What Is Social Impact And Why Does It Matter?

When we go shopping, it's normal to look for the price tag to see whether the item we want is good value. The price is certainly a key piece of information. But it doesn't give us the full picture.

We may, for example, buy some green beans from the supermarket that have been flown from Kenya because they are out of season in the UK. In this case, there is an environmental cost in flying the beans thousands of miles to us - a cost that the price tag doesn't show. Perhaps there is a human cost too, depending on how fair the deal is for the developing world farmers who grew the produce.

More and more consumers and procurers of goods and services are becoming aware that price, by itself, doesn't give them all the information they need to make a judgement on value. In the supermarket, labels now often state if the product has been flown in. Logos and stamps such as the Fairtrade mark aim to reassure us about the human or environmental story behind our purchase.

In the social enterprise world, which is all about trading goods and services, telling the story of successful business is fundamental. Price is important and social enterprises aim to be competitive in the marketplace.

But, for a social business, providing evidence of social impact takes on special significance. Whether we use methods such as SROI (Social Return on Investment) or other forms of social and environmental accounting and auditing, the basic aim is to measure and communicate the social, environmental or economic value that our activity creates.

By doing this, the compelling stories told by social enterprises, by charities and by ethical businesses can be backed up with facts that prove - and improve - the value of their activity.

At the RBS SE100, we believe that making an effort to measure, explain and promote the 'social impact' of organisations operating in this sector is crucial if social enterprise is to win mainstream support as a business model that can make a real difference. The government too has backed initiatives to promote this.

Jeremy Nicholls, chief executive of the SROI Network, advises the RBS SE100 on how the index should collect and communicate information on social impact. Nicholls says that, "in much the same way as during the early days of financial reporting and accounting, we need standard approaches to understanding and managing social value in order to unlock more investment in organisations that create social value."

Through this website, and through Social Enterprise, RBS SE100 aims to help social businesses develop this focus.

• For more information on measuring social impact, visit the SROI site