About This Resource
Learn more about social costs – costs you incur above and beyond ordinary business costs due to your social mission – and understand how you can identify and quantify them. Distinguishing social costs from ordinary business costs enables you to make more informed decisions on managing your budget and making targeted cost reductions.
What are social costs?
Social costs are any cost incurred by a social enterprise above and beyond ordinary business costs in order to fulfill its mission. In social enterprises with an employment mission, these costs are often related to providing the extra training, supervision, and support that enable individuals with significant barriers to employment to become successful employees.
On the other hand, social costs are not:
● General inefficiencies – some inefficiency is inherent in all businesses
● All training costs – most businesses require some training
● General overhead
● Revenue opportunity costs (i.e. potential revenue lost due to mission)
Whatever the specific social mission is, incurring social costs is not an accidental matter; it is a by-product of doing social mission work. Social enterprises are set up to accomplish special tasks and those tasks generally cost extra money. There are numerous costs to running a social enterprise that can be attributed directly to the sponsoring organization’s social mission or the social mission of the business. Many of these are found within the business itself. Examples of the social cost often carried by a social enterprise are:
● a lower level of productivity among employees
● increased materials wastage
● time spent addressing employees’ personal issues
● employee time spent with job counselors
● employee time spent involved in support groups or other support activities
● higher insurance rates that may need to be paid for certain types of employees ● additional management and supervisory costs of managing such an enterprise ● increased employee turnover