mining Foundation in this period. It is estimated that the benefits of the improved kitchen stove last until year 10. It is estimated that the benefits of higher income for families due to the Organic Vegetable Garden only last for 5 years. It is estimated that free advertising is only obtained in year 3. The social discount rate is 10%.
5.3. EDUCATION A company from the finance sector has been carrying out training projects of a community for more than five years and wants to evaluate this educational project. This project has been designed to manage efficiently the state schools which attend to students from rural and urban-marginal areas. The objective is to ensure that all children fulfill the expected learning outcomes, independently of the adverse contexts in which they live. In this way, a significant contribution is made to the human development of the neediest populations, facilitating their inclusion in the globalized world. Each year addresses five fundamental issues: I Read, I Think, I Communicate, I Fit in, and I Learn.
114
Table 5.9. Cash Flow and SROIM: Nutrition. Benefits
Year0
Year1
Year2
Year3
Year4
Year5
Year6
Year7
Year8
Year9
400,000
260,000
20,000
20,000
70,000
15,000
35,000
65,000
15,000
35,000
65,000
29,922
Year10
29,922
29,922
29,922
29,922
29,922
29,922
29,922
29,922
29,922
129,870
129,870
129,870
129,870
129,870
7,013
7,013
7,013
7,013
7,013
6,954
6,954
6,954
6,954
6,954
6,954
6,954
6,954
6,954
Families
Acquisition of skills Children Nutritional reinforcement Women Nutritional reinforcement Family Fuel saving Higher income Generation of employment Greater availability of time
6,954
Return on Investment in Corporate Responsibility
Capitalization of assets
Saving in medicine
779
779
779
779
779
779
779
779
779
779
7,013
7,013
7,013
7,013
7,013
7,013
7,013
7,013
7,013
7,013
3,117
3,117
3,117
3,117
3,117
3,117
3,117
3,117
Saving for reduction in repetition of year Asset depreciation
40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000
Case Studies
Saving in transport for medical attention
(Stove) Environment Reduction in CO2
2,555
2,555
2,555
2,555
2,555
2,555
2,555
2,555
2,555
2,555
49,870
49,870
49,870
49,870
49,870
49,870
49,870
49,870
49,870
49,870
10
10
10
10
10
10
10
10
10
10
emission Reduction in tree felling Absorption of CO2 Community Free advertising
5,195
Government Free advertising Saving in medicine Saving in health services Saving from reduction in repetition
15,584
15,584
15,584
15,584
15,584
15,584
15,584
15,584
15,584
15,584
3,896
3,896
3,896
3,896
3,896
3,896
3,896
3,896
3,896
3,896
4,675
4,675
4,675
4,675
4,675
4,675
4,675
4,675
115
of year
25,974
116
Table 5.9. (Continued ) Benefits
Year0
Year1
Year2
Year3
Year4
Year5
Year6
221,260
221,260
221,260
Year7
Year8
Year9
84,377
84,377
84,377
Year10
Mining Foundation 51,948
Free advertising
25,974
Mining Company Avoided costs
109,091
Free advertising Total Social Benefits Present value
10,390 450,000
426,585
413,468
350,000
200,000
449,831
84,377
2,081,858
Investment
450,000
Present value of
933,471
investment SROIM
1.23
Interpretation: There is a multiplier effect of 123% on the investment made in the identified social network. That is, the direct beneficiaries receive the investment of 933,471.07 dollars (present value of the investment) and this produces an additional 123%, which benefits the stakeholders of the social network. As a result, the total social benefits climb to $2,081,858.
Return on Investment in Corporate Responsibility
Higher income
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117
• The first year, I READ, is dedicated to improving the reading performance of the students. • The second year concentrates on the development of mathematical reasoning and critical thinking, and its motto is I THINK. • Writing and oral communication are the skills that are prioritized in the third year, the motto of which is I COMMUNICATE. • Social skills are the focus of the fourth year, called I FIT IN. • In the fifth year of the program, the development of the capacity for autonomous learning is promoted with the motto I LEARN. The strategy rests on the strengthening of the success factors: 1. The organization of groups of rural schools into networks, which learn from and support each other. 2. The leadership of the director, who constructs a shared vision and mission, and drives and motivates the community toward achieving them. 3. The work of the teaching teams, based on a solid command of the contemporary pedagogical approaches for the development of reading and writing and mathematical thinking, as well as a relationship of respect and trust with girls and boys. 4. The involvement of families in supporting the educational processes from the home. 5. The establishment of alliances with the institutions and organizations of the community, as well as the different management levels of the educational system.
118
Return on Investment in Corporate Responsibility
The proposal works with directors, teachers, and families of up to a maximum of 10 educational institutions around a network. In each of the networks established, a participative organizational structure is generated, which provides support to schools and supports the achievement of learning outcomes. Furthermore, each school has a participative leadership, which involves the teachers and families in the decisions and learning outcomes. The training is implemented by means of Diploma courses aimed at directors, teams of teachers, and families; the goal of training is to develop, through day sessions, workshops, and meetings, the skills and attitudes necessary for all of the educational actors to contribute to the achievement of the expected learning outcomes.
5.3.1. Application of the SROIM Model in Education • First Objective of the SROIM Model: Visualize the Real Impacts We assume that the financial company has a mining foundation, which carries out its social responsibility activities. The investment of the project is $300,000 per annum for a period of 5 years. A social discount rate of 10% is considered. With regard to the foundation, its stakeholders are: • The financial company which makes the investment. • The Local Educational Management Unit (LEMU), which is the public authority of the State, with which it has to coordinate in order to implement this project. The target beneficiary is the teacher whose stakeholders are: • The students who receive this new teaching methodology.
