Topics

Social Return on Investment for Greater Impact

Featured Image

Summary: The Social Return On Investment framework is one of the tools we can use to evaluate projects, calculate the created social impact, and therefore bring societies closer to positive change.

Managing resources more sustainably and creating bigger changes in society should be common goals achieved by public and private sector players. Organizations can use social return on investment to calculate past and estimate future activities’ cost, scale, and social impact to bring us closer to positive change.

We live in an era where improving people’s wellbeing and decreasing environmental degradation have become significant goals. Only if every organization brings about a positive social and environmental impact will the Earth become a better place to live. Learning about managing social impact and using impact measuring tools should be an objective of all private and public sector institutions. The Social Return On Investment framework is one of the tools organizations can use to evaluate their projects and calculate the created social impact. 

Social Return On Investment (SROI) is a framework that helps organizations calculate financial benefits by identifying how effectively capital and other sources are used to create societal value. It incorporates social, environmental, and economic costs and benefits to reduce social problems and improve wellbeing. The uniqueness of SROI is that it uses monetary values to represent the change by measuring social, environmental, and economic outcomes. It allows stakeholders and contributors to understand how the social change was created and how significant the society shift is. Although the SROI gives the score in monetary value, its primary focus is on created value rather than money. In this case, money is just a tool to let all relevant stakeholders easily understand what value was created.

The analysis of the SROI can be displayed in many different forms. It can focus on the social value generated by an entire organization or on just one specific project. SROI includes information on the number of resources the policy program uses and identifies significant impacts on society. There are two types of SROI: evaluative and forecasted. The evaluative SROI is conducted in retrospect and based on the actual outcomes that have already taken place. It is used in projects post-implementation. Forecasted SROI predicts how much social value will be created if the activities meet their expected or intended outcomes. It is useful when the project is still in the planning stage.

SROI was developed by modifying a social cost-benefit analysis and is intended to provide a better framework for achieving better lives and improving people’s well-being. Therefore eight principles were introduced by Social Value International for anyone who wants to contribute to the positive change in equity, wellbeing and environmental sustainability. Those principles are generally accepted social accounting principles that together create the basis of SROI (SVI, 2021). The principles are as follows:

  1. Involve stakeholders.
  2. Understand the impact of projects.
  3. Value the things that matter.
  4. Only include what is material.
  5. Do not overclaim.
  6. Be transparent.
  7. Verify the result.
  8. Be responsive. 

The above principles’ application can contribute to measuring the value that has been created or destroyed. Depending on the activity and stakeholders involved, the measures and values of outcomes can be different. The above principles’ application can contribute to measuring the value that has been created or destroyed. Depending on the activity and stakeholders involved, the measures and values of outcomes can be different.  Further, because of the variety of audience needs, applying the principles requires judgment to verify and assure the obtained information. The above principles’ application can contribute to measuring the value that has been created or destroyed. Depending on the activity and stakeholders involved, the measures and values of outcomes can be different.  Further, because of the variety of audience needs, applying the principles requires judgment to verify and assure the obtained information.  Social Return on Investment is used to apply this set of principles within a framework designed to help make the information consistent and recognize differences in created value depending on the situation, culture, and people (SVI, 2012). 

Stage 1Establish the scope of the SROI and identify the key stakeholders.
Clarify what SROI analysis will cover and who will be involved in the process, and how.
What is the activity to measure?
What is within the scope of SROI?
Who are key stakeholders?
Clarify what SROI analysis will cover and who will be involved in the process, and how. 
Stage 2Mapping outcomes
Engage with stakeholders and develop an impact map that shows the relationship between inputs, outputs, and outcomes. 
What are the inputs?
What is the financial value of these inputs?
What are the outputs?
What are the outcomes? 
Stage 3Evidencing outcomes and giving them value.
Find data to show whether outcomes have happened and value them.
Which indicators can be used to measure the outcomes?
What is the baseline position of the outcomes? How long will each intended outcome last?
Which outcome is a result of external factors of the activity?
What are the financial or monetary values of the outcomes? 
Stage 4Establishing impact.
Collect evidence of outcomes and monetize them.
Which outcome can be directly attributed to the activity?
Which outcome cannot be directly attributed to the activity?
Stage 5Calculating the SROI
Add up all the benefits, subtract any negatives, and compare the result to the investment.
Stage 6Reporting, using, and embedding results.
Write a meaningful report telling the story of change with a focus on social value.
Table 1. Six stages of SROI analysis. 
Source: Nicholls, J., Lawlor, E., Neitzert, E., & Goodspeed, T. (2015). A guide to Social Return on Investment.

SROI framework is not only used to calculate the created value but also can help improve services. It provides guidelines for strategic discussions and helps increase or build the potential to create social value through organized activities. It targets appropriate resources to manage all positive and negative outcomes. SROI shows the importance of collaboration with other organizations, stakeholders, and contributors in order to create a more significant change. SROI also enhances sustainability in the organization by estimating future impacts and evaluating the impacts of existing and past projects. Implementing SROI is making the organization more attractive and strengthening its position for gaining more financial grand. 

Reference

  1. Kah, Sally & Akenroye, Temidayo. (2020). Evaluation of social impact measurement tools and techniques: a systematic review of the literature. Social Enterprise Journal. ahead-of-print. 10.1108/SEJ-05-2020-0027.
  2. KPMG. (2018). Social Return on Investment – Measuring Impact. Retrieved September 15, 2022, from https://assets.kpmg/content/dam/kpmg/in/pdf/2019/01/Social-Return-on-Investment%E2%80%93Measuring-Impact.pdf
  3. Nicholls, J., Lawlor, E., Neitzert, E., & Goodspeed, T. (2015). A guide to Social Return on Investment. Retrieved September 15, 2022, from https://socialvalueuk.org/wp-content/uploads/2016/03/The%20Guide%20to%20Social%20Return%20on%20Investment%202015.pdf
  4. Shen, C.-w. and Koziel, A. (2021), “Public Policy for Social Value Creation in East Asia”, Richards, A. and Nicholls, J. (Ed.) Generation Impact, Emerald Publishing Limited, Bingley, pp. 163-175. https://doi.org/10.1108/978-1-78973-929-920200017
  5. Vardakoulias, O. (2012). Social CBA and SROI . Nef Consulting. Retrieved from https://www.nefconsulting.com
  6. SVI. (2021). The Principles of Social Value. Social Value International. Retrieved September 25, 2022, from https://www.socialvalueint.org/principles

To cite this article, please use:

Koziel, A. (2022, September 13). Social Return On Investment For Greater Impact. Retrieved from https://aimr.asia/frameworks-standards/social-return-on-investment-for-greater-impact/

About the Author

Aga Koziel

Agnieszka Kozieł is a Ph.D. candidate in Business Administration at National Central University, awarded with Taiwan Government Scholarship. Currently, work as a project manager at the Asian Institute of Impact Management and Measurement as an associate editor at Asian Impact Management Review.

View Profile

Comments (0)