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Social Return on Investment

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Social Return on Investment. There are many things we value that cannot be easily captured in traditional economic terms. Conventional cost-benefit analysis does not consider anything beyond simple costs and price, which is why we have developed alternative tools to measure social and environmental impacts. Social Return on Investment is an analytic tool for measuring and accounting for a much broader concept of value, taking into account social, economic and environmental factors.

Key Facts £1 invested in high-quality residential care for children generates a social return of between £4 and £6.10. £1 invested in alternative, non-prison based sentencing for women offenders generates a social return of £14. Featured Work Publication // December 14, 2009 A Bit Rich Calculating the real value to society of different professions More.

SROI 'open to misunderstandings' By Sophie Hudson, Third Sector Online, 10 January 2011 Third Sector Research Centre Measuring charities' impact through the social return on investment method can be unreliable and has limited uses, according to a new report by the Third Sector Research Centre. The SROI framework puts a financial value on work performed and results achieved, and calculates a ratio to show how effective a charity is. In its report The Ambitions and Challenges of SROI, the centre says the tool is being used increasingly by organisations that are competing for contracts or philanthropic funds, despite the fact that it has numerous problems. "Although aiming for rigour, the method used leaves ample room for not only judgement that makes it possible to inflate the value created when there is no assurance system used, but also for misunderstandings regarding how to interpret and use the SROI ratios," the report says.

It can be particularly unreliable to use SROI to compare organisations, it adds. Social return on investment. Social return on investment (SROI) is a principles-based method for measuring extra-financial value (i.e., environmental and social value not currently reflected in conventional financial accounts) relative to resources invested. It can be used by any entity to evaluate impact on stakeholders, identify ways to improve performance, and enhance the performance of investments. A network was formed in 2006 to facilitate the continued evolution of the method. Over 570 practitioners globally are members of the SROI Network.

The SROI method as it has been standardized by the SROI Network provides a consistent quantitative approach to understanding and managing the impacts of a project, business, organisation, fund or policy. It accounts for stakeholders' views of impact, and puts financial 'proxy' values on all those impacts identified by stakeholders which do not typically have market values. Development[edit] Primary purpose[edit] The principles[edit] Monetisation principle[edit] References[edit] Social Return on Investment. Like other outcomes approaches, SROI can help you manage and improve services and make your organisation more sustainable. It can also improve your relationships with stakeholders; stakeholder engagement is a very important part of the SROI process and is one of its real strengths. SROI is especially useful if the funders of an organisation require outcomes information in financial terms.

How does SROI work? SROI is different from many other approaches in that it values outcomes by using financial proxies, so that they can be added up and compared to the investment made. This results in a ratio of total benefits (a sum of all the outcomes) to total investments. For example, an organisation might have a ratio of £4 of social value created for every £1 spent on its activities.

While the ratio is important, SROI is about much more than this. There is understandable fear that funders may use the ratio – and this only – to guide funding decisions. Who can use SROI? CES and SROI. The SROI Network.