Social Accounting for Sustainability. Monetizing Social Value

The University of the Basque Country and the University of Deusto have been working with other social actors for more than four years via the ECRI [Ethics in Finance & Social Value] Research Group on systematically modeling the monetizing of the social value generated and distributed by different organizations. The findings obtained are methodologically robust, and have enabled an integrated accounting model to be developed in which the social value and economic value generated by organizations for their stakeholders as a whole can be considered jointly (Blended Value).
The conventional, monist prospective focuses solely on the value generated by firms for shareholders (Friedman vs. Freeman), so the fundamental indicators of value are financial in nature. Based on the ontological stakeholder view (Wood, 1991; Mitnick, 1994; 2000; Retolaza & San-Jose, 2011; San-Jose & Retolaza, 2012; Retolaza, San-Jose & Ruiz-Roqueñi, 2014; 2015) a broader concept of value can be considered that extends in two directions, including the value distributed to all stakeholders on one side and incorporating not-directly-economic effects caused by organizations to their various stakeholders on the other. This gives rise to a more comprehensive concept of value generated, which we refer to here in general as “Social Value”, though it could also be called extended value, blended value, broad value or even social income.
This book both analyses the state of the art in regard to the quantifying of social value and summarizes the various methods that are being used in practice to quantify that value (Tuan, 2008; Olsen & Galimidi, 2008; Wood & Leighton, 2010; Mulgan, 2010), going into more depth in regard to those which focus on economic evaluation.
The method proposed is based on four assumptions: stakeholder theory (Freeman, 1984), the action research method (Lewin, 1946), the phenomenological perspective (Husserl (1859-1938), Tarde, 1902, Polkinghorne, 1989), and fuzzy logic (Zadeh, 1965; Kaufmann & Gil Aluja, 1986. It is developed on the basis of cost-benefit analysis (Mishan, 2007), and gives rise to an overall, integrational model that we call the “Polyhedral Model” (SPOLY). This model is structured in three complementary dimensions: economic value with social impact (which we also refer to as socio-economic value), socio-economic return for the public administration, and specific social value or “social value in the strict sense”. The study presents motivated proposals for mechanisms capable of monetizing these values and for consolidating them in a single, overall social value, thus facilitating the processes of identifying value variables, selecting proxies, and consolidating them by means of algorithms drawn up for that purpose.
To check the applicability and practical usefulness of the method, it is tested on the ground in various organizations. We provide data and graphics taken from the foundations Lantegi Batuak and Argía, from the public sector housing management organization Viviendas Municipales de Bilbao, and from private companies Euskaltel and Formació i Treball.
Our findings reveal that it is possible for social and mercantile organizations and public administrations to autonomously quantify the social value that they generate, to integrate it as a management indicator with a view to improving their impact on society, and even to give social matters a central role in their organizations. In the conclusions to our study we reflect on the usefulness of a methodological proposal of this type, and on the possibility of scaling and standardization through a community of users.
The study comprises 10 chapters. The first is this introduction; the second examines the current situation as regards social accounting and its grounding in theory. The third looks in greater depth at the assumptions underlying the model proposed – action research, stakeholder theory, the phenomenological perspective, and fuzzy logic – in the context of an analytical/synthetic method. Chapter 4 reviews the methods used to date and Chapter 5 presents a differential analysis with the SROI. Chapter 6 sets out the Polyhedral Model as an underlying model that can support the process of social monetization, Chapter 7 examines the variables and relationships involved, and Chapter 8 looks at its practical implementation. Chapter 9 presents our conclusions and Chapter 10 gives a list of bibliographical references. The study is rounded off by two annexes intended to help stakeholders identify value variables.