A generation from now, we may look back at today's corporate accounting standards and wonder, What were we thinking? Jed Emerson, 45, wonders the same thing today. The onetime social worker, now a lecturer at the Stanford Graduate School of Business, has attracted curiosity and some notoriety for asking, What if we didn't judge business on financial performance alone? What would be a truer assessment of contribution? Fast Company got Emerson's take on "blended value," Alan Greenspan, and General Motors.
Fast Company: What exactly is blended value?
Emerson: It's a notion intended to challenge an underlying premise that we rarely question: We tend to categorize value as economic or social. You either work for a nonprofit that creates social value or you work for a for-profit that creates economic value. But in fact, for-profits generate social value: They create jobs, they contribute taxes that help build local communities, and their products can improve people's lives. And nonprofits create economic value: They represent 7% of the national GDP, they create jobs, and they consume goods and services.
Notice that the act of creating jobs shows up on both lists. There is an economic value to that. Likewise, it has social value: Jobs lead to stable family units. That alone shows how value is inherently indivisible. Economic, social, and environmental value is all part of a piece. You can't disaggregate it. This is a very simple, intuitive idea. A colleague calls it "common sense suppressed by thinking." Blended value is a way of trying to measure the whole picture.
FC: Sounds good—but that's easier said than done.
Emerson: The first thing is to recognize that not having the right metrics today doesn't mean that we won't ever have them—or that it's not a worthwhile question to pursue. People assume that econometrics was handed down from the hand of God to Alan Greenspan. And that's not really the way it worked. That interpretation of value has evolved over the past 50 years. With all due respect, we've really only been grappling seriously with measuring the environmental impact of a company, for example, for 5 or 10 years. I think it's natural to think that we might need another 5 to 50 to figure it out.
FC: Will companies ever embrace blended value?
Emerson: I remember in my days as a social worker being really offended at the phrase "What's good for GM is good for America." In some ways, though, that's exactly right. Companies create jobs, pay taxes, and play a role in building thriving communities. Today, there's an idea that companies are "the problem." I would say that notion comes more from the fact that few companies track and report their social value, rather than that they don't generate any. There is increasing pressure on companies to understand, quantify, and measure their social impact. It's inevitable. Successful companies will be savvy about how understanding the full value proposition can create wider opportunity.
FC: So how will blended value gain acceptance?
Emerson: We need to have a fundamental shift in our understanding of the nature of value. Think about it on an individual level. The reason you want to make money is to be secure to live a certain way. Simply having wealth doesn't produce that end. It doesn't matter if you have a six-figure salary if you can't breathe the air or drink the water. A better question to ask would be, What are the elements of a life worth living, and how can I assemble them? Not, How much do I earn? Likewise, in our approach to value, we need to think more about the end rather than the means. The larger question is, As a civilization, what do we need to thrive?
A version of this article appeared in the March 2004 issue of Fast Company magazine.