Radicals for Responsibility

As Wall Street pored over a fresh batch of lackluster earnings statements last month, another group in Berkeley, California scrutinized some important bottom-line figures of its own: social return on investment.

Snicker if you must, but judging from trends at top B-schools, and even in many high-octane boardrooms, corporate responsibility is emerging as an increasingly important variable in the traditional profit-loss calculation.

"There is a dual bottom line," says Jerry Engel, a professor at the Haas School of Business at UC Berkeley. "Businesses not only have to look for a financial return on investment but also for a social return."

So how exactly does a CEO quantify a social return, or SROI? That, says Engel, is a question that Berkeley's National Social Venture Competition (NSVC) is helping to answer. It was that same question of measuring social impact that held the attention of high-profile judges as they evaluated entrants' business plans in Berkeley last month.

"The notion of corporate responsibility isn't new," says Engel, who also serves as director of the school's Lester Center for Entrepreneurship and Innovation, which sponsors the NSVC. "What's new is that we're asking applicants to quantify the social return."

Social-impact columns may not appear on corporate ledgers any time soon, but the idea of quantifying business responsibility is starting to take hold. Why? Partially because companies now face more pressure than ever -- from shareholders, employees, and beyond -- to come clean about the results they deliver and the impact of those results on society. (Enron anyone?)

Trade-Off? What Trade-Off?

The NSVC started in 1999 as a contest for student entrepreneurs who were seeking strong results along two bottom lines: the financial and the social. During three of the most tumultuous years in business history, the pool of contest applicants has soared 140%, while Columbia Business School and the Goldman Sachs Foundation have thrown their weight -- and money -- behind the competition as well.

Programs focused on social responsibility have cropped up at other top schools too. Harvard Business School, for example, offers the Initiative on Social Enterprise, which prepares students for leadership roles in nonprofit organizations. Stanford has launched its own Public Management Program, and Boston College hosts an annual contest called The Best MBA Paper on Corporate Citizenship.

When asked what challenges his company faces in balancing financial interests with social concerns, Bruce Anderson, CEO of Wilson TurboPower Inc. -- this year's $25,000 prize winner in the NSVC's high-growth category -- is quick to answer: "Huh?"

It's not that Anderson doesn't understand the question. It's just that his business sees a wide-open market opportunity, making a question about trade-offs largely unanswerable. No zero-sum game here. It turns out that profit and social responsibility are mutually inclusive after all.

Wilson TurboPower emerged from the labs of MIT -- specifically, from the shelf of long-time mechanical-engineering professor and environmental activist Peter Wilson. The company's first product, the regenerator, works with microturbines, units that resemble backup generators, except that they provide a source of primary, not secondary, power for a limited area like a small group of office buildings, alleviating many of the headaches associated with centralized utility grids. The Wilson TurboPower regenerator takes waste heat from microturbines and puts it to other uses, such as heating water, boosting efficiency from about 30% to 80%.

During the colossal California energy crisis of 2000, the dangers of utility grids became obvious. (The phrase "rolling blackout" still sends shivers down the spines of many Californians.) What makes Wilson TurboPower's business plan so intriguing is that it offers an energy-efficient product at little extra cost to consumers -- at least when compared to an expensive, arduous endeavor like solar energy.

The fact that Wilson TurboPower faces essentially no trade-off between its bottom line and its benefit to society hits upon a fundamental point about corporate responsibility: It doesn't have to be an either-or choice, like picking decaf over regular. And it's not just about philanthropy. Social responsibility is a principle that gets infused into a company's DNA, oftentimes manifesting itself in a series of seemingly trivial business decisions.