Greetings from sun-kissed Vauxhall!

Long may the weather continue!

Week four is well underway here at the Big Issue Foundation and the project is coming along. I wish I’d written a little more sooner, it’s evolved a great deal since I first arrived and I don’t quite where to begin. I’ve still got a few more weeks before I need to log out for the final time, so I’ll start from the top, lay out the basics, and (hopefully) catch up before the end.

Speaking broadly, the nature of the third sector is changing.

Charities are becoming more businesslike. They are learning the lessons of the private sector and applying to their own to cut costs and grow impacts. The rise of the terms ‘social enterprise’ and ‘third sector’ seems symptomatic of the change; charities are getting more serious. Uniquely they are looking to marry the cold calculation of business with the warm, fuzzy outcomes of charity, with a view, you could say, to making them warmer and fuzzier.

The change is already underway, with the charities at the top taking the lead. The press worked themselves into a lather last month over the fact that many charity bosses earned salaries upwards of £100,000 a year. But many of these charities have turnovers that run into the hundreds of millions of pounds, dwarfing the pay cheques of their management team and making them equivalent in size to a FTSE 250 company. When dealing with such significant responsibilities, having someone with the requisite skills is key. Working in the third sector is rapidly becoming a career in and of itself, and not just as a way for executive retirees to keep themselves busy altruistically.

Philanthropy too is changing. The rise of corporate social responsibility has meant giving back is not just a free gift from corporations to charities but now is an integral part of any modern business’ identity. It defines how the company is viewed from outside and, perhaps more importantly, how employees view themselves and what they do. Equally, by and large, philanthropy is no longer about the super-wealthy throwing cash at a pet cause. Donors are now investors and they want to see bang for their buck.

Most significantly, governments now see that many of the goals they set out to achieve through policy – in healthcare, crime, education, whatever it might be – lie very closely to the work undertaken by charities. If a social enterprise works with teens to help them keep on track in school, go on to university and become happy adults, there’s a knock on benefit to society. Potentially, it could lead to reduced crime, better health, improved economic output – all goals that the State sets out to improve via policy.

But what if you could transform this social benefit to fuel its creation in future? To incentivise (for want of a better word) future, better, more efficient projects, just as financial incentive drives business?

It’s this idea that has lead to the social impact bond, or SIB. A SIB is a way for social enterprises to fuel their growth, for social investors to put their money to good use and for governments to reward actions (preventive interventions) that ultimate save them money down the line. The investor puts up the funding, the social project receives the funding it needs and the government rewards the investor, analogously to interest, based on the outcomes that the project brings about. No social change, no payout; big social change, big payout. But how do you measure this social change? How much money will it have save in the long-term?  How can you put a monetary value on an intangible outcome?

This is where social return on investment (SROI) comes into play. Given the increased need for a consistent and shared language around accounting for social value, the principles of social return on investment were developed. By its very nature, translating social impact into pounds and pence is very difficult, but SROI offers a methodology for arriving at a balanced, best estimation. Once undertaken, a SROI study can be used in a variety of ways, from making a more compelling case when fundraising to evaluating the efficiencies of the work undertaken by an organisation.

Originally, I was tasked with attempting a SROI study for the Big Issue Foundation. And technically that’s what it still is. But having immersed myself into the organisation, it’s got a bit more complex than that.

But that can wait until another post, as there’s tanning that needs to be done.

Charities may be getting more serious but they’re not too serious (yet).

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