Social Return on Investment (SROI) is a framework for measuring and accounting for the social value that a project or activity may return, once the investment has been deducted.
SROI measures change in ways that are relevant to the people or organisations that experience or contribute to it. It tells the story of how change is being created by measuring social, environmental and economic outcomes and uses monetary values to represent them. This enables a ratio of benefits to costs to be calculated. For example, a ratio of 3:1 indicates that an investment of $1 delivers $3 of social value. SROI is about value, rather than money. In the same way that a business plan contains much more information than the financial projections, SROI is much more than just a number. It is a story about change, on which to base decisions, that includes case studies and qualitative, quantitative and financial information.
In the context of businesses, SROIs can be used before, during or after a project to measure the social value or ‘return’ that the project or organisation may or has delivered. This may be relevant when:
- Planning a project that requires significant investment upfront and needing to demonstrate the likely financial and/or social return the project will generate to gain executive approval or board endorsement
- Planning for stakeholder engagement and needing to demonstrate social value of project to facilitate commitment from stakeholders
- Facilitating business decision making processes around whether to undertake a project or pursue an activity
- Promoting the project and wanting to promote the ‘added value’ to the community and/or consumers
There are two types of SROI:
- Evaluative, which is conducted retrospectively and based on actual outcomes that have already taken place.
- Forecast, which predicts how much social value will be created if the activities meet their intended outcomes.