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• The educational institution where the project is carried out. • The Director of the Educational Institution. • Other teachers. The target beneficiary teacher usually works in other educational centers, where he has contact with other teachers and, in some cases, there is a transfer of knowledge of the project toward these other teachers. • Other students. These students are from other educational institutions, which receive this transfer of knowledge through the other teachers mentioned above. With this social network formed, we can formulate the case as shown in Figure 5.8. The real impact of the project is presented by means of the Stakeholders versus Impacts Matrix in Table 5.10. As can be concluded from Figure 5.8, these impacts are estimated in the design stage of the project so that they may be known and may generate greater commitment on the part of the stakeholders. • Second Objective of the SROIM Model: Calculation of SROIM Isolation: As mentioned, isolation has two stages: 1. WITH project less WITHOUT project. This will be seen in the valuation calculations. 2. Attribution. For the calculation of the attribution, we will consider that the investment is made with the participation of only five actors: foundation, teachers, directors, Educational Institution (EI), and Local Educational Management Unit (LEMU). As a result, the investment of these five actors should be calculated (Table 5.11).
Return on Investment in Corporate Responsibility
120
Figure 5.8. Social Network: Case of Education.
Student
LEMU
Educational institution
Parents
Director Teacher
Foundation
Other teachers
Company Community Awarenessraising/Training
Implementation
USE/ Production
Social costs • • • • •
Foundation Teachers Directors Educational Institution (EI) Local Educational Management Unit (LEMU)
Other students Closure/ disposal
Social benefits Students Availability of time Capacity development Avoid course repetition Increased pleasure from reading Other students Capacity development Parents Capacity development Savings due to repetition rate
Teachers Improved access to labor market Achievement of goals Availability of time at school Higher income Improved image Capacity development Improved CV Access to educational material Improved relationship with stakeholders, etc.
Director Foundation and the company Acquisition of knowledge Achievement of goals Free publicity Improved image Improved CV Improved relationship with stakeholders
Some of the impacts shown can be monetized. The cash flow of the said benefits is presented in Table 5.12.
5.4. PRODUCTIVE PROJECT The project for breeding “rabbits” for meat consumption aims at developing productive capacities for self-employment
Greater access to the labor market
X
XX
Availability of time (avoids vacation recovery course)
X
X
Foundation
Investor
Company
Community
X
Saving (avoids payment for recovery course)
X
Depreciation educational material
X
Free advertising
X
Achievement of goals
X
X
Improvement of image
X
X
X X X
X
X
X
X
X
X
121
Possibility of regulatory improvement
UGEL
Educational Institution
X
Availability of time (avoids private classes)
Availability of time (avoids preparing classes)
Parents
Other Students
Other Teachers
Director
Students
Teacher
Impact Indicators
Case Studies
Table 5.10. Matrix: Stakeholders versus Indicators.
122
Acquisition of knowledge
X
Curriculum improvement
X
Access to educational material
X
Improved relationship with stakeholders
X
Foundation
Investor
Company
Community
UGEL
Institution
Educational
X
X X
Parents
X
X X
Greater access to higher education Improves the pleasure from reading
Students
Teacher Avoid repeating communication course
Other Students
Other Teachers
X
Impact Indicators
X
X
X
X
X
X
X X X
X
X
X
Improved educational equity
X
Increase in educational quality
X
X
Return on Investment in Corporate Responsibility
Director
Table 5.10. (Continued )
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Table 5.11. Attribution: Case of Education. Target Beneficiary Educational Institution (EI) Number of EI
3
Rental $/infrastructure
100
Total EI $
300
Teachers $/hour wage/teacher
10
Number of hours invested in training
20
Number of teachers
20
Total teachers $
4,000
Directors $/hour wage/teacher Number of hours inverted in training Number of teachers Total directors $
15 3 3 135
Local Educational Management Unit (LEMU) $/hour wage/teacher Number of hours inverted in training Total directors $ Total target beneficiary $
15 3 45 4,480
Impact investor Training $
2,000
Products: Books $
12,000
Total impact investor $
14,000
Combined total (impact investor, target beneficiary $)
18,480
Attribution: Total interventions/Combined total
76%
124
Table 5.12. Calculation of SROIM: Education (Thousands of $). Year 1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
35
35
35
35
35
35
35
35
35
35
35
35
35
35
35
35
35
35
35
35
Foundation 5
5
5
5
5
10
10
10
10
10
40
40
40
40
Company Free advertising Local Educational Management Unit Saving in investment in policy guidelines
30
Directors Capacity development
40
Teachers Capacity development
250
250 250 250 250
Availability of time at school
35
35
35
35
35
Higher income
54
54
54
54
54
Capacity development
10
10
10
10
10
Savings due to repetition rate
35
35
35
35
35
Parents
Return on Investment in Corporate Responsibility
Free advertising
Case Studies
Students Capacity development
155
155 155 155 155
Availability of time
130
130 130 130 130
Other students Capacity development
85
85
85
85
85
85
85
85
85
85
Other teachers Reproduction of the acquisition of skills Total annual social benefits Present value of the social benefits
12 766
12
12
12
12
736 736 736 736 155 155 155 155 155 155 155 155 155 155
3,652
Investment
300
300 300 300 300
Present value of investment
300
270 243 219 198
Total present value of the investment
1,231
SNPV
2,421
SROIM
1.97
Interpretation: There is a multiplier effect of 180% on the investment made in the identified social network. That is, the direct beneficiaries receive the investment of $1,231,000 (present value of the investment) and this produces an additional 191%, which benefits the actors of the social network. As a result, the total social benefits climb to $3,652,000.
