About us
We believe that great companies do more than generate profits. Great companies have a purpose that guides their decision-making and moves humanity forward. Great companies care about social issues like education and the environment and find innovative ways to contribute to society.
Like many people, we want to spend and invest our hard-earned money with great companies. The question is "how do you identify them?" How do you separate great companies from great storytellers, and how do you measure social value with the same rigor as financial value? That's why we created Purpose Caps. Our goal is to help you identify companies that share and advance your purpose.
The idea of measuring social value isn't new. Several firms use surveys and algorithms to quantify social value. While these systems work for some people, we think there's a better way. We created this community to connect you directly to the social issue experts and company affiliates uniquely qualified to measure social value. The benefit of this approach is that it taps into a wider range of perspectives and allows for a more personalized experience. Oh, and did we mention it's free?
Opportunity
Sound bite
For decades, capitalism has been the engine of financial wealth creation in our society. Unfortunately, our track record for generating social wealth (e.g., education) isn't quite as strong. What if we could harness the power of our corporations to efficiently generate social wealth (in addition to profits)?
Fine print
How is social wealth generated in our society? At a high level, we take financial wealth created by our economy and convert it into social wealth. Whether you're talking about governments, non-profits, foundations, or endowments, the basic operating model is one of collecting financial wealth and distributing social wealth. While necessary, these systems tend to be inefficient. The tax and spend practices employed by governments are highly bureaucratic and subject to lobbying and political maneuvering. Non-profits, foundations, and endowments exhaust considerable resources on fundraising and administration while often lacking access to the human capital and infrastructure required to fully accomplish their missions. With that said, what's the alternative?
We believe that corporations represent an enormous source of untapped social wealth. Companies have the people, infrastructure, and intellectual property necessary to tackle society's greatest challenges. Additionally, global financial assets dwarf those of philanthropy by a ratio of more than 40 to 1. To be clear, we're not talking about changing companies into non-profit, social enterprises. We're simply talking about using existing resources, infrastructure, and insights to spur social innovation. By working directly with corporations, we can greatly improve the efficiency with which we generate social wealth as a society.
To convince companies that they should generate social wealth in addition to profits, we need to provide the proper incentives. Favorable publicity and a pat on the back only go so far. To unlock the full potential of capitalism, investors and consumers must begin making decisions that reflect their social priorities. By providing you with Purpose Caps, our goal is to change the way you make decisions when it comes to investing and spending your hard-earned money.
Admittedly, we're not going to change how society generates social wealth overnight. In addition, there are some social issues for which a market-based approach won't work and we must continue to rely on traditional systems. However, the long-run opportunity for corporations to generate social wealth is incredible.
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Sound bite
Purpose Caps uses social media to estimate the social value of S&P 500 companies. Our decentralized approach helps us incorporate a wide range of perspectives and provide Purpose Caps to members free of charge.
Fine print
With so many metrics available to assess the financial value of companies, why is it that we don't have a widely accepted metric for social value? To answer that question, let's look at why measuring social value is so hard and what we're doing to overcome traditional obstacles.
- Social Priorities: We all have our own, very personal, set of social priorities. While you may view education and social mobility as the most important factors when measuring social value, I may wish to measure social value in terms of contributions to the environment. The Purpose Caps approach is to help each member understand what companies are doing to address the specific social issues that he or she holds most dear. By arming people with un-biased, personalized information, we can help shift resources towards those companies doing the most to benefit society.
- Company Contributions: Companies have made great strides in recent years with respect to social reporting. Most large corporations now include information in their annual reports (e.g., CO2 emissions) or publish separate "sustainability" reports. Additionally, initiatives like the Principles for Responsible Investment (www.unpri.org) and GIIRS (www.giirs.org) are helping to drive standardization in social reporting. These approaches are limited, however, in the level of detail that they can provide. Surveys and standard reports are typically prepared by a handful of people at corporate headquarters using ad-hoc reporting systems. This limits the amount of insight one can gain into the full scope of a company's social wealth creation efforts. Using social media, we seek to gain access to a much wider range of information without losing the level of detail necessary to appreciate what's behind the published results.
