What is SROI?

What is Social Return on Investment (SROI)?

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SROI is based on seven principles:

  1. Involve stakeholders
    Understand the way in which the organisation creates change through a dialogue with stakeholders
  2. Understand what changes
    Acknowledge and articulate all the values,  objectives and stakeholders of the organisation before agreeing which aspects of the organisation are to be included in the scope; and determine what must be included in the account in order that stakeholders can make reasonable decisions
  3. Value the things that matter
    Use financial proxies for indicators in order to include the values of those excluded from markets in same terms as used in markets
  4. Only include what is material
    Articulate clearly how activities create change and evaluate this through the evidence gathered
  5. Do not over-claim
    Make comparisons of performance and impact using appropriate benchmarks, targets and external standards.
  6. Be transparent
    Demonstrate the basis on which the findings may be considered accurate and honest; and showing that they will be reported to and discussed with stakeholders
  7. Verify the result
    Ensure appropriate independent verification of the account

These principles are core to SROI and how it should be used.  However, in encouraging consistency of models, the SROI Network is in discussion with practitioners who use related tools to see if principles can be aligned and agreement established on measuring social impact.  Therefore, these principles and how they are expressed may be revised.

SROI is an approach to understanding and managing the value of the social, economic and environmental outcomes created by an activity or an organisation. It is based on a set of principles that are applied within a framework.

SROI seeks to include the values of people that are often excluded from markets in the same terms as used in markets, that is money, in order to give people a voice in resource allocation decisions. SROI is a framework to structure thinking and understanding. It’s a story not a number. The story should show how you understand the value created, manage it and can prove it.

If you are producing a report of your SROI, we recommend that you have the report assured.

Go to the SROI Guide documents

Why are the principles so important?

The principles are the building blocks for SROI analysis and the assurance process focuses on compliance with these principles.

Principles are important because:

  • an account of value created focuses on how value is being accounted for rather than focusing on what tools are being used.
  • more flexibility is then possible, for different types of value and scale
  • consistent and shared principles help communication

Download the Seven Principles of SROI document >

What about the social return on investment ratio?

SROI is an account of value creation and the account requires a mix of information including qualitative, quantitative and financial. In the same way as quoting a financial return on investment without any other information, the SROI ratio, by itself, has little meaning. The range of judgement that is permissible within an SROI analysis means that comparisons of SROI ratios alone are not recommended. Comparison of forecast and actual ratios provide the starting point for an understanding the reasons for the difference which will also need to draw on other types of information.

Whilst we do not believe that investors will make decisions based on a single indicator, or that commissioners would be able to use a ratio as part of their decisions, we recognise that this could become part of the information that informs and influences decisions.

What is the relationship between IRIS and SROI?

IRIS and SROI have prepared a short note setting out the relationship between these two approaches. To see this please click here

What is the relationship between SROI and social accounting?

The SROI Network and the Social Audit Network have prepared a note which explains the relationship which you can find here

What is the relationship between SROI and GIIRS?

The SROi Network and the Global Impact Investing Rating System have prepared a document explainin this relationship: SROI and GIIRS

SROI For Investors

SROI can be used as part of the due diligence process for making an investment.

This can range from a risk management approach, helping you check that the organisation seeking finance has considered and is making steps to manage the relevant social and environmental risks, through to a business support approach for social investors, helping you check that the organisation is the right systems to manage the value they are planning to create.Read More

Click here to download a copy of the guide to SROI for social investors.

"The core business of Noaber is to create social return, through grants and social investments. Measuring impact accurately is therefore crucial to our success, and SROI enables us to assess all relevant aspects. We have integrated SROI in our business processes of screening, monitoring and evaluating projects. Supported by the social e-valuator webtool, the method helps the team to really involve (potential) projects in analyzing and improving the social business case. Identifying the key stakeholders and social value drivers improves the quality of the decision making and monitoring process. In conclusion, SROI helps us and our investees to focus on the factors that are significant in achieving the positive change that is aimed for."- Jan Olde Loohuis- Investment Analyst

SROI For Commissioners

Commissioners can use SROI in a number of different ways. SROI can help explore what types of value the market can provide. It can also help define outcomes that are relevant to a commissioner and provide a framework for exploring whether the outcomes can be included in a commissioning process.

Here are some publications relevant to commissioners:

SROI For Business

SROI can help business identify risks and opportunities and provide a framework for assessing whether the business should actively manage them

For businesses that are selling to customers that have social or environmental goals, SROI can help business identify how it can contribute to those goals

SROI For Organisations With a Social Purpose

Organisations which have social objectives will want to know if they are achieving these objectives. SROI is a method that can help organisations design systems that ensure they have the information they need.

This information can help in developing strategies to increase the social and environmental value you create, manage activities by comparing performance against forecasts and help communicate with funders and beneficiaries.

Information elsewhere on this site will show you how and show examples of how others have used SROI.

Click here for the Guide to SROI

"Bulky Bob's won the contract not only on the quality of the tender submission and value for money but also on the additional social and environmental benefits they bring to Liverpool and its residents. We were very impressed with their creative ideas and passion and crucially with the strength of the information they could provide to demonstrate that what they do really makes an impact"- Keith Cadman, Partnership & Contracts Manager, Liverpool City Council.
 

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