125
126
Return on Investment in Corporate Responsibility
and the sustainable generation of economic income in the communities with an aptitude for breeding. The project works with families of local entrepreneurs, the members of which are trained in all aspects of the breeding, multiplication, health, and commercialization of rabbits. The participants receive technical assistance for the self-building of farms and certified seeds for growing quality pastures which are used in the feeding of the breeding animals. Objectives: • That the producers develop their own organizational capacity and strengthen business management. • That the rabbit producers achieve a sustained production, responding to opportunities and quality criteria demanded by the market. • That the business-organized producers commercialize rabbits by responding to quality standards demanded by the market. • The project participants receive intensive training courses in the commercial breeding of rabbits. The model of internship course on a farm of industrial scale turns out to be a great experience for the participants. Guided by specialists, they can see, feel, and perform with their own hands the different tasks of demanding breeding. The project is directed at families qualified by their entrepreneurial ability. It provides training to these families in all aspects of the breeding of small animals, from the construction of sheds to the location of markets and commercialization. 1. Technical training and implementation. It is developed by means of the Field School methodology. Each school is a nucleus of existential learning. The participants learn each stage of production before starting their own breeding
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center. The project also provides the design of farms and facilitates the implementation of commercial breeding centers. 2. Organization. The project strengthens the organizational capacity of the groups of producers and promotes the associated work in order to address the commercial challenge. The project advises on and facilitates the formation of rabbit-breeding companies. 3. Market articulation. The project prepares and trains the organized producers to interact with the market and provides them with business management and administration tools. Moreover, the project provides advice on the handling of commercial contacts and the creation of demand circuits to facilitate the commercialization of products from their projects. We assume that: The company has a foundation that carries out its social responsibility activities. The research subject is the association of rabbit producers. The project investment is $500,000 which is spent as follows: $100,000 in the first year, $250,000 the second year, and $150,000 the third year. The social discount rate is 10%. • First Objective of the SROIM Model: Visualize the Real Impacts For the calculation of the impacts of each actor, the actor’s participation in the life cycle of the target beneficiary is calculated. As an example, Figure 5.9 only shows the impacts on the producers of rabbits, the association of producers, and
Return on Investment in Corporate Responsibility
128
Figure 5.9. Social Network: Productive Case. Association Of producers
Facilitators Families Friends
Foundation
Rabbit producers
Community
Municipality Clients
Awareness-raising
Social costs • Foundation • Rabbit producers
Implementation
USE Production
End
Social benefits Producers of rabbits Association of producers Acquires knowledge Creation of company Better quality of life Acquires knowledge Nutritional improvement Improved image Improved relationship with Higher income stakeholders Savings for bulk purchase Higher income Clients Increased value of land Increased consumption Capitalization due to reduced Nutritional improvement rabbit mortality Improved soil productivity due to Savings for local purchase organic fertilizer Better use of and access to water
the clients. This has to be analyzed for each relevant actor of the social network. We present in Table 5.13 the real impact of the project through the Stakeholders versus Impacts Matrix. • Second Objective of the SROIM Model: Calculation of SROIM The respective valuations are made in order to prepare the social cash flow (Table 5.14).
Mining Company
Foundation
Community
Collaborators
Municipality
Clients
Facilitators
Association
Producers’
Other Families
Conejos
Rabbit Producers
Impact Indicators
Case Studies
Table 5.13. Stakeholders versus Indicators Matrix.
Economic Higher income
X
X
Company creation
X
Increase in capital for fodder
X
Implementation modules farm, pastures,
X
hydroponic fodder, breeding animals Cost saving for bulk purchase
X
Cost saving due to local purchases
X
Capitalization due to reduction in rabbit mortality
X X
129
Value of stock
X
130
Access to greater financing
X
X
X
Community
Clients
Facilitators X
X
X X
Social Improved quality of life
X X
Free advertising Improved quality of other products (animals)
Mining Company
X
Foundation
Improvement of image
Collaborators
X
Municipality
X
Saving in project management expenses
Association
Producers’
Other Families
Saving in commercial contact expenses
X
Increase in consumption
X
X
X
Improved nutrition
X
X
X
X
X
Return on Investment in Corporate Responsibility
Conejos
Impact Indicators
Rabbit Producers
Table 5.13. (Continued )
X
Better relationship with stakeholders
X
Acquisition of new skills
X
Possibility of disseminating acquired knowledge
X
X
X
X
X
X
X
X
X
X
X
Case Studies
Perception of improved status
X
Environment Soil improvement with organic fertilizer
X
Better use of water
X
Greater access to water
X
131
132
Table 5.14. Cash Flow and SROIM: Productive Project. Year1
Year2
Year3
Year4
Year5
Year6
Beneficiaries (Producers)
Number of rabbits sold in the year
50
50
50
50
50
3,500
8,000
12,000
25,000
25,000
Increased income due to sale of rabbits
30,000
73,000
110,000
225,000
225,000
Increase in capital due to surplus fodder
150,000
120,000
50,000
0
0
Implementation modules farm, pastures, hydroponic fodder,
200,000
35,000
50,000
50,000
50,000
1,500
1,500
1,500
1,500
breeding animals Value of stock
25,000
Acquisition of new abilities
50,000
Greater access to water
1,500
Other Families Capitalization due to reduction in rabbit mortality Acquisition of new skills
5,200 15,000
Producers’ Association Cost saving from commercial contacts
150,000
Return on Investment in Corporate Responsibility
Number of beneficiaries
15,000
18,000
20,000
25,000
15,000
15,000
15,000
15,000
from the Revolving Fund Acquisition of new skills
80,000
Facilitators Acquisition of new skills
Case Studies
Cost saving due to purchase in volume with resources
20,000
Foundation Free advertising
15,000
Mining Company Free advertising Total annual social benefits Present value of the social benefits
100,000
15,000
15,000
15,000
15,000
444,700
259,500
326,500
331,500
250,000
150,000
1,533,599
Investment
100,000
Present value of investment
451,240
SROIM
15,000 486,500
2.4
Note: Interpretation: There is a multiplier effect of 240% on the investment made in the identified social network. That is, the direct beneficiaries receive the investment of $451,240 (present value of the investment) and this produces $1,082,359.22 (an additional 240%), which benefits the actors of the social network. As a result, the total of social benefits increases to $ 1,533,599.