- Expert Analysis: The process for evaluating financial returns is highly standardized. The "experts" (i.e., auditors) work with companies to prepare financial statements according to GAAP. Sure, there are gray areas when it comes to financial reporting, but generally the process works. In contrast, social reporting has no rulebook or certified group of experts. Therefore, to provide reliable social analyses, one must solicit a wide range of assessments and have a process for selecting the best estimate of impact. Using social media, we're able to accomplish this task without the need for a complex system of checks and balances like the one that exists in the world of finance.
It would be virtually impossible to source social priorities, corporate contributions, and expert analyses without an engaged online community. Trying to accomplish this feat with a centralized organization would be too costly and force members to pay for Purpose Caps. Nobody should have to pay for the information they need to make socially responsible decisions. Thanks to the Purpose Caps community, they don't have to.
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Sound bite
The term "Purpose Cap" is a play on the investing term "Market Cap". Whereas a market cap is an indicator of a firm's financial value, a Purpose Cap is an indicator of a firm's social value. This site will provide Purpose Caps to members free of charge.
Fine print
Market caps are widely used in the investment community as a proxy for the financial value of a company. To calculate a company's market cap, you simply multiply the number of shares outstanding by the current price of a share. If somebody says that a company is "worth $5 billion", there's a good chance that they're referring to the company's market cap. Similarly, Purpose Caps are a proxy for the social value of a company. Rather than try to explain how we calculate Purpose Caps in theory, it's probably best to walk through an example.
Let's say we have three companies and three social issues upon which those companies are focused: education, environment, and health care. We start by prioritizing the social issues based on the "purpose" you supply. In this case, let's say you allocate 50% of your points to education, 30% to the environment, and 20% to health care. To keep things simple, we'll assign the social issues priority scores of 5, 3, and 2. Next, we look at the contributions that each company is making against each social issue and the corresponding impact estimates supplied by experts. In this example, Company 1 contributed $15 million in "social value" as determined by experts (read the "Experts" section if you'd like to learn more about how social value is estimated). The "Purpose Cap" of a company is simply the sum-product of your social issue priority scores and the expert-supplied impact estimates. Here's an illustration to articulate the methodology:
The Purpose Caps you see will be unique to you, and reflect your "purpose". Why do we provide this service free of charge? Because we hope that you will use your Purpose Caps to make more socially responsible decisions when it comes to investing and spending your hard-earned money.
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Sound bite
Purpose Caps can be used to make more socially responsible decisions as an investor and consumer. Use them any time you need an easy way to determine whether a company supports your social priorities.
Fine print
Great, so you receive Purpose Caps free of charge? What exactly are you supposed to do with them? Here area few ideas:
- Security Selection: Thinking of purchasing the stock of an S&P 500 company? Wouldn't it be nice to know how that company stacks up against similar companies when it comes to the benefits it generates for society? Using your Purpose Caps, you'll be able to quickly see which companies support your social priorities.
- Portfolio Design: Research indicates that companies generating social wealth in addition to profits do not tend to underperform peers focused purely on financial returns. Working with your financial advisor, you can use your Purpose Caps to construct a portfolio of companies doing the most to address your social priorities.
- Purchasing Decisions: We all buy various products and services from S&P 500 companies. With your Purchase Caps, you'll be able to make sure you're buying from companies that support your social priorities.
These are just a few examples of how you can use your Purpose Caps. If you have other ideas, we'd love to hear them.
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Sound bite
Purpose Caps is currently focused on 5 of the largest social issues facing society. Members prioritize these issues and use information generated by the community to make more socially responsible decisions as investors and consumers.
Fine print
With so many opportunities for corporations to generate social wealth, where do you start? Our view is that you focus on the big issues for a couple of reasons. First, big issues impact a lot of people, so social innovation will be highly scalable and have far reaching benefits. Second, most companies can easily understand their role in addressing big social issues whereas more acute issues require a disproportionate level of outside direction and support. Remember, we're not advocating the wholesale replacement of governments, non-profits, foundations and endowments with market-driven systems. These institutions play important roles and will continue to generate social wealth for society. We're simply looking for big opportunities to compliment their efforts by directly engaging corporations.
