What Is Social Return on Investment
Social Return on Investment (SROI) is a framework for measuring and accounting for the broader social, environmental, and economic value created by an organization's activities — not just the financial return captured by the organization itself. An SROI analysis assigns monetary values to social outcomes, enabling comparison of the social value created per dollar invested against alternative uses of that capital.
The SROI Process
A rigorous SROI analysis follows a structured process. Mapping stakeholders and outcomes — identifying all the groups of people affected by an organization's activities and the changes those activities create. Evidencing outcomes — collecting data that demonstrates outcomes occurred, including their scale, depth, and duration. Valuing outcomes — assigning financial proxies to outcomes, drawing on established financial values for comparable outcomes where available. Calculating SROI — dividing total social value created by total investment to produce a ratio (a common benchmark is at least 3:1 — three dollars of social value per dollar invested).
Common Pitfalls
SROI analysis can produce misleading results when done poorly. Deadweight — the outcome that would have happened anyway without the intervention — must be deducted from claimed impact. Attribution — the proportion of the outcome attributable to the organization versus other factors — must be considered when multiple actors contributed to the outcome. Displacement — whether the intervention moved problems rather than solving them — requires assessment. Rigorous SROI accounts for all these adjustments rather than claiming gross outcomes.
Using SROI for Decision-Making
SROI is most valuable as a decision-making tool rather than as a reporting metric. Comparing the projected SROI of different program interventions helps organizations allocate resources to the activities most likely to generate the greatest social value. Tracking SROI over time reveals whether programs are improving in effectiveness or declining. And SROI analysis can guide pricing decisions for social enterprises — pricing below the social value delivered is often both sustainable and ethical.