133
134
Return on Investment in Corporate Responsibility
5.5. ENVIRONMENT An industrial company, which is a manufacturer of cardboard packaging for juices, yogurts, and drinks, has carried out a recycling campaign with the community. Its annual campaign has the following objectives: • To create awareness among the population about the importance of recycling. • To call for the participation of the general public in contributing to the deposit of milk, juice, drink, and yogurt cartons in the main supermarkets. The processing of containers creates a unique recycling process, which results in a material called tectan, thanks to the collaboration of the general public, who deposit cartons in special containers located in various supermarkets and government institutions in the city. With this material it will be possible to produce a significant amount of school furniture for low-income schools. The commitment of the company is to donate 5,000 sheets of a new material called polyaluminum, which is also obtained through a process of transformation of containers. By means of hydra pulping of the containers, cardboard is recovered (75% of the containers), which is used for making boxes, diary covers, files, etc. From the polyethylene and the aluminum (25% of the containers) obtained after the separation of the cardboard from the containers, a new material is obtained, called polyaluminum, with which sheets are made, as well as tile-type corrugated sheets for use as fabrication material. The impact measurement indicators are: Quality: the quality of the containers which is based on the controlled quality of their raw material, and the
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135
technology used during the process. For this reason, the sheets of tectan have been approved and tested by various organizations which have verified their quality. Quantity: • Manufacture of 5,000 sheets of polyaluminum. • Creation of awareness on a national level regarding the importance of collaborating with the environment through recycling. The direct beneficiaries are the low-income schools, preferably those which do not have adequate school furniture (it is not quantified). The indirect beneficiaries are society in general. Let us assume: The company is the impact investor. The project investment is $43,000 for only one year. • First Objective of the SROIM Model: Visualize the Real Impacts In order to calculate the impacts of each actor, its participation in the life cycle of the research subject is analyzed. As an example, Figure 5.10 shows only the impacts on the students, the environment, the municipality, company, and suppliers. This must be analyzed for each relevant actor of the social network. The actual impact of the project is shown in Table 5.15 by means of the Stakeholders versus Impacts Matrix. • Second Objective of the SROIM Model: Calculation of SROIM For the valuation of impacts, such as CO2 emission and tree felling, the methodology of the previous case of Nutrition can be used.
Return on Investment in Corporate Responsibility
136
Figure 5.10. Social Network, Sustainability, and Life Cycle Indicators of the Target Beneficiary.
Educational center
Alliances: Supermarkets Collection Centers
Environment
Municipality
Company
Students
Clients
Directors Suppliers: Recyclers Carpenters
Awareness-raising
Social costs • Company • Teachers • Students
Implementation
Teachers
Community USE/ Production
Closure/ Disposal
Social benefits Students Acquisition of skills Better quality education Environment Reduction of tree felling Absorption of CO2 Municipality Savings
Educational center Avoided costs Company Free advertising Suppliers Higher income
For the calculation of SROIM, only one-year’s benefits have been considered (Table 5.16).
Case Studies
Alliances
Clients
Municipality
Suppliers
Company
Community
Educational Center
Directors
Teachers
Impact Indicators
Students
Table 5.15. Stakeholders versus Impacts Matrix: Environment.
Economic Savings
X
Higher income Avoided cost
X
X
X
Organizational Free advertising Achievement of goals
X X
Improvement of image X
X
X
X
X
X
X
X
X
X
137
Better relationship with stakeholders
X
138
Cleaner city
X
Education Acquisition of new skills
X
X
X
Improved educational quality
X
X
X
Environment Reduction in tree felling
X
Absorption of CO2
X
X
X
Alliances
Clients
Municipality
Suppliers
Company
Community
Educational Center
Directors
Social
Return on Investment in Corporate Responsibility
Teachers
Impact Indicators
Students
Table 5.15. (Continued )
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139
Table 5.16. Cash Flow and SROIM: Environment. Year 1 Students Acquisition of skills
8,000.00
Teachers Acquisition of skills
5,000.00
Directors Acquisition of skills
2,000.00
Educational center Avoided cost
25,000.00
Company Free advertising
5,000.00
Suppliers Higher income
30,000.00
Municipality Savings
2,000.00
Environment Reduction in CO2 emission Reduction in tree felling
500.00 800.00
Total benefits
78,300.00
Total investment
43,000.00
SROIM
82%
Interpretation: There is a multiplier effect of 82% on the investment made in the identified social network. That is, the direct beneficiaries receive the investment of $43,000 and this produces $35,300 (an additional 82%), which benefits the actors of the social network. As a result, the sum total of social benefits is $78,300.
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CHAPTER 6 INTEGRATING THE SOCIAL PROGRAMS
According to the examples shown in the previous chapter for education, health, productive project, and environmental, we can conclude the following: • There are transversal indicators that can serve as a means for the integration of all of the social inclusion programs. These indicators are: higher income, savings, avoided costs, improvement of image, institutional improvement, reduction in the contamination of water, air, soil, etc. • Each program will have various impacts according to its particular objectives. • The impacts cover the issues of sustainability, namely, economic, social, and environmental. • The impacts cover the life cycle of the interventions. • The impacts are for each actor who intervenes or is affected.
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• Some impacts can be easily evaluated. With this, the social return of the investment or SROIM indicator can be calculated.
6.1. INTEGRATION MATRIX OF THE SOCIAL INCLUSION PROGRAMS The integration matrix of the social inclusion programs is presented in Table 6.1, considering the following: • All of the issues addressed have social impacts. Many of these impacts are transversal to all interventions. • The actual impacts of each program must be determined independently. Given the diversity of social inclusion programs, the matrix generically shows the impact generated for all of the programs with an “X”; however, this must be validated in each evaluation of the programs. Advantages of the matrix of integration and control of the social inclusion programs are as follows: • This matrix permits the organizations to have a more general vision of the impacts of all of their programs. • It serves as a control panel of the interventions, where the impacts for each intervention and their magnitude can be established. • It demonstrates the synergy between the different programs. • It enables to locate the greatest social returns on investment.
