How can you measure social impact with SROI?

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Social impact is the positive change that your organization or project creates for people and the planet. But how can you measure and communicate this impact effectively? One way is to use SROI, or social return on investment, a framework that assigns a monetary value to the social and environmental outcomes of your activities. In this article, you will learn what SROI is, how it works, and what benefits and challenges it offers.

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Mercedes Gutiérrez álvarez

Head of New Business & Innovation Circular Business Ingka | IKEA ? Keynote speaker ? Coach ? Mentor
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Co-founder @ Human Driven Lab & @Kudra
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Ecosystem Creator on a Mission to foster spaces for Conscious Leadership and Digital Transformation; Amplifying…

1 What is SROI?

SROI stands for social return on investment, a method of measuring and comparing the social and environmental value of different interventions. It is based on the principle that every investment has not only a financial return, but also a social and environmental one. SROI aims to capture and quantify these impacts by assigning a monetary value to them, and then calculating the ratio of benefits to costs. For example, if a project costs $100,000 and generates $300,000 worth of social and environmental value, its SROI ratio is 3:1.

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Mercedes Gutiérrez álvarez

Head of New Business & Innovation Circular Business Ingka | IKEA ? Keynote speaker ? Coach ? Mentor
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I believe that monetizing the outputs, outcomes, and impacts of social impact initiatives can be a complex task, especially when considering the systemic impact and behavioral changes resulting from these interventions. In my view, the best way to measure the return on investment for a social impact initiative is through a combination of quantitative KPIs and qualitative assessments such as personal successful stories. This approach allows us to capture both the tangible metrics and the nuanced changes that contribute to meaningful social change. #SocialImpact #ROI #StoriesforSocialChange #MetricsMatter

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Mert Alt?nc?

Co-founder @ Human Driven Lab & @Kudra
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SROI is NOT a method to measure the impact. SROI is a method of financially valuation of the impact. So, we should first measure the impact by numbers and percentages, then we estimate the financial value of that impact. Don’t mix between impact measurement methods and financial valuation methods.

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2 How does SROI work?

SROI follows a six-step process that involves identifying, measuring, and valuing the outcomes of an intervention, as well as the inputs and stakeholders involved. These steps include establishing the scope and objectives of the analysis, mapping the theory of change, collecting and analyzing data on the inputs, outputs, outcomes, and impacts of the intervention using both qualitative and quantitative methods, estimating the monetary value of the outcomes and impacts, calculating the SROI ratio by dividing the total value of the outcomes and impacts by the total value of the inputs, and finally reporting, verifying, and using the results. The purpose of this process can be for decision making, communication, or learning.

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3 What are the benefits of SROI?

SROI can assist you in demonstrating the value and impact of your work to those who fund, invest, partner, or benefit from it. It can also help to improve performance and accountability by recognizing what works and what doesn't, and how to increase outcomes and efficiency. Furthermore, SROI can be utilized to support strategic planning and resource allocation by contrasting the relative value of different options and scenarios. Additionally, it can be used to enhance stakeholder engagement and participation by involving them in the process and taking their perspectives and preferences into account.

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??Pretty Ndlovu

Ecosystem Creator on a Mission to foster spaces for Conscious Leadership and Digital Transformation; Amplifying Impact-Driven Brands
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Social return on investment (SROI) helps organizations make informed decisions by providing data-driven insights into the effectiveness of their social investments. It enables them to allocate resources more efficiently and focus on activities that generate the most significant positive impact. By assessing the social and environmental risks associated with an investment, SROI helps organizations identify potential challenges and mitigate them proactively. This minimizes the likelihood of negative outcomes. The SROI process encourages organizations to innovate and experiment with different approaches to maximize social impact. It also promotes a culture of continuous learning and improvement.

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4 What are the challenges of SROI?

SROI has some limitations and challenges that you need to be aware of, such as the complexity and time-consuming nature of the process, which requires a lot of data collection, analysis, and verification. The subjectivity and uncertainty of some assumptions and estimates involved may affect the reliability and validity of the results. Additionally, there is the risk of over-simplifying or misrepresenting the social and environmental value of an intervention, which may ignore or neglect some intangible or long-term aspects. Furthermore, there is the potential for misuse or manipulation of the results, which may be influenced by biases or agendas.

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5 How can you apply SROI?

If you want to use SROI to measure and communicate your social impact, you need to have a clear and specific question or objective that you want to answer or achieve with the analysis, as well as access to sufficient and relevant data and information on your intervention and its outcomes and impacts. You should also have the necessary skills and resources to conduct the analysis, or seek external support or guidance if needed. Additionally, it is essential to follow the principles and standards of SROI, such as involving stakeholders, being transparent, and verifying the results. You should also use the results in a responsible and ethical way, such as for learning, improvement, and dialogue. While SROI is a powerful tool for measuring and communicating social impact, it is not the only one. You must consider the context, purpose, and audience of your analysis in order to use the most appropriate and credible method for your situation; this will help you increase your social impact and contribute to a better world.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Heidi Fisher MBE

Impact Measurement Expert | For healthcare organisations & social enterprises to measure & manage their impact | Evaluations, impact & SROI reports, impact data & insight systems, theories of change & impact training
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SROI isn't right for every organisation or activity. A lot of funders don't care about your SROI, they want stories instead. It's more relevant if you deliver public sector services. It's particularly useful for activities where there are lots of financial proxies available (health, social care, employment and training).

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How can you measure social impact with SROI?

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1 What is SROI?

2 How does SROI work?

3 What are the benefits of SROI?

4 What are the challenges of SROI?

5 How can you apply SROI?

6 Here’s what else to consider

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