Confused about the difference between double and triple bottom line? What about SROI? Well look no further – below are a glossary of frequently used terms in the social entrepreneurship/innovation (also known as #socent in Twitter-speak) space:
Bottom of the Pyramid (BOP): A term developed by Stuart Hart and C. K. Prahalad (author of The Fortune at the Bottom of the Pyramid) referring to the largest but poorest socioeconomic group in the world, i.e., the 2.5 billion people who live on less than $2.50 per day. Because of the large number of people, the BOP represents a huge market if affordable products and services can be offered to them, [via Prahalad].
Blended Value Investments: Investments that are a “blend” of economic, environmental and social factors. According to the Institute for Social Entrepreneurs, “maximizing value requires taking all three elements into account, regardless of whether the organization is in the for-profit or nonprofit sector.” Blended value investments may generate a financial return, but will be coupled with a social or environmental positive impact.
Corporate Social Responsibility: The continuing commitment by businesses to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large (via World Business Council for Sustainable Development).
Crowd-sourcing: Term coined by Jeff Howe in Wired magazine in 2006 as, “The act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call.” Kiva, Inventure Fund, and UShahidi are examples of organizations in the social enterprise space that use crowdsourcing.
Dependency: The traditional business model for nonprofits, in which they depend solely or almost entirely on charitable contributions and public sector subsidies, with earned income either non-existent or minimal, [via Institute for Social Entrepreneurs].
Double Bottom Line: DBL or 2BL takes into account the social impact of an investment, as well its financial returns or performance, [see also Triple Bottom Line].
ICT4Dev: A general term that refers to the application of Information and Communication Technologies (ICTS) within the fields of socioeconomic development, international development and human rights.
Impact Investments: Investments that aim to solve social or environmental challenges while generating financial profit. Impact investing includes investments that range from producing a return of principal capital to offering market-rate or even market-beating financial returns. They actively seek to place capital in businesses and funds that can harness the positive power of enterprise, [via GIIN].
Impact Reporting & Investment Standards (IRIS): A set of standardized indicators for organizations to use when reporting their social and environmental performance. IRIS enables increased comparability and consistency in the reporting and analysis of impact performance data, [via the Global Impact Investing Network, GIIN].
MFIs: Acronym for Micro-finance Institutions, broadly defined as an organization that offers financial services to the poor.
Patient Capital: Term defined and used by the Acumen Fund as, “a debt or equity investment in an early-stage enterprise providing low-income consumers with access to health care, water, housing, alternative energy, or agricultural inputs.” Patient capital generally has a long-term investment horizon, has a goal of maximizing social instead of financial returns, and is risk tolerant.
#socent: Twitter hashtag that references “social enterprise.”
Social Enterprise: Social mission-driven businesses that apply market-based approaches to achieve social impact. Social enterprises can be both for-profit or non-profit, but ultimately strive to achieve social or environmental returns with their businesses.
Social Entrepreneurs: Individuals with innovative solutions to society’s most pressing social problems. According to Social Entrepreneurship: The Case for Definition, “The social entrepreneur should be understood as someone who targets an unfortunate but stable equilibrium that causes the neglect, marginalization, or suffering of a segment of humanity; who brings to bear on this situation his or her inspiration, direct action, creativity, courage, and fortitude; and who aims for and ultimately affects the establishment of a new stable equilibrium that secures permanent benefit for the targeted group and society at large.”
Social Return on Investment (SROI): A principles-based method that provides a consistent approach to understanding and managing an organization’s social impact. The aim of SROI is to assess the social, environmental, and economic value of an organization’s outcomes.
Sustainability: The ability to fund the future of a nonprofit through a mixed revenue stream — a combination of earned income, charitable contributions and public sector subsidies (via the Institute for Social Entrepreneurs).
Triple Bottom Line: TBL or 3BL takes into account social and environmental impact of investments as well as financial performance.
Venture Philanthropy: Applies venture capital strategies, skills, and resources to philanthropic giving, often investing or providing grants to innovative ideas in order to produce a larger social impact, (other similar terms: philanthrocapitalism). Players in the industry are increasingly using the term impact investing.