Benefits
Health Education
Productive
Governability Infrastructure
Development Family Capitalization of assets
X
X
X
X
X
Acquisition of skills
X
X
X
X
X
Savings
X
X
X
X
X
Higher income
X
X
X
X
X
Generation of employment
X
X
X
X
X
More time available to carry out other productive
X
X
X
X
X
Saving in transport for medical attention
X
X
X
X
X
Saving in medicine
X
X
X
X
X
Saving for reduction in repetition of the school
X
X
X
X
X
Integrating the Social Programs
Table 6.1. Integration Matrix of the Social Inclusion Programs.
activities
year
143
144
Table 6.1. (Continued ) Benefits
Health Education
Productive
Governability Infrastructure
Development
Nutritional reinforcement
X
X
X
X
X
X
X
X
X
X
Reduction in CO2 emission
X
X
X
X
X
Reduction in tree felling
X
X
X
X
X
Absorption of CO2
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Women Nutritional reinforcement Environment
Community Free advertising Government Free advertising Saving in medicine
X
X
X
X
X
Saving in health services
X
X
X
X
X
Return on Investment in Corporate Responsibility
Children
X
X
X
X
X
Higher income
X
X
X
X
X
Free advertising
X
X
X
X
X
Avoided costs
X
X
X
X
X
Free advertising
X
X
X
X
X
Total social benefits
X
X
X
X
X
school year Mining Foundation
Mining Company
Integrating the Social Programs
Saving for reduction in repetition of the
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Return on Investment in Corporate Responsibility
• This executive matrix enables to identify the social inclusion programs, which are most relevant due to their social impact. • It improves the evaluation of the programs, as it contains the impacts and their valuation. • It improves the communication to the external actors regarding the impacts of the programs. • It permits the alignment of the impacts found with international indicators like the MDG or others. It is proposed that organizations maintain a scorecard or matrix of integration and control so as to have an executive summary for decision-making.
REFERENCES
Bandura, A. (1977). Perceived self-efficacy in the exercise of control over AIDS infection. In V. M. Mayes, G. W. Albee, & S. F. Schneider (Eds.), Primary prevention of AIDS: Psychological approaches (pp. 128141). London: Sage. Carroll, A. B. (1989). Business and society: Ethics and stakeholder management. Cincinnati, OH: South-Western. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Marshfield, MA: Pitman Publishing Inc. Freeman, R. E., & Reed, D. L. (1983). Stockholders and stakeholders: A new perspective on corporate governance. California Management Review, 25, 88106. GRI. (2000). Guide for the preparation of Sustainability Reports. International Standard Organization. (2010a). ISO 26000: Guía de Responsabilidad Social. International Standard Organization. (2010b). ISO 26000: Social responsibility guide. Kerlinger, F. (2001). Investigación del comportamiento, cuarta edición.
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References
Krueger, R. A. (1994). Focus groups: A practical guide for applied research (2nd ed.). Thousand Oaks, CA: Sage Publications. Lingane, A., & Olsen, S. (2004). Guidelines for social return on investment. California Management Review, 60(2). Naciones Unidas. (2007). Indicadores de Desarrollo Sostenible: Guía y Metodología. Comisión de Desarrollo Sostenible. Porchaska, J. O., DiClemente, C. C., & Norcross, J. C. (1992). In search of how people change: Applications to addictive behaviors. American Psychologist, 47(9), 11021114. Porter, M. E., & Kramer, M. R. (2011). La creación del valor compartido. Rogers, E. M. (1995). Diffusion of innovations (4th Ed.). New York, NY: The Free Press. Rowley, T. (1997). Moving beyond dyadic ties: A network theory of stakeholder influences. The Academy of Management Review, 22(4), 887. Salkind, N. (1998). Métodos de Investigación. Mexico: Pearson Educación. Taylor, S. J., & Bogdan, R. (1995). Introducción a los Métodos Cualitativos de Investigación. Barcelona, España. United Nations. (2008). Objectives of the Millennium. Report 2008. United Nations Environment Program. (2009). Toward a triple impact toolbox for the analysis of sustainable ventures in developing countries. Viscusi, W. K., & Aldy, J. E. (2003). The value of a statistical life: A critical review of market estimates throughout the world. Journal of Risk and Uncertainty, 27(1), 576.
ANNEXES
ANNEX 1: SOCIAL DISCOUNT RATE OF VARIOUS COUNTRIES The social discount rate is the rate at which the future benefits and costs of a government investment project are discounted, in order to determine the convenience of implementing it. Since a public investment project extracts resources from the society, at the expense of private investment and consumption, the use of this rate guarantees that, whenever the government requires resources to execute a determined project, the project will only be carried out if it represents a net benefit for society.
Country
Rate (%)
Argentina
12
Bolivia
12.67
Chile
12
Colombia
12
Mexico
12
Peru
10
Uruguay
12
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(Continued ) Country
Rate (%)
United Kingdom
4
France
3.8
Japan
5
ANNEX 2: SOME SUSTAINABILITY INDICATORS 1
Sustainability Social
Topic Organizational
Sub-topic Corruption Better relationship with actors Free advertising Achievement of goals Process improvement
Health
Child nutrition Mortality Life expectancy at birth Immunization against infectious childhood diseases Access to basic health services Mortality from major diseases, such as AIDS, Malaria, TBC
Education
Enrollment in primary education Conclude primary education Literacy
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(Continued ) Sustainability
Topic
Sub-topic School level in secondary education
Poverty
Income poverty Income inequality Unemployment Sanitation services Drinking water Access to energy Standard of living
Environment
Natural risks
Population living in areas susceptible to natural risks
Air
Air quality Carbon dioxide emissions Consumption of ozone layerdepleting substances
Soil
Soil condition and use Desertification Agriculture Forests
Water
Quantity of water Water quality
Biodiversity
Ecosystems Species
Sustainable
Consumption of materials
consumption and
Use of energy
production
Waste generation and handling Transport
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(Continued ) Sustainability Economic
Topic
Sub-topic
Economic
Higher income
development
Capitalization of assets Savings Avoided costs Generation of employment Information and communication technologies Research and development Access to finance
ANNEX 3: INFORMATION GATHERING TECHNIQUES A general description of the most widely used information gathering techniques is provided below: A. Surveys2 Research by means of surveys studies large or smaller populations, selecting and analyzing chosen “samples” of the population in order to discover the relative incidence, distribution, and interrelation of sociological and psychological variables. Thus, they are usually called “sampling surveys.” Steps for carrying out a survey are listed as follows: • The flow plan of a survey begins with the objectives of the survey. What is the information that is desired to obtain? Does it relate to a specific problem and a simple variable, or a more complex variable with different facets and dimensions?
