Elements needed to measure SROI (Social Return on Investment)

Elements needed to measure SROI While the approach varies depending on the program that is being evaluated, there are four main elements that are needed to measure SROI:

• Inputs or resources investments in your activity (such as the costs of running, say, a skill development program)
• Outputs or the direct and tangible products from the activity (for example, the number of people trained by the program)
• Outcomes or the changes to people resulting from the activity (i.e., new jobs, better income, improved quality of life for the individuals; and reduced support from, the government)
• Impact measurement efforts can be logically grouped into four key measurement objectives : Estimating impact: Conducting due diligence pre – investment, Planning impact: Deriving metrics and data collection methods to monitor impact, Monitoring impact: Measuring and analysing impact to ensure mission alignment and performance, Evaluating impact: Understanding post-investment social impact of an intervention or investment

Principles of SROI

1. Involve stakeholders:

This principle means that stakeholders need to be identified and then involved in consultation throughout the analysis, stakeholders need to be identified and then involved in consultation throughout the analysis, in order that the value, and the way that it is measured, is informed by those affected by or who affect the activity.

2. Understand what changes:

This principle requires consideration of how the changes are created, stated, and supported by evidence. These changes are social, economic, or environmental outcomes. It is these outcomes that should be measured in order to provide evidence that the change has taken place.

3. Value the things that matter:

Use financial proxies in order that the value of the outcomes can be recognised. Many outcomes are not traded in markets and as a result their value is not recognised. Financial proxies should be used in order to recognise the value of these outcomes and to give a voice to those excluded from markets but who are affected by activities. This will influence the existing balance of power between different stakeholders.

4. Only include what is material:

Identify key indicators, information, and evidence such that stakeholders can draw reasonable conclusions about impact. Deciding what is material requires reference to the organization’s own policies, societal norms, and short-term financial impacts. External assurance would improve the comfort of that material issues have been included.

5. Do not over-claim :

This principle requires measurement and disclosure of changes brought in as a result of the impact of the program as opposed to other factors, that would have happened anyway.

6. Be transparent :

This principle requires that each decision relating to stakeholders, outcomes, indicators and benchmarks; the sources and methods of information collection; the different scenarios considered and the communication of the results to stakeholders, should be explained and documented. The analysis will be more credible when the reasons for the decisions are transparent.

7. Verify the result :

Although an SROI analysis provides an understanding of the value being created by an activity, it inevitably involves subjectivity. Appropriate independent assurance is required to help stakeholders assess whether or not the decisions made by those responsible for the analysis were reasonable.

Recommended

• Accounting Estimates – Meaning of Accounting
• Fundamentals of Accounting
• What is Debit and credit explained with accounting equation
• Valuation approaches for distressed firms
• Relative Valuation – Steps for Relative Valuation
• An introduction to Social Return on Investment