What is SROI?

 

By calculating the value of the benefits in relation to the investment required to achieve them, SROI presents a ratio easily understood by investors, commissioners and lenders.

 
 

For instance, a ratio of 2:1 indicates that an investment of €1 delivers €2 in social value. Social Return on Investment (SROI) is a framework based on the principles of economic cost–benefit analysis, impact assessment and social accounting. SROI aims to understand and manage an intervention’s social, economic and environmental outcomes and monetize their value. A SROI assessment enables organizations to determine how to maximize the value and impacts of social projects. By calculating the value of the benefits in relation to the investment required to achieve them, SROI presents a ratio that can be easily understood by investors, commissioners and lenders.

For instance, a ratio of 2:1 indicates that an investment of €1 delivers €2 in social value. Therefore, SROI is an excellent mean of communicating social value. One of the most important elements in SROI is the engagement with local communities who are benefiting from such intervention. Stakeholder participation and analysis are at the core of this approach. SROI thus reflects stakeholders actual needs, priorities and potential role in the implementation of the strategy.

Check out the first public Portuguese SROI developed by 4Change and led by me here.