What are the best practices for conducting a SROI analysis?

Within the scope it will be very relevant to understand that in social impact projects we do not refer to the Return of Investment (ROI), we refer to the Return of Engagement (ROE). Therefore, the scope of the indicators should include the commitment of the parties or allies. In my case, it has worked very well to include the commitment of the beneficiaries from the beginning. We don't even call them beneficiaries, we call them allies, since it is expected that as part of their commitment they will provide in-kind compensation for the development of the project.

Clearly outline the objectives, stakeholders, and timeframe of your SROI analysis. Define the social outcomes you want to measure and the activities or interventions that contribute to these outcomes.

> Involve key stakeholders to define the project's goals and identify all potential social impacts - positive and negative. > This ensures a comprehensive analysis. > Assign monetary values to the social impacts based on established methods or stakeholder input. > Be transparent about valuation methods and limitations. > Use a systematic approach to data collection and analysis. > Clearly communicate the SROI ratio, its limitations, and the broader social value created by the project.

Scoping should cover the following: 1 - main stakeholder for whom the social returns are being estimated - usually there are multiple stakeholders and each one brings different input and hence different 'investment' into the program. Hence it is of utmost importance to define the stakeholder. 2 - outcomes that will be covered - not everything that can be measured is worth measuring and not everything that is important can be measured. Hence define what gets measured. 3 - geographical scope - what part of region/location or country - as depending on baseline situation value add will be vary as per geography 4- Approach and methodology - number of surveys, number of interviews etc.. We add all of the above and more to our SROI assignments.

Conducting a Social Return on Investment (SROI) analysis involves several key best practices to ensure accuracy and reliability in assessing the social impact of initiatives or investments. Firstly, it's essential to define the scope of the analysis clearly. This includes outlining the objectives, stakeholders involved, and the timeframe for assessment.

In my experience working on the EU Project VARCITIES, I have found that Theory of Change workshops are an extremely valuable method for identifying the stakeholders and outcomes that are important for Social Return on Investment (SROI) analysis. These workshops promote engagement among a diverse group of stakeholders, allowing us to collaboratively map out the different pathways of change and predict the potential impacts and outcomes of our interventions. By involving various stakeholders in these sessions, we were able to comprehensively evaluate the social value that was created and make well-informed decisions about how to allocate resources and develop project strategies.

In addition to utilizing the Theory of Change and mapping stakeholders and interested parties around the focus themes to be developed, conducting field studies and analyses is crucial to understanding the exact situation of the region, problem, or community where the work is being undertaken. This process provides a comprehensive understanding that allows for a comparison with the final results later on, enabling a more accurate assessment of progress and impact.

Gather relevant data on inputs, outputs, outcomes, and impacts. Use both qualitative and quantitative data collection methods to capture a comprehensive view of the social value created by your organization or initiative.

This is drawn from the scope as discussed earlier, the complexity of SROI engagement, nature of intervention being measured and costs involved in completing the study. We have used both quantitative and qualitative approaches, interviews, detailed surveys ( some questionnaires ran upto 60 questions), focused group discussions, stakeholder discussions, government agencies and other players engage in the program. Usually our approach is to collect more information so that population being studied is represented and data lying on extremes is moderated and any false data is removed without affecting the overall analysis. We also conduct audit and quality checks of collected data so as to ensure minimum quality standards.

Next, robust data collection and analysis are crucial. This entails gathering both quantitative and qualitative data related to inputs, outputs, outcomes, and impacts. Utilizing primary and secondary sources of data helps in ensuring comprehensive analysis.

Carefully designing a stated preference survey, using methodologies such as Choice Experiments, has proven to be an effective approach for evaluating the outcomes of the Theory of Change. This approach involves a process of selecting key outcomes in collaboration with stakeholders, transforming them into attributes, and determining their levels to create the choice cards for the survey. The valuation through Choice Experiments enables us to derive monetary values from the collective preferences expressed through the limited number of choice cards. Analyzing the willingness to pay within these experiments provides valuable insights into the perceived value of the outcomes, which in turn helps quantify the social impact for the SROI analysis.

Assigning monetary values to non-financial outcomes is another critical step. This involves converting intangible outcomes into monetary values wherever feasible, using proxies or market prices and consulting experts for validation.

Assign monetary values to the social outcomes identified in your analysis. This involves quantifying the social benefits and costs associated with your activities, which can be challenging but is essential for calculating the SROI ratio accurately.

This is especially important part and we have had exposure to assignments where monetary value for outcomes was easy to assign or it was directly reflected in the outcome ( such as changes in income levels or costs, increase or decrease in medical expenses, changes in education cost, changes in expenditure basket etc). Whereas we also worked on assignments where monetary value of outcome was unclear or indirect - such as women empowerment, confidence building measures, elderly support and care, gender equity programs etc. In these cases we have designed and developed value games, priority matrix, cost assignment exercises and other novel methods to extract value perceived by stakeholders for outcomes of the program.

Use the formula to calculate the SROI ratio, which compares the social value created to the investment made. The formula typically involves dividing the social value by the investment to determine the ratio. A ratio greater than 1 indicates that the social benefits outweigh the costs.

This is again important part and largely driven by outcome values assigned in earlier step of the assignment. In addition to core calculations on projections, there are 4 adjustments such as "deadweight", "displacement", "attribution" and "drop off" to be made as a part of SROI estimation. Therefore, we always add control group in our methodology to accurately reflect the impact of the program, as data and information these 4 adjustments is drawn from control group of the study. In addition to these adjustments, the control group data also helps to assess the terminal value of outcomes that will continue in perpetuity and also the discount factor to estimate the present values. And last but not the least, we do scenario/sensitivity analysis

Finally, calculating the SROI ratio is the culmination of the analysis. This ratio represents the social value created relative to the investment made. It's computed by dividing the net present value of social benefits by the net present value of costs, expressing it as a multiplier.

El SROI: ?herramienta valiosa o espejismo enga?oso? Su utilidad para cuantificar el valor social de una inversión es innegable, pero su aplicación exige rigor. La atribución de resultados en sistemas sociales complejos y la asignación de valores monetarios a resultados intangibles son desafíos clave. La sobreestimación del impacto es un riesgo si no se utilizan metodologías sólidas, triangulación de datos y evaluaciones independientes. El SROI, aunque poderoso, no es infalible. Su complejidad requiere un enfoque riguroso que combine análisis cuantitativo y cualitativo para comprender el verdadero impacto social, trascendiendo el simple "storytelling".

Present your findings in a clear and transparent manner. Communicate the results of your SROI analysis to stakeholders, including funders, investors, and beneficiaries. Highlight key insights, lessons learned, and recommendations for improving social impact.

This is important as right value should be communicated and presented. Lot of SROI assessment is based on field data and some assumptions, hence no fixed number can be completely proved or disapproved, but reporting and if time and money allows, auditing of process and data can add credibility to the SROI report.

Merece la pena que para acompa?ar al SROI realices el levantamiento de resultados cualitativos que te permitan contar la historia de los resultados numéricos que obtendrás con la herramienta, esto por varias razones: generar empatía con algunos de tus grupos de interés, tener una triangulación que avale tus resultados, entre otras.