What’s next in social enterprise to unlock the $120 billion market opportunity for individual impact investment? Impact investing will take off once we make consumption decisions that value the externalities behind what we create, buy and use.

Below, originally posted in response to the SOCAP Impact Challenge for SOCAP10. Thank you to Sloane for inspiring me to think about this and submit my idea.

Why aren’t we all ethical capitalists? Why aren’t more businesses based on “doing good”?

Why aren’t more of us ethical consumers? Why don’t more of us make decisions about what we buy based on how, where or why it’s made? Why don’t we all consider the full value, cost or impact of our actions?

Being an ethical capitalist doesn’t pay because being an ethical consumer is too hard. Although we’ve created enormous amounts of information about companies’ CSR initiatives, employment policies, outsourcing and manufacturing relationships, and the economic and social impact of their products and services, for a consumer it’s simply too hard for us to factor everything in at the purchase point. It’s too expensive to find, understand and use; it’s too hard for us to value the short- and long-term impacts of our decisions in a simple way for the information to help us decide if paying an extra $1 for organic (or local, or ethically-produced, etc.) is worth it.

People struggle to value the ethical edge, and thus the extra ethical effort and added costs incurred by companies aren’t economically rewarded. Companies will care about being ethical and socially responsible once people allocate their time and money based on ethics and social responsibility. And once a critical mass of people do that, companies will “do good” not because it’s strategically, economically and financially necessary.

How does it start? First, create an accounting system that captures and values more information about the full cost and benefits of what we buy and do. Externalities skew investment and consumption decisions and lead to misallocated money, time and passion, because some of the benefits and costs associated with a creating, buying or using something don’t fall on or accrue to the creator, buyer or user.

This isn’t new. Carbon credits and trading schemes, for example, were created to assign the cost of producing carbon to manufacturers and force them to make decisions and trade-offs about how their manufacturing processes.

The second step is getting people to use this broader accounting system. Caring is a start, but it isn’t enough. The information has to be easy to understand, trusted and easy to use. It has to be available to us when we’re researching a consumption decision, making a purchase, and telling people about what we bought. You have to be able to explain it quickly in line in a store. Your friend has to understand what it means when you tell them why it’s worth it. Your mom has to be able to access the information easily when she’s in the store. Caring has to be quicker, easier and cheaper than simply buying something without caring.

Caring (as a consumer) shouldn’t be so expensive. Doing good (as a business owner) shouldn’t be so expensive. The information asymmetries that make caring and doing good expensive represent both a hurdle and a business opportunity for thousands of entrepreneurs to unlock.

It won’t be easy. But it will truly unlock the potential of impact investing.