Social Return on Investment
= framework for valuing social impact.
See also: Social Metrics
Description
1. Penny Morriss:
"Any organisation – be it a private business, a social enterprise, a charity or government initiative – engages in activities that have an impact on the world around it. In particular, enterprising third sector organisations deliver activities that are designed to bring about positive impacts for their beneficiaries in the short, medium and long term. The activities undertaken by these organisations create value, and this value can be social or environmental, as well as economic.
‘Social Return on Investment’ (SROI) is a method for measuring and communicating this broader-than-economic concept of value. Based on a range of impact measurement, evaluation and cost benefit analysis approaches, it shares many of the same principles, whilst making a comparison between the investments required by an activity and the social value it generates. SROI tells the story of how an activity creates this social, environmental and economic value, and expresses this in monetary terms, allowing a ratio of benefits to investment to be calculated. For example, a ratio of 6:1 indicates that for every £1 invested in an intervention, an equivalent to £6 of social value is returned.
For third sector organisations, SROI can be used as a tool for both proving the worth of an activity to interested parties, including funders, investors, staff, potential collaborators and beneficiaries themselves. It can also be used as a management tool to track projections, improve performance and highlight added value when tendering competitively." (http://www.scotregen.co.uk/pdf.pl?file=surf/news/Scotregen_46_web.pdf, pp. 5-7)
2. From the Wikipedia;
"Social return on investment (SROI) is a principles-based method for measuring extra-financial value (i.e., environmental and social value not currently reflected in conventional financial accounts) relative to resources invested. It can be used by any entity to evaluate impact on stakeholders, identify ways to improve performance, and enhance the performance of investments.
A network was formed in 2006 to facilitate the continued evolution of the method. Over 700 globally are members of this network called Social Value UK (formerly the SROI Network). The SROI method as it has been standardized by the Social Value UK provides a consistent quantitative approach to understanding and managing the impacts of a project, business, organisation, fund or policy. It accounts for stakeholders' views of impact, and puts financial 'proxy' values on all those impacts identified by stakeholders which do not typically have market values. The aim is to include the values of people that are often excluded from markets in the same terms as used in markets, that is money, in order to give people a voice in resource allocation decisions.
Some SROI users employ a version of the method that does not require that all impacts be assigned a financial proxy. Instead the "numerator" includes monetized, quantitative but not monetized, qualitative, and narrative types of information about value." (https://en.wikipedia.org/wiki/Social_return_on_investment)
How it works
“Boundary Setting and Impact Mapping: There are two major areas here: Boundary Setting and Impact
Mapping. Boundary setting is concerned with clearly indicating what your measuring,. This may be one project within your organization, or the processes and projects of your entire organization.
Impact Mapping visualizes your theory of change, or the systematic actions that will lead you to your stated social goal.
Choosing Indicators and Financial Proxies: Drawing from your impact map, SROI specialists will choose indicators of success, or results that best reflect the progress of your project. The next step is to attach financial values to these indicators. For example, if your organization helps youth attain higher education, and by doing so, they will have an average salary of $44,000, then the indicator is employment after graduation, and the financial proxy is average salary.
Collecting Data: After choosing indicators and financial proxies, an SROI specialist will collect data on your program’s impact according to the chosen indicators.
Summing Social and Financial Returns: From the collected data, an SROI specialist will organize and aggregate the data. This is the gross benefit, the total benefit to society according to your indicators.
Subtracting Deadweight Loss: However, gross benefit is not the impact of your projects because often some social impact would have happened without the presence of your programs. Therefore, an SROI specialist will ask “What would have happened anyways?”; this is called deadweight loss and will be subtracted from the gross benefit to produce the net total benefits of your programs.
The net total benefit will then be discounted for present value and placed in the SROI formula below. The final ratio represents the Social Return on Investment of your programs. ” (http://www.socialassets.org/wp-content/uploads/2010/06/Social-Metric-Primer1.pdf)
History
“In 1990, the Robert Enterprise Development Fund (REDF) started using business practices to solve social issues unemployment issues in San Francisco. It was here that Social Return on Investment was first developed so that REDF could understand where to direct their funding for maximizing benefit. After this, SROI was refined and used by the new economic foundation. It is currently practiced by a number of organizations throughout the world. ” (http://www.socialassets.org/wp-content/uploads/2010/06/Social-Metric-Primer1.pdf)
More Information
UK
- Further information on the SROI Project is available at http://www.sroiproject.org.uk
- or from the Forth Sector Development website at http://www.forthsectordevelopment.org.uk.
- Information about SROI itself can be found on the SROI Network website at http://www.sroiuk.org
- Report: Jeremy Nichollis
et al. A guide to Social Return on Investment (Cabinet Office of the Third Sector United Kingdom: new economics foundation, 2009
- Report: new economic foundation.
Measuring Social Impact: the foundation of social return on investment (SROI).
URL = http:// sroi.london.edu/ Measuring-Social- Impact.pdf