A Smart New Way to Rate Socially Responsible Businesses

Tuesday, August 2, 2011

Better World Books sells used books. Nothing special there. But how it does it deserve more praise. Better World is a social enterprise that has put over $9 million in literacy and library programs around the world, minimized its carbon footprint with clever offset incentives to customers, and has been able to treat its employees damn well. While all of this may garner extra business from conscious consumers, it’s a different story when it comes to financing from investors.

Better World is a for-profit company. It has an explicit goal of doing good in the world, but to grow it needs investments, not donations. Investors, though, can be a tough bunch. They need metrics, analyses, and audits before pumping millions into a young company. Even the growing class of “impact investors” who demand social impact along with their financial return want all of that… all that and more actually.

Thanks to a new rating system for socially responsible companies called GIIRS (pronounced “gears”), it just got easier for companies like Better World to grow faster and do more good in the world. GIIRS, the Global Impact Investment Rating System, will rate companies on social, environmental, and community impact in a system designed especially for investors. As Beth Richardson, the director of GIIRS, put it, “we can’t invest for impact until we measure impact.”

When a social enterprise like Better World Books turns to an investment fund for capital and says, “hey, we’re awesome, we make money and we have positive social impact,” investors will often reply, “prove it.” Until now, there hasn’t been a standard response. Every company measures impact its own way. Better World can furnish a balance sheet based on standard accounting practices for the profit part. But to tout its positive impact on employees, or its effect on literacy levels is a lot tricker. GIIRS aims to fix that, allowing impact investors to compare the social impact of companies they may want to fund. GIIRS is still rolling out, on pace for a full launch in September at the Clinton Global Initiative, but starting last week, GIIRS opened the doors to any company that wants to get rated.

Source: GOOD (link opens in a new window)