At its most basic level, social innovations are novel solutions to societal and environmental problems. They are designed to support social progress and are often aimed at addressing chronic systemic issues. One distinguishing characteristic of social innovations is that the value derived accrues primarily to society as a whole rather than to specific individuals or organizations.
Social innovation has taken on greater prominence with the introduction and promotion of the United Nations Sustainable Development Goals, which were specifically designed to “end poverty, protect the planet, and ensure prosperity for all.” Recognizing the critical role that companies must play in achieving these goals, the UN created Principles for Responsible Management Education (PRME) to “jump-start business action and responsible management everywhere on the new Sustainable Development Goals.”
The investment community has also placed greater emphasis on social innovation. To provide insight for socially conscious investors, several prominent environmental, social and governance (ESG) indices have been created (e.g. Bloomberg, Thomson Reuters). Moreover, this information has been used to create a wide variety of social impact investment funds. To quote The Wall Street Journal, however, “The evidence is clear that investors undervalue socially responsible firms.”
Innovation primarily impacts firm financial performance to the degree that it is observable by consumers, recognized as providing a superior value, and therefore results in increased loyalty. The American Social Innovation Index™ (by the American Innovation Index™) is the only scientifically vetted, national measure of customers’ perceptions of social innovation in the US. It measures the degree to which companies’ social innovation efforts have impacted customers’ perceptions of these firms in solving societal and environmental problems. As such, it serves as a benchmark for companies to assess both their social innovation performance and their success at tying their social innovation efforts back to their firms in consumers’ minds. It also provides insight for socially conscious investors to identify and gauge investment opportunities. And perhaps most importantly, it serves as a benchmark to assess the degree to which firms have embraced the Sustainable Development Goals endorsed by the UN Principles for Responsible Management.