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| Primary purpose Summary Potential benefits Who can use the tool? What resources are needed? Development, ownership and support Social enterprise examples Further sources of information Footnotes Social Return on SROI aims to help organisations understand and manage the social, environmental and economic benefits (value) that they are creating. It is a measurement approach, developed from traditional cost-benefit analysis that captures the economic value of social benefits by translating social objectives into financial measures and focuses on the most important sources of value as defined by stakeholders.1 The SROI model developed by nef is designed to promote the inclusion of all stakeholders’ voices in the way organisations make decisions about allocating resources. An SROI analysis is the process of understanding, measuring and reporting on the social, environmental and economic value that is created by an organisation. An SROI ratio is a monetised measure of the social value that has been created, compared to the investment required to achieve that impact.2 It takes the financial concept of return on investment a step further by capturing social, economic, and environmental as well as financial value. For example, when a previously unemployed person completes a training programme and starts a new job, not only does she increase her personal income, but also she creates value for the Government by paying taxes and no longer claiming welfare benefits. Thus, the impacts of the training programme are both social and economic, the value of which SROI was designed to measure. Three key features of nef’s SROI framework are a stakeholder approach, an impact map and an estimation of the value that would have been created even without the organisation’s intervention. First, as it is based on social and environmental accounting principles, nef’s approach includes a process for involving stakeholders. In the nef model, each stakeholder identifies his/her own objectives for the programme—or what he or she wants to get out of it-- enabling common objectives to be identified, whilst also allowing for an SROI analysis specific to each stakeholder. The following are the key stages in undertaking an SROI analysis: [some basic formatting might be required to lay out these points, e.g. p.80 of Tools book, as below is also fine though]
The approach to SROI developed by nef offers a number of benefits, including:
Potential limitations
This clarity informs stakeholder engagement. Therefore, if an organisation seeks to monetise its impact without having considered its mission and stakeholders, then it risks choosing inappropriate indicators; and as a result the SROI calculations can be of limited use or even misconstrued.
While it is designed so that small organisations can use the process as well, it does require a basic level of proficiency with measuring outcomes that is more commonly found in well-established organisations. Leadership An SROI analysis should be led by a member of the organisation in a position senior enough to have access to information from across the organisation’s activities. Proficiencies or skills Skills in measuring long-term outcomes can help to make the process easier. An organisation needs at least a basic understanding of its outcomes to begin. If intending to follow through to develop the social return on investment calculation, it is useful to have a background in cost-benefit analysis and basic accounting principles. Staff time Staff time to complete an SROI analysis is variable, depending upon the quality of information the organisation already collects, the difficulty of finding appropriate proxies for the value of its impacts, and its proficiency with calculations. It can take several days of staff time over several months or can be done within a period of weeks. Courses, support, and information Courses may be available to introduce SROI (see organisations below). Some business schools’ social entrepreneurship programmes may offer modules on measuring social value as part of their social entrepreneurship modules. The measurement of SROI is part of the judgement criteria for applicants to the Global Social Venture Competition open to MBA students and alumni. There is no cost for materials, as nef makes SROI materials and reports available free of charge. While there is no cost to undertake the process of developing an analysis of an organisation’s social return on investment, it can be time intensive for organisations wishing to build a full model and develop the SROI calculations. nef makes assistance available by contract. Development, ownership and support SROI was pioneered by REDF, a San Francisco US-based venture philanthropy fund. The concept has since been adopted by organisations in various fields, including social enterprise, socially responsible investing (SRI) and government, in an attempt to assess social aspects of their investments. In 2003 nef began exploring ways in which SROI could be tested and developed in a UK context. An important goal of the project was to advance an approach to SROI that is as widely applicable and as usable as possible. In addition to the UK work, nef is collaborating with the SROI Circle in the US and the European Social Return on Investment Network to develop common standards for SROI analysis and methods.
Further sources of information The following publications can be downloaded for free at: www.neweconomics.org
The SROI Primer can be accessed online at http://sroi.london.edu 1 Cost-Benefit Analysis: A method of reaching economic decisions by comparing the costs of doing something with its benefits. The calculation of a benefit to customers accruing from a particular cost; for example, how much extra will consumers pay to get a special service? Is the benefit to be gained from buying that service at a premium price higher than the cost of purchasing the enhanced service? The concept is relatively simple, but difficulty often arises in decisions about which costs to include in the analysis and which benefits to include. CBA also becomes complex when the benefits being measured do not have a price. SROI is one form of cost benefit analysis that tries to address this difficulty by associating some impacts of social enterprises, offerings with monetary values and in the nef model values costs and benefits to multiple stakeholders. 2 Discounted Value of Money: a ‘£’ today is worth more than a ‘£’ tomorrow, because its value will have decreased by a certain percentage, known as the discount rate. |
“It allows us to systematically evaluate and show that it’s not just about getting people back into work, but [in the long term] what is their quality of life? Are they earning more?” - Green Apprentices
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“It’s about finally being able to be objective. It makes the difference when you’re preparing reports or bids for Treasury or government.” - Green Apprentices |
