Social Return On Investment
Michael Weatherhead
nef consulting (the new economics foundation)
The Session
• In a nutshell…
• Why is it needed? The problems
• Where did it come from?
• How do you do it?
• Who does it work for?
new economics into action
In a nutshell…
• Based on traditional cost-benefit analysis
• Uses principle of social auditing
• Captures social value by translating social outcomes in financial values
new economics into action
…still in a nutshell…
• SROI Ratio = [value of benefits] [value of investments]
E.g. ratio of 3:1 = for every £1 invested in organisation, £3 of social value generated
• ‘Social’ includes environmental and economic = triple bottom line
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Problem 1
new economics into action
Problem 2
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What matters most
– social and environmental well-being – gets left out
What gets measured is what gets valued
We measure what we can count (often the financial)
We allocate resources to those things
we value
Problem 3
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How does it help?
• Framework for measuring what matters– Triple bottom line– Giving voice to those normally excluded from
decision-making
• Basis for debating the allocation of (scarce) resources to maximise social, environmental and economic outcomes– Organisations– Society
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History
Mid 1990s:REDF &
Jed Emerson
Early 2000s: new economics
foundation
Mainstreaming:nef consulting
& others
new economics into action
How do you do it?
new economics into action
Engage stakeholders to develop an impact map
Indicators, data collection and monetisation
Model and calculate SROI
Report and embed
new economics into action
Boundaries & Stakeholders
Materiality check
•either most affected
or
•whose influence can most directly affect the outcome
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OutcomesOutputsActivitiesInputs
Impact Map
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Impact Map: example
Stakeholder Input Activity Output Outcome
Participants(32)
SkillsTime
Trained in computer recycling
IT skill setNo. of recycled computers
Increased self-confidenceImproved mental healthSustainable employmentImproved life stability
Participants’ families
Time Encourage family member
Continued participation
Improved mental health of participantsIncreased income for familyLess time spent on care for family member
Local government
N/A N/A No. of computers recycled and diverted from landfill
Reduced landfill expenditure Improved local environment
National Health Service
N/A N/A Prolonged support for participants Improved skills for participants
Reduction in care costsImproved mental health of participants
How do you do it?
new economics into action
Engage stakeholders to develop an impact map
Indicators, data collection and monetisation
Model and calculate SROI
Report and embed
new economics into action
Reduced social isolation •Participants are trying new things and socialising more•Participants report increase in self-confidence and social skills•Participants join clubs and/or develop new social networks
Indicators
• A way of knowing the outcomes have occurred
Monetisation
• For some outcomes, financial values are already available and monetisation can be a simple step
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Stakeholder (beneficiary) Outcome Monetised value
Local Authority Reduction in waste going to landfill as a result of recycling programme
• Cost of sending one tonne to landfill (£39, source: Local Authority)
State Improvement in mental health
• Saving in government spending on mental health (£20,500 for each in-patient, source: NHS)
Monetisation cont’d
• Where no direct financial value is available, we use financial proxies– Definition: A proxy is a value that is deemed close to
the desired indicator, for which exact data is unavailable
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Stakeholder Outcome Indicators Value
State Improved overall physical health
• Reduced healthcare needs
• Healthcare costs (NHS)
Individual Improved physical health
• Reduced visit to GP surgery• Participant reports an improvement in health•Increase in exercise
• Cost of visiting private GP clinic• Cost of health insurance• Cost of gym membership
Stakeholder Outcome Indicator Value
Child Improved mental and emotional health
Positive outlook and less stressed/ anxiety
Cost of x no. of sessions/week of CBT
Parent Better family relations Perception of relationship with child
Annual cost of having a child (Liverpool Victoria study)
Child 1) Improved educational performance
School performance (reports)
cost: average annual salary 16-17yr old in full time work
Child 2) Better social (non-family) relationships
More friends, better relationships with staff
Amount spent on school counsellor
Parent 3) Reduced social isolation
Frequency of interaction outside of immediate family circle
Econometric calculation as to value of seeing friends
Exercise: Indicators & Proxies
How do you do it?
new economics into action
Engage stakeholders to develop an impact map
Indicators, data collection and monetisation
Model and calculate SROI
Report and embed
• Deadweight• Attribution• Displacement – Are the benefits net benefits, or
are they being displaced from elsewhere?• Negative Outcomes – Is it possible that an
intervention is having negative unintended consequences?
Impact = Outcomes – (DW + A + D + NO)
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Impact
• Deadweight – What change would have happened anyway, in the absence of your intervention?
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Deadweight
• Attribution – How much credit can your organisation take for the outcomes?
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Attribution
• Benefit period – the length of time over which outcomes are expected to endure– e.g. reduced reoffending will endure for ex-offenders
even after they finish a training programme
• Drop-off – the rate at which benefits decrease over time– e.g. it is likely that some of the ex-offenders will re-
offend
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Future Projections
• Types– Financial – e.g. grants, sales income– Physical resources – e.g. buildings,
equipment– Volunteers– Gifts in kind
• If just looking at one project within organisation, need to work out its ‘share’ of inputs
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Inputs
• Sensitivity analysis – tests how the SROI ratio changes when key assumptions are altered (e.g. the value of proxies)
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Sensitivity Analysis
How do you do it?
new economics into action
Engage stakeholders to develop an impact map
Indicators, data collection and monetisation
Model and calculate SROI
Report and embed
• How would you use SROI for your organisation/in your work?– Make the case– Prove and Improve – learning tool
new economics into action
Report & Embed
Types of SROI
Evaluative SROI – based on actual outcomes data to assess the value that has been createdBest: When something is already up and running
Forecasted SROI – based on projections of what is expected to take place if the objectives
of the project/organisation are metBest: When something is in the planning stages
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Who does it work for?
• Third sector
– to understand the value they are creating, communicate with funders and stakeholders, and improve.
new economics into action
Who does it work for?
• Public sector
– to maximise public benefit when allocating resources.
new economics into action
Who does it work for?
• Private sector
– to consider more fully (beyond the financial) how business activities are creating value (or not).
new economics into action