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ScienceDirect Procedia - Social and Behavioral Sciences 213 (2015) 275 – 280

20th International Scientific Conference Economics and Management - 2015 (ICEM-2015)

A TBL Approach Based Theoretical Framework for Measuring Social Innovations 5DVD'DLQLHQơa, *, Lina 'DJLOLHQơb a,b

Kaunas University of TechnoORJ\.'RQHODLþLRVWU.DXQDV LT- 44239, Lithuania

Abstract The aim of this paper is to present theoretical framework for measuring value of social innovations. The paper examines measurement of social innovations in the context of their multidimensionality and the triple bottom line (TBL) approach. The basis of the analysis is the theoretical frameworks for measuring value of social innovations and identification of key measurement indicators. This paper presents the theoretical background that is needed in order to develop a measurement model for social innovations. The final result of this theoretical framework is the measured value of social innovations which is expressed using index. The development of this framework will contribute in measuring value created by social innovations and its impact for the whole society. © 2015 2015The TheAuthors. Authors. Published Elsevier © Published by by Elsevier Ltd.Ltd. This is an open access article under the CC BY-NC-ND license Peer-review under responsibility of Kaunas University of Technology, School of Economics and Business. (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of Kaunas University of Technology, School of Economics and Business Keywords: Social Innovations; Measurement; Triple Bottom Line.

Introduction The role and importance of social innovations is growing nowadays as the traditional solutions are not enough to address deep-rooted social problems. Social needs and solvency of these problems become mainstream in terms of education, social mobility, trust and community life, obesity, violence, child well-being and etc. The interest in social innovations has grown approximately since 2000. The reason for such increase was a demand for developing a new approach, which helps to review and analyze social challenges. Usage of the

* 5DVD'DLQLHQơ Tel.: +37068091534 E-mail address: [email protected]; [email protected]

1877-0428 © 2015 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of Kaunas University of Technology, School of Economics and Business doi:10.1016/j.sbspro.2015.11.537

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innovation to solve problems associated with social needs leads to the deeper development of the social innovation (OECD, 2010, Howaldt & Schwarz, 2010; Murray, et al., 2010, Reeder et al., 2012). The European Commission has developed a larger number of policies, programmes and initiatives that have contributed to empowering citizens and organisations to address social issues (Social Innovation Europe, 2011), policy-makers explore ways to foster social entrepreneurship in order to achieve economic growth. There are a lot of metrics for separate categories of social measurements developed by OECD, NESTA, PISA, EUSI, CSI and others institutions. These metrics are useful and used for measuring social innovation in frameworks. But there are only a few frameworks for measuring social innovations: x x x x x

Integrated model for measuring social innovations by TEPSIE † project (2014); Regional Social Innovation Index- Resindex (2013); Vision’s European Social Innovation Index (2011); Australian Public Sector Innovation Indicators (APSII) (2013); Surveys developed for measuring public sector innovations: NESTA, MEPIN, Innobarometer, EPSIS and etc.

As measurement of social value is important for stakeholders, there is a broad academic space to identify valuation methods used in different approaches. Notwithstanding many efforts of institutions, governments and scientists to create the unified system of social innovations’ measurement, there is still a gap in theoretical methodology or explicative models of social innovations. The developed frameworks for measuring social innovations are presented in the scientific and pilot research projects’ literature, and they are of national and regional level. Because of social innovation multidimensionality scientists are facing the problem of developing a general unified framework which could be used to measure social innovations. And the developments of suitable frameworks are still in progress. It is also complicated by the fact that there is no single specialized statistical database for social measurements. Also, another problem is the lack of generic sets of indicators for measuring social value (TEPSIE, 2012-2014, Resindex, 2013, Spila et al. 2013, Vision’s, 2011). Group of scientists referred, during TEPSIE project, that up to now there are no existing metrics and established measurement approach to capture social innovation in particular (Krlev, Bund, Mildenberger, 2014). Thus, the aim of this paper is to present theoretical framework for measuring value of social innovations. The paper examines measurement of social innovations in the context of their multidimensionality and the triple bottom line (TBL) approach. 1. Social innovation Social innovations refer to innovative activities and services that satisfy social needs (Mulgan, 2006). According to the definition proposed by Bund et al. (2013), social innovations include the following elements: x x x x

social innovations must satisfy social needs in terms of employment, health, education and etc. have some novel elements (or at least be new to their context), must be implemented (they are more than just ideas), and they must work (they are more effective than existing solutions).

They must also lead to new or improved capabilities, assets and/or relationships, so that they enhance the capacity of society to act in the future (Bund et al., 2013, Caulier-Grice et al., 2012, The Young Foundation, 2012).

†

TEPSIE is a research project funded under the European Commission’s 7th Framework Programme and is an acronym for “The Theoretical, Empirical and Policy Foundations for Building Social Innovation in Europe”.

