All enterprises have social and financial impacts on the economy. These impacts may occur through the enterprise’s treatment of employees, the nature of its products & services, its supply chain activities, and the general commitment to long-term value creation rather than quarterly earnings, and so on. These effects in aggregate comprise an enterprise’s social performance.
At Heron we prefer to use the term “social performance” instead of “social impact” or “social return”—and we believe it is important to distinguish between the three terms. In our view, “social return” implies a two way relationship between an enterprise (investee) and investor, which we believe is a misnomer because social outcomes affect a wide range of parties. “Social impact” encompasses the full range of outcomes of an enterprise on its stakeholders (including employees, customers and communities), but it is also misleading because it can include factors that fall outside of the enterprise’s zone of control. “Impact” also implicitly assumes a point-in-time assessment that cannot change over time. The term social performance is preferable to Heron because it can be positive, negative or neutral and it varies over time. Every enterprise, regardless of business model, has the ability to improve its social performance.