Developing a Conceptual Framework for Comparing Social Value Creation

Can we standardise social value creation across companies?

Arne Kroeger and Christiana Weber tackle the challenge of comparing the social impact of companies with different business models in Developing a Conceptual Framework for Comparing Social Value Creation.

The study proposes a framework for measuring and comparing social value creation across industries by integrating subjective well-being metrics and organisational effectiveness theory.

This new way to quantify and benchmark corporate social impact leads them to conclude:

• Traditional social impact metrics lack comparability and fail to offer a standardised unit of measurement.
• The study introduces mean life satisfaction as a tool to compare and serve as a benchmark for the social impact of different interventions.
• Integrating social value creation and well-being metrics could tackle standardisation issues and improve transparency in ESG disclosures.
• For better accountability, companies should measure how effectively their initiatives reduce a community's social need, rather than just reporting outputs.
• The proposed framework enables cross-sector comparisons by focusing on social outcome improvements rather than business model specifics, which makes it applicable across industries.

Investors can use this framework to assess companies' real social impact rather than relying on vague ESG scores. Policymakers might develop standardised reporting norms, and companies could better communicate their social impact to stakeholders.

The reliance on subjective well-being introduces challenges in measurement reliability. Further empirical validation is needed to ensure broad adoption.