Tris Lumley

16th May: Tris Lumley, Director of Development at New Philanthopy Capital, gives his take on the challenges of stakeholder involvement…

It’s all relative, isn’t it?

Albert Einstein might well turn in his grave at the misuse of the term relativity beyond the context of his special and general theories. But when it comes to measuring social impact or social value, it’s often said that it’s all relative – it depends from whose perspective you’re measuring. Is that true, and what does it mean if it is?

Certainly, an outcome can have different value to different stakeholders. An organisation campaigning for action to end the UK’s housing shortage would celebrate new legislation opening up land use for new affordable homes. An environmental protection organisation would mourn the same decision if it put previously protected countryside into residential use. It matters where you stand and what you value.

There’s a simple answer to this when we’re trying to establish the social value involved in a decision or an outcome – we need to include stakeholders’ views in our valuation, and combine different perspectives to come to a balanced view.

This is an important element of any good approach to measuring social impact – the need to include stakeholders. Whether we’re talking about the principles at the heart of SROI, or the guidance for social impact investors being developed through the European GECES and currently through the Social Impact Investment Taskforce established by the G8, stakeholders play a prominent role.

Sounds straightforward? Well it isn’t. After a decade of working in this field, I believe that the apparent simplicity of including stakeholders belies the multiple layers of complexity this actually entails if we’re to do it in more than a tokenistic way.

First, we need to include the right people. Customers, service users, beneficiaries – so far, so obvious. Staff, boards, funders, investors – for sure. But where do we stop? Government? The general public? Competitors? Non-customers?

Second, we need to include their perspectives in as neutral and balanced a way as possible. How much weight should an electronics business attach to the views of its staff who are paid barely enough to subsist, let alone a living wage? More weight if its shareholders start to value the living conditions of its staff? Less if no-one’s taking any notice?

Third, we need to remember Einstein’s Special Theory of Relativity – time is also relative. So stakeholders today will have different views from those in fifty years. The value that people struggling with their fuel bills today attach to cheaper gas prices due to shale gas and fracking will be different from the value that people attach to it in fifty years when the environmental results of further fossil fuel use are more evident. If there’s anything we should have learned in the global financial crisis, it’s that humans are terrible at including long-term considerations in their decision-making criteria.

What’s my point? I believe it’s crucial to include stakeholders’ views when we establish the social value of anything, but I also believe that this is almost never done meaningfully. There’s a danger that we include just enough of perspectives that are not aligned with our own to create a pretence of inclusion when in reality it remains tokenistic.

Ultimately, the inclusion of stakeholders in decision-making should result in a transfer of power. Our challenge is to make sure it does.

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