While the guidelines above describe the scope of the social issues addressed by the
Purpose Caps community, the prioritization of social issues is up to you. We use the social priorities that you supply
(i.e., your "Purpose") to calculate Purpose Caps that you can use to make more socially responsible
decisions.
Below is our initial list of social issues:
- Education - e.g., early childhood learning, K-12 learning, higher learning
- Environment - e.g., conservation, air quality, water quality
- Health care - e.g., cancer, heart disease, obesity
- Human rights - e.g., workplace conditions, physical safety
- Social mobility - e.g., skill development, poverty reduction
We will continue to update this list based on how members prioritize these issues and suggestions we receive for issues to add.
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Sound bite
Purpose Caps relies on a decentralized network of experts to analyze the impact of company contributions on society. By estimating how much it would cost society to replicate the impact as a given company contribution, we are able to more easily compare across different social issues and experts.
Fine print
How do you know that the contributions companies are making to society have real impact? How do you know it's not just a bunch of marketing spin or exaggerations based on unsubstantiated estimates? The key is to engage a network of independent experts to analyze the impact of company contributions. These experts come from academia, corporations, non-profits, and other institutions that have a deep understanding of social issues. If you know more about a particular social issue than most people, you should document your expertise in your profile.
Analyzing impact seems like it should be a straightforward process. You simply take data from the company and compute the benefits generated for society. However, it's not quite that simple. For one, how do you compare a contribution focused on environmental impact with one focused on educational impact? To simplify the process, Purpose Caps asks experts to estimate how much it would cost society to produce the same outcome as a given corporate contribution. If corporations are truly leveraging resources efficiently, the estimated cost for society to produce the benefit should be significantly higher than the actual cost to the corporation.
This process isn't perfect, but it keeps the community from getting bogged down in endless debate regarding the benefits of every contribution. We believe that companies doing the most to benefit society will be rewarded using this process even if the exact measurement system is not overly complex. Additionally, we understand that expert approaches to analyzing contributions will vary. For that reason, we ask that experts document the methodologies behind their estimates.
To ensure that all members are involved in the process of estimating impact, we use a champion/challenger system to select the "best" expert analysis for each contribution. Each day you log into the site, you'll receive a set number of "votes". You'll use those votes to indicate which expert analyses provide the most accurate and compelling analysis of impact. The reason we call it a champion/challenger system is that the leading expert analysis for each contribution will be pitted against new challengers as they emerge. The expert analysis that receives the highest number of votes for each contribution is used in the calculation of Purpose Caps.
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Sound bite
It's important to reward companies for the specific contributions they make to society rather than relying on generic checklists and reports. Community members with company affiliations (e.g., current employees) help the Purpose Caps community track corporate contributions to society.
Fine print
Rather than rewarding or penalizing companies based decisions made decades ago, we think it's better to create incentives focused on the future. To help gather information on corporate contributions, Purpose Caps relies on members with corporate affiliations. If you're a current employee, former employee, or just somebody who knows a lot about a particular S&P 500 company, we encourage you to document your affiliations in your profile.
When we say "contributions", what we're talking about are the actions companies are taking to deploy people, infrastructure, and intellectual property in the pursuit of social benefits. While commendable, donating profits to charity is not the same thing as deploying unique resources. Here are a few tangible examples of corporate contributions.
- IBM: Launched World Community Grid to harness surplus computer processing power to tackle projects that benefit humanity. IBM donated the hardware, software, technical services, and expertise to build the grid and provides free hosting, maintenance and support. There are currently almost 600,000 members and over 2 million devices supporting the grid.
- Starbucks: Established a process for evaluating farmers, suppliers and processors on 200 sustainability factors. As of 2011, 86% of the company's coffee (367 million pounds) was sourced through providers who meet these qualifications as determined by third parties.
- UPS: Reduced CO2 emissions by 100,000 metric tons since 2004 using delivery routes that minimize left hand turns. This is equivalent to taking 5,300 passenger cars off the road for an entire year.
These are just a few examples of contributions that companies have made to society. In most cases, the actions do not require companies to shift resources away from profit-seeking activities. In fact, many actions (like the UPS example above) have both social and financial benefits (i.e., lower fuel consumption). Purpose Caps' affiliates help track these contributions and play a critical role in the community.
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