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• After defining the objectives and facets of the problem, the preparation of drafts of the possible questions begins, seeking to achieve a clear, simple, and concrete form. • Every survey is preceded by relevant personal data that also serve to relate the problem being researched according to the characteristics or conditions of the subjects themselves, such as age, sex, profession, years of experience, and marital status. • In order to standardize and facilitate its application, an initial presentation must be drafted, which justifies the importance of obtaining the required information. It is advisable to guarantee the privacy of the data provided. • The next step is to study the sampling plan. In the best survey research, random samples are used. After designing the survey, it is tested on a small representative sample of the universe. It is reviewed with various experts and it is given its final form. This constitutes the process of verification of the validity of the instrument. Here ends the first part, which involves the design of a survey. The collection of data by means of the survey is the second part. The interviewers or implementers must be trained and sent into the field with precise instructions. In most cases, they are not granted freedom regarding who to interview. Their work must be programmed, supervised, and verified. The third part of the flow plan is the analytical part. The replies are coded and tabulated. Coding is understood as the process of translation of the replies and the information from the interviewee into specific categories for the purposes of analysis.
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Advantages and disadvantages The survey has the advantage of its broad scope, it can be quickly constructed and is economical in its application. It adapts better to “extensive” rather than “intensive” research, since the information that is sought, more precise and specific, is usually detrimental to deep study. Another disadvantage is that in certain cases, it may temporarily separate the interviewee from his own social context, and this may invalidate the result of the survey. The interview is an extraordinary event in the life of the interviewee. This separation may affect the manner of interaction with the interviewer in an unnatural way. B. The Interview3 Interviews or oral questionnaires can adopt various forms, from a totally informal question and answer session in the street to a highly structured and detailed interaction. Although it is not necessary to worry about the physical format of the interview questions (because the interviewee never sees them), attention must be paid to questions such as the transitions between sections, being sensitive to the type of information that is requested, and being objective and direct. They are usually very useful when it is necessary to obtain information which would otherwise be inaccessible, which includes first-hand knowledge of peoples’ feelings and perceptions. The results of the interviews are combined with other observation techniques and important documents. Advantages and disadvantages of the interview Interviews offer great flexibility, because the questions can be guided in any direction (within the scope of the project). The non-verbal behavior of the interviewee can also be observed, which provides valuable information. However, they also
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have their negative side; they take up a lot of time, as a result of which it is a costly technique, and, as a result of not enjoying total anonymity, the interviewees may be reluctant to provide honest answers. As a result of not having a standardized format of questions and giving freedom to the interviewer to express them, the interview process can fall into subjectivity and variations between interviewers, where some are more inquiring and successful in obtaining the information and others more cautious or prudent in the art of interviewing, who would obtain less information and, therefore, different results. How to design it 1. State the purpose of the interview, bearing in mind the goals of the research project. 2. Select the appropriate sample for the study, both for its characteristics as well as its size. If we are going to study “styles of educational supervision,” it would be interesting to interview not only School Directors, but also those being supervised, that is, the teachers, and try to appreciate how they feel about being supervised. The sample size is usually smaller when compared to working with surveys or questionnaires, for reasons of time and cost. 3. Design the questions, whether structured or unstructured, they must be clear and direct, without hidden intentions, words that are elaborate or difficult to understand. One of the best ways of finding out how good an interview is, is to submit it to “a pilot test.” Use it with people with the same characteristics as the public to which it is addressed. Ask for feedback and make the changes that you consider pertinent.
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4. Once the format or the script of the interview has been defined, it is time to “train the interviewers.” Most of the characteristics that are looked for in an interviewer are obvious: friendly, well presented, a non-provocative appearance, responsible to arrive punctually at the place of the interview, not too timid or too aggressive, capable of sensing when he must dig deeper with a “Why?,” and when to wait for the answer to be given, without pressing. How to apply the interview • Do not begin the interview coldly. Warm up with conversation about any subject. Use anything that works to break the ice and make the interaction warmer. This period of time, which may be long or short, is called “rapport” and means “building trust” to begin the interview. • Recording and video may only be used with the consent of the interviewee. However, do not let the tape run without taking notes that may be very important, such as body language, non-verbal language, etc. • Remember that your mission is to obtain information. Concentrate on your task and use a series of printed questions as an interview aid or guide. You must be familiar with them in advance to avoid giving the impression of improvisation or disinterest. • Dress appropriately (too many clothing accessories and details are unadvisable). • Find a quiet place to carry out the interview, where you and the interviewee are not subject to distractions. • Be direct with your questions. If the interviewee does not provide you with a satisfactory reply the first time that you
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ask the question, present it in another way, until getting as near as possible to the reply that you think you need. • Make the interviewee feel like an important part of the project and not just someone who is taking a test. Most people like to talk if given the opportunity. Tell him that you realize how valuable his time is and how much you appreciate his participation. Do not forget “to promise and deliver, in due course, the results.” • Finally, thank the interviewee and invite him to raise doubts or make comments and suggestions. • It requires practice to become a good interviewer. The first interview is usually full of apprehension and doubts. It is convenient to rehearse and make a video recording in order to observe and try to improve posture, diction, tone of voice, pauses between one question and another, or between replies. As more interviews are carried out, confidence and command of the questions will increase, with a more relaxed interaction, resulting in the obtaining of more useful information. C. Observation4 This involves social interaction between the researcher and the informants in the environment or context of the latter, and during which data are collected in a systematic and nonintrusive manner. The researcher begins his study with questions and general interests and usually does not predefine the nature and number of cases, scenarios, or informants to be studied. The design of research in participant observation remains flexible. That being said, how does the observer enter and act in the field or scenario under study?
