As firms become increasingly involved with alternate business strategies and corporate social responsibility, it is important to be reminded that the push to define the tools of the trade and the means of measuring success is still ongoing.
Along with the drive to standardize the tools of social innovation there must also be a drive to regulate them. Without accountability, doing “good” could have any number of ramifications for everyone who stands to gain from it. A classic example of unregulated social ventures are carbon credits. In the green-washing craze of the past decade, many polluters have opted to offset their carbon footprint and other pollution through schemes such as planting trees, preserving land from development, investing in solar, etc. The problem? While these companies can write off their emissions now, that tree farm won’t start offsetting significant amounts of carbon until those trees are 20 years old, assuming that most of them live that long.
Not only is measuring the social good difficult, but it is in this case only a good in the sense that it seeks to remediate damages already done, and that is what bothers me the most. As with the environment, there does not seem to be a precautionary principle applied to ventures in impact investing. For example, increasingly complex schemes to revitalize neighborhoods and business corridors through tax increment financing (TIF) have proven both successful and disastrous. By leveraging predicted future value of the area’s property, developers can raise capital based on the increased taxes and property value that the revitalized area will bring in. In Pittsburgh, we can still see how Penn Ave near the children’s hospital is struggling to develop where once the hospital was touted as the new heart of the neighborhood.
Sources:
Johnson, Keith. “Selling hot air: are bogus carbon offsets really that bad?” The Wall Street Journal. 25 October, 2008
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