Social Impact Evaluation
Impact Evaluation of the work or projects implemented by a for-profit, non-profit or public organization through Social Return on Investment (SROI) methodology
Social Return on Investment (SROI) represents a way to measure economic, social or environment value produced or damaged by the organizations activity or projects. In a SROI analysis, the amplitude of the value produced or damaged is based in part on the perception and experience of the stakeholders, in part on the observable indicators of the change registered. Where possible, a SROI analysis permits the monetization of that change, which means that a ratio between the investment and the resulted value can be calculated.
The keystone of the methodology lays in the seven principles to be observed:
- Involve stakeholders.
- Understand what changes.
- Value the things that matter.
- Only include what is material.
- Do not over-claim.
- Be transparent.
- Verify the result.
”Value the things that matter,” or the monetization principle is unique to the SROI approach and includes the use of financial proxies and monetization of value. It is based on the assumption that the price is a proxy for value.
The use of monetary proxies to measure the social, economic and environmental value has the following benefits:
- it facilitates the alignment and integration of the performance management system with the financial system;
- it eases the communication with internal stakeholders, especially with those responsible for finances and resource allocation;
- it induces transparency through the clarification of the values included and those left aside from the analysis;
- it leads to the identification of key resources of value, thus streamlining performance management.
The disadvantage of using these financial proxies is the concern that monetization allows comparison of the end number at the expense of understanding the actual method by which it was arrived at. Such comparison is highly irrelevant.
As it informs the decision-making process on optimization of social, economic and environmental impact of an organization, the use of SROI analysis could assist to reduce social inequality, environmental degradation and to improve the quality of life of individuals and members of the community where the organization conducts its business.
Depending on the objectives of the SROI analysis, it can:
- take many different forms;
- be carried out as an in-house exercise or it can be led by an external researcher.
- be brief (for internal purposes), or a full report (for external stakeholders) that meets the requirements for verification.
Depending on the moment it takes place, there are two types of SROI analysis:
- evaluative – conducted retrospectively and based on already established outcomes, and
- forecast – it predicts the level of social value that is created if the intended outcomes would be achieved.