Social Return On Investment

Social Return On Investment, or SROI, is a gauge to measure the social and financial value, usually created by a non-profit or a Non-Governmental Organization (NGO), for positive change in the world. One example is a group that helps private donors, called stakeholders, to appraise and research charities associated with various developing countries.

SROI helps investors to understand and manage the impacts of a project, an organization or a policy. The aim of SROI is to include the values of people who are often excluded from markets because of a lack of money in order to give them a voice in resource allocation decisions. The goals are meant to impact social and environmental issues globally.

How individuals and societies value one thing over another continues to absorb the world's philosophers, psychologists, social scientists and economists. The bottom line is that price is the indicator for the preference of one thing over another. Price is a proxy for value.

Although not monetary, outcomes like increased self-esteem and improved family relationships of the people being helped do have value and can be rewarding in other ways, as well.

A San Francisco-based fund that invests in organizations working for social benefit started the movement. Since then, interest has been fuelled by the increasing recognition of the importance of philanthropy. In order to incorporate both social and financial benefits into the SROI, ratio proxies for these values would be required. And although SROI analysis is a relatively new area, there is hope that a monetary value can be placed on the selfless deed of philanthropy. Pretty ironic.

The main elements of SROI are the stakeholders, who are at the center; an impact map that can be used to understand how the organizations create change; and the attribution of results, both positive and negative, to other organizations.

As of now, guidelines provide that only the material impact will be included in the analysis, assessed by public policy, best practice, local values, stakeholders and financial resources that are available; and that financial proxies should be used to ensure that the issues that are relevant to all those affected have been included-this is sometimes called monetization.

SROI is most easily used when an organization is already measuring the direct and longer-term results of its work with people, groups, or the environment. So if yours falls into this category, your well on your way!