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The main criteria of social innovation are newness, multiple dimensions of improvement, sector neutrality, process, qualifying improvements, legitimacy and urgency of social needs (Krlev, Bund, Mildenberger, 2014). OECD (2011) argues that Social innovations must solve social problems by identifying and delivering new services that improve the quality of life of individuals and communities also implementing new labour market integration processes, new competencies, new jobs, and new forms of participation, as diverse elements that each contribute to improving the position of individuals in the workforce. A social innovation is not only a product, process or technology, it can also be a principle, and idea, a piece of legislation, a social movement, an intervention or some combination of them (Phills et al., 2008). The main types of social innovations according Caulier- Grice et al. (2012) are new: x x x x x x x

products (e.g. assistive technologies developed for people with disabilities); services (e.g. mobile banking); processes (e.g. peer- to- peer collaboration and crowd sourcing); markets (e.g. fair trade or time banking) platforms (e.g. new legal or regulatory frameworks or platforms for care) organizational forms (e.g. community interest companies) business models (e.g. social franchising, or just in time models applied to social challenges)

In order to help understand the scope of social innovation, public authorities responsible for Cohesion Policy can consider the different realities, challenges and opportunities of the following six societal trends (Guide for SI (2013): demography (migration and ageing of population), environmental (water, climate change and energy), new community trends (diversity and new community providing IT solutions), poverty related trends (poverty, social exclusion and child poverty), health and well- being (health inequities, happiness and carrying), ethical goods and services (fair trade and local production). Newer solutions of social innovations must be sustainable (Phills et al., 2008). Social innovations provide sustainable solutions to social problems by mobilising scarce resources and empowering the poor, it’s also actual in resource constrained developing economies (Bhatt & Altinay, 2013). Because social innovations and TBL cover the same sustainability dimension, so the assignment of the appropriate measurement indicators can be integrated in measurement of the value of social innovation through TBL approach. 2. The Triple Bottom Line approach The concept, term of sustainability appeared in the 1960s in response to worry which appeared as a result of poor resource management. The new world issue was that environment became increasingly important, so sustainability was used as a common political objective (McKenzie, 2004). Countries, governments had to find their own approaches to grow their economies without having too much negative impact to the environment or saving the well- being of future which let further generations to grow consciousness, in the 1980s (Slaper, Hall, 2011). Sustainability became a powerful and important idea in the business world. A sustainable organization was defined by Slaper and Hall (2011) as the one that “creates profit for its shareholders while protecting the environment and improving the lives of those with whom it interacts”. Businesses were proceeding in such level that interests of its activity cross the environment and society. If company is sustainable then it can act more profitably. As the the amount of organizations is growing significantly this will lead to a new approach, i.e. business cases for action and investment are built using Triple Bottom Line (TBL) ideology and accounting. So, the TBL approach is used to account companies’ impact for sustainability performance (Elkington, 1999, 2004, Adams et al 2004). The TBL is an accounting approach for sustainability, which arises within a business context (McKenzie, 2004). Companies around the world using ideas of the triple bottom line have started to be care about the degree of their success impacted by sustainable development. These companies related their progress with implications on a quality of life (Hall and Matthews, 2008). John Elkington developed the Triple bottom line approach in 1994 in order to unify sustainability conception with business activity performance (Elkington, 1999, 2004; Slaper, Hall, 2011). The researcher suggests that

