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Social Return on Investment (SROI)

What is Social Return on Investment (SROI)?

Social Return on Investment (SROI) is a framework for measuring and accounting for a much broader concept of value; it seeks to reduce inequality and environmental degradation and improve the well being by incorporating social, environmental and economic costs and benefits.

SROI measures change in ways that are relevant to the people or organizations that experience or contribute to it. It tells the story of how change is being created by measuring social, environmental and economic outcomes and uses monetary values to represent them. This enables a ratio of benefits to costs to be calculated. For example, a ratio of 3:1 indicates that an investment of $1 delivers $3 of social value.

The principles of SROI 

They were developed from social accounting and cost-benefit analysis and is based on seven principles. These principles indicate how the SROI should be applied. They consist of the following:

  1. Involve stakeholders.
  2. Understand what changes.
  3. Value the things that matter.
  4. Only include what is material.
  5. Do not over-claim.
  6. Be transparent.
  7. Verify the result.


The stages in SROI Carrying out an SROI analysis involves six stages:

1  Establishing scope and identifying key stakeholders. It is important to have clear boundaries about what your SROI analysis will cover, who will be involved in the process and how.

2  Mapping outcomes. Through engaging with your stakeholders you will develop an impact map, or theory of change, which shows the relationship between inputs, outputs and outcomes.

2 Guidance from Accountability recommends that you consider the views of your stakeholders, societal norms, what your peers are doing, financial considerations, and organizational policies and objectives as criteria for judging materiality.

3 Evidencing outcomes and giving them a value. This stage involves finding data to show whether outcomes have happened and then valuing them.

4 Establishing impact. Having collecte
d evidence on outcomes and monetized them, those aspects of change that would have happened anyway or are a result of other factors are eliminated from consideration.

5 Calculating the SROI. This stage involves adding up all the benefits, subtracting any negatives and comparing the result to the investment. This is also where the sensitivity of the results can be tested.

6   Reporting, using and embedding. Easily forgotten, this vital last step involves sharing findings with stakeholders and responding to them, embedding good outcomes processes and verification of the report.


How SROI Can Help You

An SROI analysis can fulfil a range of purposes. It can be used as a tool for strategic planning and improving, for communicating impact and attracting investment, or for making investment decisions. It can help guide choices that manager’s face when deciding where they should spend time and money.

SROI can help you improve services by:

*  Facilitating strategic discussions and helping you understand and maximize the social value an activity creates;

*  Helping you target appropriate resources at managing unexpected outcomes, both positive and negative;

*  Demonstrating the importance of working with other organizations and people that have a contribution to make in creating change;

*  Identifying common ground between what an organization wants to achieve and what its stakeholders want to achieve, helping to maximize social value;

*  Creating a formal dialogue with stakeholders that enables them to hold the service to account and involves them meaningfully in service design.


SROI can help make your organization more sustainable by:

* Raising your profile;

* Improving your case for further funding;

* Making your tenders more persuasive


SROI is less useful when:

*
A strategic planning process has already been undertaken and is already being implemented

* Stakeholders are not interested in the results

* it is being undertaken only to prove the value of a service and there is no opportunity for changing the way things are done as a result of the analysis.

 
Comparing social return between different organizations

Organizations work with different stakeholders and will have made different judgments when analyzing their social return. Consequently, it is not appropriate to compare the social return ratios alone. In the same way that investor’s need more than financial return information to make investment decisions, social investors will need to read all of the information produced as part of an SROI analysis. However, an organization should compare changes in its own social return over time and examine the reasons for changes. Organizations should also endeavor to educate funders and investors on the importance of putting the ratio in the context of the overall analysis


Who Can Use SROI?

Types of organization SROI has been used by a range of organizations across the third, public and private sectors, including those that are small, large, new and established.

 

Source: The cabinet office