Social Return on Investment
The SROI utilises a methodology for financial proxies to value outcomes for different stakeholders. The framework for the process is based on 7 key Principles of Social Value:
Involve stakeholders – We need to go beyond just including stakeholders. They need to be involved in all aspects of the programme or venture being evaluated. Stakeholders inform what gets measured, how this is measured and why it is valued.
Understand what changes – Articulate how change is created and evaluate this through evidence gathered. This includes recognising positive and negative changes, as well as those that are intended and unintended.
Value the things that matter – Making decisions about allocating resources between different options needs to recognise the values of stakeholders. Value, in this instance, refers to the relative importance of different outcomes. It is informed by stakeholders’ preferences.
Only include what is material – We determine what information and evidence must be included in the accounts to give a true and fair picture. It should be such that all stakeholders can draw reasonable conclusions about impact.
Do not over-claim – We don’t claim every change, but clearly state the value that activities are responsible for creating.
Be transparent – Demonstrate the basis on which the analysis was conducted, ensuring verifiable accuracy and honesty. Demonstrate that it will be reported to and discussed with stakeholders.
Verify the result – Ensure appropriate independent assurance via SVI.
As a matter of principle, each SROI analysis is tailored to each organisation.
The end result is that an SROI is a stakeholder-driven evaluation blended with cost-benefit analysis tailored to social purposes. Overall, it tells the story of how change is being created and places a monetary value on that change and compares it with the costs of inputs required to achieve it. The SROI analysis concludes with an SROI ratio - a number which represents the social value created for each $1 invested.