Social return on investment (SROI) represents a set of principles used to measure extra-financial value (environmental/social value) in relation to the resources invested. The goal is for this framework to help you manage, plan and make decisions to increase the value created for your stakeholders by your activities.
The starting point for this calculation is for everyone involved to ask himself “how much difference are we making?” and “how much value are we destroying?”
The value of the outcomes is the one experienced by our stakeholders that result from our activities – the significant ones.
The necessary steps to determine this value is to find out:
Which are your stakeholders?
What are their outcomes?
Which ones are material?
To what extent they result from our activities and what is their value?
A general formula used to calculate SROI is as follows:
SROI = (social impact value – initial investment amount) / initial investment amount *100%
There are four main elements of great importance in order for you to measure SROI:
- Inputs – the resources invested in your activity (for example the cost of a program for the care of elderly people)
- Outputs – the concrete products from the activity (such as the number of elderly people taken care of)
- Outcomes – the changes people experienced due to the activity (for example better health, improved psychological state and quality of life)
- Impact – the outcome minus an estimate of what would have happened if the activity did not take place (for example, if 40 people had improved health but 10 people would experience this improvement anyway, the impact is based on the 30 people who had improved health due to the program)
Certain general rules to be followed according to this framework are:
- Involve your stakeholders when planning your activities
- Be precise and careful when estimating the outcomes of your activities
- Value should be accredited to the things that matter
- Be objective and transparent
- Carry out a proper materiality assessment
If you would like to acquire all the necessary tools and knowledge to calculate the social impact of your organization’s activities, the Introduction to Social Impact Assessment and SROI is the course for you. It will guide you through identifying the inputs, outputs and outcomes of your Sustainability activities and it will help you understand Social Return on Investment.