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1. During the initial days, the observers must remain relatively passive, weighing up the situation, advancing slowly, trying not to disturb the established routine. 2. During this initial period, the gathering of data is secondary in order to get to know the scenario and the people. It is important, to the extent that people ask, to clarify who you are and why you are there without saying exactly what we are studying (so as to avoid causing inhibition or feelings of threat). The researcher will often feel uncomfortable, with doubts and even frustration, but this will improve as the study progresses. 3. Observations should not take up too much time, and should be of a length that permits them to be remembered. Therefore, do not remain in the field if you feel that you are going to forget much of the data or will not have time to record it. 4. In order to achieve the level of confidence and acceptance of the informants, you are advised to: Revere their routines, adjust to their way of doing things. Help people, do favors. Be humble, displaying excessive knowledge constitutes a threat. Show interest in what others do or say. 5. Identify key informants. Generally, the researcher relates to all of the informants, but he tries to cultivate closer relations with one or two respected people who are knowledgeable about the environment and become primary sources of information, providing him with a deeper understanding of the scenario. These closer relations
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should not be established until a good awareness of the scenario has been acquired. 6. The researcher will begin to define specific lines of enquiry and will have to formulate questions to allow people to talk about what they have in mind and what interests them. In this sense, when people start to talk, he must encourage them to say more about the subjects that interest them, not take for granted that he is understanding what people are saying, ask What do you understand by this? Can you explain it to me again?, etc. Therefore, as the observers acquire knowledge and understanding of the scenario, the questions become more directive and focused. 7. It is necessary to learn the informants’ own language, because the words and symbols used in the world of the researcher may have very different meanings in the worlds of his informants. This is only achieved after an extensive period of observation. 8. The record of notes must be complete, precise, and detailed. In order to achieve greater objectivity and reliability, it is recommended that a colleague should read the notes. These must include descriptions of people, events, and conversations, as well as the actions, feelings, intuitions, or work hypotheses of the observer. The structure of the scenario is described in detail. In summary, the field notes seek to record on paper everything that can be remembered from the observation. A good rule to establish is “if it isn’t written down, it didn’t happen.” 9. Participant observation is commonly combined with other techniques for a study. Generally, in-depth interviews and document analyses are used as supplementary techniques, which produces so-called triangulation. This triangulation
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can also be obtained through teamwork, when two or more people study the same scenario. D. Focus Groups5 Focus groups typically comprise between 7 and 10 participants, selected as a result of having certain common characteristics and who are related to the subject or topic to be dealt with in the group. This technique can be repeated several times with different people. A study where this technique is applied requires a minimum of three groups, although research exists which can include up to a dozen groups. The researcher must be a capable interviewer so as to foster in the group a permissive environment, which nourishes and permits the expression of different perceptions and points of view, without pressure for a plan, voting or reaching a consensus. Group discussion is carried out several times with similar types of people in order to identify patterns and trends in those perceptions. The discussion is comfortable, often agreeable for the participants, and the members of the group influence each other by responding to ideas and comments in the discussion. This is a technique that uses interviews which permit individuals to reply without feeling limited. Interviews in focus groups are widely accepted within the research framework, because they produce credible results at a reasonable cost. It is a technique that has been growing in popularity among social scientists. It is a particularly appropriate procedure to use when the objective is to explain how people consider an experience, idea, or event. The results produced by the focus group are qualitative data that provide a view of the attitudes, perceptions, and opinions of the participants. The interviewer must fulfill various functions within the group: moderate, listen, observe,
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and eventually analyze, using an inductive process. The inductive researcher gets to understand processes through discussion, as opposed to wanting to prove or confirm preconceived theories or hypotheses. The art of asking questions in focus groups The questions must be stimulating so that people respond. Semi-open questions are advisable, because without suggesting replies, the interviewer maintains the purpose of the focus group. Some examples are: What do you think about ……? How did you feel about ……? How would you suggest improving ……? What are the biggest problems that parents have with their adolescent children? When not to use the focus group 1. When the atmosphere is emotionally charged and the search for information may generate or intensify conflicts. 2. When the researcher does not have control of the group or has lost control of the group. 3. When statistical projections are needed. 4. When other methodologies may produce a better quality of information. 5. When the researcher cannot ensure the confidentiality of the informants. Advantages of the technique 1. It is a natural technique, because people are accustomed to interact with each other, and in that interaction, all of
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the dynamics of the relationship, influences, inhibitions, changes of attitude, etc. can be observed. 2. The second advantage is that it permits the researcher to explore in advance possible solutions to problems that may arise. 3. The technique is easily understood by everyone and its results have a high percentage of credibility, as a result of not being presented in complicated statistical tables, but with the participants’ own terminology. 4. It is a low cost technique. The participants can even be invited by phone. The sessions do not require major resources, except for a capable interviewer and, if the participants allow it, a recorder or video. 5. Interviews in focal groups provide rapid results. The information that it is intended to obtain may arise rapidly, permitting the preparation of an analysis report thereon in less than a week. Limitations 1. The researcher can have less control of the session, compared to what he would have with a single interviewee. He needs to stimulate the process of conversation in all of the participants and ensure that they listen to each other, which is not an easy task. 2. The data obtained are difficult to analyze. The results must be interpreted within the context in which they are produced. Sometimes participants tend to change their individual positions after interacting with others. 3. The technique requires carefully trained interviewers. 4. Groups may vary considerably. Each focus group may have unique characteristics; some may be apathetic, others
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stimulating, others may show resistance, etc. To avoid this happening, as much as possible, it is recommended that the participants selected should have a diversity of experience and personal characteristics.
NOTES 1. Naciones Unidas (2007). 2. Kerlinger (2001). 3. Salkind (1998). 4. Taylor and Bogdan (1995). 5. Krueger (1994).
