The External Rate of Return: an inclusive, transparent platform for measuring the
overall impact of business activities upon the economy and society in general
There is increasing ubiquity in considering the ‘impact’ business has on people and places.
Environmental, social and governance (ESG) issues are mapped by corporations, ‘social
enterprises’ are abounding, governments are launching ‘social impact bonds’ and there is
integration of ESG considerations into financial analyses by traditional investors. Even
archetypal profit-focused investment banks, including Goldman Sachs and Morgan Stanley,
include ESG and impact activities in their business. The notion of the social impact of business
has become so mainstream that government at the highest levels – including G8 leaders and
even the Pope – advocate the creation of institutions to give greater attention to driving social
Along with these efforts aimed at sustainable, responsible business, there has been a rise in the
tools available for measuring the social impact of business – to the tune of more than 150
impact assessment methods. The strengths of these methods are their ability to measure social
impact through their usability, inclusiveness and ability to demonstrate – and enhance – value.
Despite these advances, the social impact assessment landscape is missing a platform that
allows users to input and share their information in a truly transparent, comparative manner.
Above all, four limitations beset existing social impact assessment methodologies:
- First, existing methods focus too much on ESG and social enterprises, underplaying
the role of business activity and related financial, employment and other gains as part
of an overall social impact.
- Second, methods are designed to measure outcomes pre-prescribed by the investor,
often orientated to the new investing activity rather than measuring a greater or
broader holistic impact.
- Third, much greater accessibility and transparency are needed.
- Fourth, there is a tendency to focus on social enterprises when measuring impact.
In an effort to move impact assessment forward, we propose a holistic, transparent platform –
called the External Rate of Return (ERR). Our aim is to develop the ERR platform to be the
destination for companies and stakeholders to engage in discussions and assessments about
the impact of companies, and new activities of those companies, around the globe. The ERR is
intended for all companies, not only social enterprises, and not only for companies with ESG
departments or investors pursuing an impact investing approach. Through the ERR,
enterprises and investors will be able to converge on using a singular, holistic platform that
does not judge, silo or reduce economic and social impact inputs.
The ERR would have a social character rather than being merely a repository of company
information or industry best practices. To enable itsfundamentally social nature and promote
a space where “social pressure” helps to build more transparent and accountable business
activities, we propose the following means to achieve an ERR score. Companies directly
engage with the public by proactively sharing their processes and data for each of the aspects
of the platform. In addition to providing their qualitative insights, companies would propose
to quantify their score for each indicator within the five proposed vectors: Company,
Suppliers, Customers, Society and Environment.
ERR platform users – across the public at large – could then comment on the scoring and
provide an alternative score. Users’ rationale for an alternative score would be transparently
displayed alongside the score designated by the company. This side-by-side comparison of
scores would allow the company, members of the public, its suppliers, customers, and other
stakeholders to engage in an ongoing conversation about the economic and social impact of
the company in an informed, area-specific manner.
The crowdsourcing of impactscoring would add to the viral nature of the assessment method;
rather than yet another assessment method that suggests a ranking, the ERR would be the
platform for companies and external stakeholders to share information about the impact of
their activities. Above all, the ERR will enable an ongoing dialogue across the global
community about the myriad ways business activities affect people and places.
The below diagram visualizes the areas covered by the ERR and highlights some of our
proposed indicators. The design isthat ofripplesin water as business activities have numerous
impacts, inside the company, on the suppliers and customers, and on broader society and the