The best information on this topic comes from a recent discussion at the npEnterprise Forum, the 7000-subscriber official listserv partner of the Social Enterprise Alliance.
From Esther Kim:
“Our basic rule of thumb is that:
* it’s a social cost if it’s incurred to accomplish a social mission;
* it’s a business cost if it’s incurred by a similar for-profit business in the same industry;
* if all social costs are taken out, the remaining cost structure should be comparable to a for-profit business in the same industry.
“Many social enterprises approach this differently, making benchmarking difficult. The third point above is especially helpful in this case – because if you’ve allocated your social costs correctly, you actually DO have a place to benchmark: that is, a comparable for-profit business. Many for-profit businesses publish benchmarks of costs and cost drivers across specific industries/functions (worker efficiency, $/sq ft, etc). Even if they aren’t published per se, consulting an industry expert is a great way to get ballpark estimates.”
And then a response from Don Palmer:
“Very logical, however, it is not always so black and white. Example: We operate a catering social enterprise with a work force composed of disabled workers. Training costs and food wastage is higher than for the majority of the industry (we have a yet not been able to identify the industry standard for either), however we know our costs are higher than our competitors, therefore in our view the difference between our cost and the industry standard would also have to considered a social cost.”
Rolfe Larson provides consulting and training in areas such as strategic planning, market research, feasibility analysis, business planning, marketing and implementation strategies.