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INDEX Activity/process indicators, 33 Acute respiratory infections (ARIs), 90 Advertising media, 60 Analysis of the investment, 102105 Anticipated impacts versus non-anticipated impacts, 35 Application (App), Uber, 74, 75, 77, 78 Attribution, 50, 53, 100 calculation of, 55 case of education, 123 Avoided cost, 62, 112 Awareness-raising stage, 57 “Business control” activity, 75 Calculation of isolation, 54, 55 Cash flow, steps for, 68 Cash outflows, 6768 Children stage, 910
Clean delivery attention kit, 92 Clients, 27 Coding, 153 Collection of information, 20, 49, 73 Community, 26, 2728, 87 Community leader, 9596 Contingent value, 22, 6364 Control group, 51 Conversion into monetary value, 22 Corporate social responsibility, 1 Demand curve, 63 Desirable versus undesirable impacts, 34 Diarrheal disease, 90 Direct and indirect impacts, 3435 Economic indicators, 45 Education, 113 application of the SROIM model in, 118120, 121125
165
166
Educational supervision, styles of, 155 Employees, 26, 28, 77 Environment, 28, 134139 Environmental impact, 36, 37, 38, 40 Environmental indicators, 45 Falling-in-love process, 6, 7 Field School methodology, 126 Financial indicators, 2 Free advertising, value of, 60 Global Reporting Initiative (GRI), 37 Government entities, 27 GPS navigator, 75 Grandparents stage, 1013 Grassroots organizations, 28 Group discussion, 160 Health and nutrition, 73, 87 productive agricultural development, 90 social development, 90 application of the SROIM model, 9397 health, 9091 non-institutional births, 9293
Index
nutritional reinforcement, 9192 organic vegetable gardens, 92 training in nutrition, hygiene, and health, 92 valuation, 97, 101113 stakeholders versus impacts matrix, 98101 Health and Productive (project), 87 Hedonic prices, 22, 63 Higher income, 5960, 81, 141 “Imminent delivery kit”, 92 Impact indicators, 15, 22, 37, 48 Impact investor, 28, 29, 45, 50, 53, 69, 70 attribution of, 53 Impact measurement indicators, 134135 Impacts versus Stakeholders Indicators Matrix, 59 Implementation stage, 8, 56, 78, 94 Inductive process, 161 Information-collection methods, 49 Information gathering techniques, 152163 focus groups, 160 advantages, 161
Index
art of asking questions in, 161 limitations, 162163 use, 161 interview, 154 advantages and disadvantages of, 154155 applying for, 156157 designing, 155156 observation, 157160 surveys, 152153 advantages and disadvantages, 154 Input indicators, 3233 Integration matrix of social inclusion programs, 142146 International Standard Organization, 35 Intervention isolation of, 2022, 5055 social network, 28 Interview, 154 advantages and disadvantages of, 154155 application for, 156157 designing, 155156 JaipurKnee, 71 Kitchen stove, improved, 91, 94 Knowledge acquisition, price of, 60 Kyoto protocol, 61
167
Life cycle of marriage, 12 of target beneficiary, 18, 3844, 93 Local Educational Management Unit (LEMU), 118 Logic Framework, 15, 23 indicators, 15 Management indicators, 2, 101 Market price, 5961 Marriage case, 513, 4044 awareness-raising, 40, 41 end of life cycle, 41, 42 implementation, 41, 4142 life cycle, 42, 43 use, 41, 42 Marriage project, 3 Marriage stage, 79 Mayor, 96 Millennium development goals (MDG), 110 Mining Company, 112 Mining Foundation, 96, 97, 111, 113 Monetary value, calculation of, 5665 Monetary value of initial benefits, 57 Multiplier effect of investment, 20 Non-institutional births, 9293
168
Index
Nutritional reinforcement, 1, 56, 58, 9192, 105
Rural Health Post, 96 Rural Medical Post, 94
Opportunity costs method, 6465 Organic vegetable gardens, 92 Outcome indicators, 34, 105 Outcomes/impacts, typology of, 34 Output indicators, 34
Sampling surveys, 152 Secondary information, 49, 57 Shareholders, defined, 2627 “Sharing expenses”, 75 Social cash flow, 4, 22, 6568, 113, 128 Social discount rate, 113, 118, 149150 Social inclusion programs, integration matrix of, 142146 Social indicators, 45 Social intervention process, 17 Social network, 18, 2532, 93 formation of, 2832 stakeholders, 2528 Social responsibility projects, 1, 2, 3, 4, 15, 87 Social return on investment, 2, 3, 18, 20, 50 Social sensitivity of business, 1 Social value of time, 60 SROIM (Social Return on Investment Management) model, 24, 1523, 2571 application
Participant observation, 157, 159 Pilot test, 155 Polyaluminum, 134 Prevention costs, 64 Primary information, 49, 73 Production function, methods based on, 62 Productive project, 4, 120, 126127, 132133 calculation of SROIM, 128 market articulation, 127 objectives, 126 organization, 127 technical training and implementation, 126127 visualizing the real impacts, 127128 Public investment project extracts resources, 149 Rapport, 156 Replacement cost, 62
Index
in education, 118120, 121125 in social development, 9397 in Uber, 7784 calculation of, 16, 2023, 48, 6971, 8487, 119 calculation of monetary value, 5665 collection of information, 49 isolation of intervention, 5055 social cash flow, 6568 objectives, 17 philosophy of, 513 awareness-raising stage, 57 children stage, 810 grandparents stage, 1013 marriage stage, 78 SROIM formula, 23 visualizing the impacts, 15, 1720, 2548 life cycle of target beneficiary, 3844 social network, 2532 stakeholders versus impacts matrix, 4448 sustainability indicators, 3238 Stakeholders, 2528, 112 Stakeholders versus impacts matrix, 20, 21, 4448 advantages of, 48
169
life cycle of target beneficiary, 48 sustainability indicators, 4548 “Stated preference technique”, 64 Suppliers, 26, 28, 31 Sustainability indicators, 3, 15, 18, 25, 3238, 4548, 150152 interrelationship between, 36 typologies of, 3236 Sustainable development, 35 Sustainable social interventions, 37 Target beneficiary intervenido, 28 life cycle of, 18, 3844 Traditional stoves, disadvantages of, 9091 Training in nutrition, hygiene, and health, 92 Transfer of results, 64 Transversal indicators, 141 Travel cost, 63 Trend line, 52 Triangulation, 159160 Typology of indicators, 3236 Uber, case study, 73 background, 73 entry of, 7477 SROIM model, 77
170
calculation of SROIM, 8487 visualizing the real impacts, 7783 stakeholders versus impacts matrix, 83 Use stage, 10 Valuation techniques of intangibles, 62
Index
Valuation techniques of tangible impacts, 59 Value of human life, 61 Value of ton of CO2, 6061 Willingness to pay (WTP), 61, 63, 64 Work time, 60