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businesses need to measure their activity not only by traditional financial bottom line of performance expressed in terms of profits and return on investment or shareholder value. It is important to measure by broader impact on the environment and on the society in which they operate. In Elkington’s own words, “the sustainability agenda, long understood as an attempt to harmonise the traditional financial bottom line with emerging thinking about the environmental bottom line, is turning out to be much more complicated than some early business enthusiasts imagined. Increasingly, we think in terms of a “triple bottom line”, focusing on economic prosperity, environmental quality, and—the element which business has tended to overlook—social justice” (Elkington, 1999, p.75). According Savitz and Weber (2006, p.8), the TBL “captures the essence of sustainability by measuring the impact of an organization’s activities on the world ... including both its profitability and shareholder values and its social, human and environmental capital.” The main practical problem that there is no common unit of measure which gives options for calculations using the TBL approach. Slaper and Hall ( 2011) mentioned possibilities such as monetizing all the dimensions of TBL, including social welfare or environmental damage and the way calculate in terms of an index. 3. Methodology The framework of measuring social innovation by adapting the TBL approach has been developed and it is based on the background of the scientific literature review and an analysis of international independent research projects on the topic of TBL and social innovations developed by the European Commission, OECD, The Young Foundation and etc. The theoretical framework for measuring value of social innovations and identification of key measurement indicators is done in the context of social innovations and the TBL concepts. The applied set of indicator dimensions of social innovation is based on social impact/ social needs. The set of these indicators is collected by combining indicators from TEPSIE (2014) project, according Krlev et al. (2014) and Guide for Social Innovation (2013). Another part of indicators for measuring social innovations in the context of TBL is collected according to Savitz, Weber (2006); Wilard, Elkington (2002); Slaper, Hall (2011) and indicators recommended by Sustainability Reporting Guidelines (GRI, 2006) version G3. The main focus is dedicated to measuring societal outputs and outcomes by combining appropriate social needs indicators’ dimensions, because of potential results such as changes in well- being. 4. Results The presented theoretical framework for measuring value of social innovations is developed on the basis of scientific literature review and analysis of international independent research projects. The list of indicator dimensions of social innovations was prepared regarding the multidimensionality of social innovations. The developed set of indicator dimensions of social innovations also reflects the policy categories and use of indicators which show fields of social impact arising from social innovations. Some dimensions, like “Demography”, “Housing” and “Political participation” are of macro level. These dimensions aren’t included in the framework. Dimensions „Social capital & Networks“, and „New community trends” are consolidated into „Community” dimension. In order to measure the social innovation using TBL approach, two sets of indicators were collected. The applied first set of indicators consists of traditional (Willard, Elkington, 2002; Savitz, Weber, 2006; Slaper, Hall 2011) and GRI G3 measuring indicators which are divided into three dimensions of TBL: economic, environmental and social fields. Most of introduced measures are traditional, but Slaper and Hall (2011) also presented some additional specific indicators’ examples for measuring in TBL. Both TBL and sustainability approaches cover the same three dimensions: economical, environmental and societal, and are assumed suitable for measuring the value of social innovations. The theoretical framework for measurement of the value of social innovations applying the TBL approach is presented in figure 1. The whole measurement process consists of the four stages: I stage- implementation of the social innovation in organization: a) selection of appropriate social innovation and

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b) application of social innovation inside organisation. II stage- identification of the dimension of social innovation: a) identifying what social needs are satisfied by the social innovation. III stage-estimation of the social innovation: a) according to dimension, assignment of appropriate indicator for the social innovation; b) calculating the index of the value of a specific social innovation. IV stage- recommendations for improving organization’s activity. Each of the TBL indicator dimensions could be used for measuring of appropriate dimension of the social innovation. The indicators use available historical data in order to measure the change in performance between trends. The indicators of the economic TBL dimension are applicable for calculating organizations sales and profits, which were obtained after the implementation of social innovation. It could be said that we are going to measure economic performance and indirect economic social and environmental impacts for the organization. Indicators of the environmental TBL dimension measure natural resources and reflect potential influence of social innovation to its viability. The measurement is applied for determining an impact of social innovation on air and water quality, energy consumption, eco-producing and product life- cycle and etc. According to Slaper and Hall (2011), having long- range trends for each of the environmental variables would help organizations to identify the impacts for a project or policy they would have on the area. The indicators of the social TBL dimension cover measuring social innovation in such fields: labour, and society, and product responsibility.

Fig. 1. The theoretical framework for measuring social innovation’s value

The value of the social innovation returns for the organization as the multiplier principle of incremental increases in products, processes, services or organization’s efficiency. At the same time, it would enable satisfying social needs by improving new capabilities, relationships and a better use of assets and resources. This leads to the enhanced society’s capacity to act and meet social needs. Conclusions This paper presents the theoretical background that is needed in order to develop a theoretical framework for measuring social innovations. Measurement of social innovation using the TBL approach is more specific and related with sustainability. The theoretical framework of measuring the value of social innovation applying the TBL approach is based on the social impact sphere of social innovations. The model applies the TBL principle based on economic, environmental and social categories. Every dimension has the composite set of indicators, which were purified to the micro level. The index of the value of social innovation would be useful to compare social performance of the companies at regional or national level. Of course, measuring using the TBL approach is

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relevant for organization’s management, so public TBL reports for stakeholders should be prepared. The set of TBL indicators is not complete. Its composition and diversity depends on organizational performance policy. Broad range of indicators is used in the Enterprise Resource Planning programs. The necessity to develop unified set of indicators in order to measure social innovations in the mezzo/micro level is still urgent in the future research. References Adams, C., Frost, G., Webber, W. (2004). Triple Bottom Line: A Review of the Literature. In A. Henriques & J. A. Richardson (Eds.), The Triple Bottom Line: Does It All Add Up? Assessing the Sustainability of Business and CSR. (pp. 17-26). Earthscan. London. Bhatt, P., Altinay, L. (2013)."How social capital is leveraged in social innovations under resource constraints?", Management Decision, 51, 1772 – 1792. Bund, E., Hubrich, D., K., Schmitz, B., Mildenberger, G., Krlev, G. (2013). 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