September 24, 2019

SROI: Insights for Better Decision Making

Eric Hensel - Global Founding Partner & Sr. Sustainability & Social Investment Advisor, Sustainable Square 
With the increasing amounts of money being given to social causes, social impact assessment has been a key area of concern for charities and philanthropic foundations, for some time now. Demonstrating the social and economic value of the programs they fund is also receiving great attention from the corporate sector.
Traditional logic models (inputs, activities, outputs, outcomes and impact ) capture one part of the story. But there are significant amounts of intangible social value being created that is hitherto not being reported in quantifiable terms and it is this desire to be able to account for the creation of social value that sparked the creation of the SROI (Social Return on Investment) tool.
SROI takes an outcomes-based measurement approach to help organisations understand and quantify the social, environmental and economic value they are creating.  It focuses on effectiveness and efficiency and captures impact in a language of 'return on investment', a term widely understood by investors and managers.
Ambuja Cement Foundation started consciously applying SROI to complement the Monitoring and Evaluation(M&E)  of our programs in 2015 when we engaged Sustainable Square to measure the SROI of our water interventions - today our 4th SROI  study is currently underway.
Thrive caught up with Eric Hensel, Global Founding Partner & Sr. Sustainability and Social Investment Advisor at Sustainable Square to understand how SROI studies can help CSR and philanthropy managers make better decisions on their social investments.
As Eric explains "Social Impact Assessment or Social Impact Measurement can mean many things in many different places.  The terms are interchangeably used to mean the act of, or the collective methods used to, demonstrate what is happening in a social intervention to create value.  SROI is one method to assess or measure your social value. SROI values a stakeholder or beneficiary's actual change in financial terms.  This is normally communicated as a ratio of inputs (think costs) to outcomes (think returns).  So an SROI is often seen as a 1x ratio, with a higher x generally indicating a higher value return on your investment (in social values)." 
The question of 'are we really making a difference' can only be answered if the process of impact measurement opens up a dialogue with stakeholders, helping to assess the degree to which activities are meeting their needs and expectations. SROI uses a ground up approach by  involving stakeholders to map what really matters to them.
The ability to quantify intangible benefits is therefore key to SROI's success and is what sets the method apart from conventional cost-benefit analyses despite its use of a similar logic.
"At its core, SROI gives you much deeper insights into what actually happened by asking constituents, 'What changed for you', by clearly understanding that change, and ranking approximate values of these social changes." Said Eric. 
"It provides a more complete picture on how effectively the social capital has been deployed, providing the true picture to the Board and managements about the effectiveness of investments on the ground. Putting a monetary value on the benefit of its investments can help foundations know what has worked well in the past and what could be improved, giving them the opportunity to improve future projects and design them to maximize benefits for communities." Mr Hensel said.

Author: Nandita Dalal - Partnerships, ACF
September 24, 2019

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