Social Return on Investment (SROI) is a framework for measuring the impact of a social or environmental initiative in monetary terms. It considers both the direct and indirect effects of the initiative and assigns a monetary value to these impacts to calculate a ratio of social value created to investment made. It provides a more comprehensive and holistic view of the value created compared to traditional financial return on investment metrics.
The goal of SROI is to provide a comprehensive and transparent evaluation of the social value generated by a project or organization, and to help decision-makers allocate resources in a more impactful way. SROI aims to assess the non-financial impacts of an initiative, such as changes in community wellbeing or environmental sustainability, and assign a monetary value to these outcomes to better understand the overall impact of an investment.
Purpose
The Social Value UK-standardized SROI method offers a consistent quantitative approach to understanding and managing the impacts of a project, business, organization, fund, or policy. It takes into account stakeholders’ perspectives on impact and assigns financial ‘proxy’ values to all impacts identified by stakeholders that do not typically have market values. The goal is to include people’s values, which are frequently excluded from markets, in the same terms as markets, namely money, in order to give people a voice in resource allocation decisions.
Unlike traditional financial return on investment (ROI) which only considers financial gains, SROI considers the wider range of benefits and costs to society. SROI aims to provide a more comprehensive picture of the value created by an initiative and to encourage investment in initiatives that generate both financial and social value.
While the term ROI in financial management refers to a single ratio, unlike the Social Earnings Ratio (S/E Ratio), SROI analysis does not necessarily refer to a single ratio but rather to a method of reporting on value creation. It bases its value assessment in part on stakeholders’ perceptions and experiences, looks for indicators of what has changed and tells the story of that change, and, where possible, uses monetary values for these indicators. It is a new management discipline that focuses on the measurement and communication of non-monetary value.
