Social Return on Investment

by Nov 26, 2019Insight

Heny Widiastuti

Heny Widiastuti

Board of Trustee, Filantra

SROI or Social Return on Investment is a way to measure values ​​that often overlooked in financial statements, such as: social, economic and environmental factors. This method can identify how effective a company using its capital and other resources to create value for society. While cost-benefit analysis has traditionally been using to compare various investments or projects, SROI often used to evaluate the general development of financial and social impacts that companies have.

We also can use SROI for strategic planning, improvement, communicating impacts, attracting investment, or making investment decisions. This can help managers to decide the allocation of time and money.

There are two types of SROI, namely evaluative SROI and pre-estimated SROI. Evaluative SROI conducted to see past events and based on actual results that have occurred. Whereas the SROI forecast is activities that estimate how much social value will be created if the activity meets the expected results.

Seven (7) principles of SROI are to involve stakeholders, understand changes, assess priorities, only provide important input, do not claim excessively, transparent and always do double check.

In carrying out SROI activities there are several stages that are routinely carried out:

  1. Make a scope and identify stakeholders
  2. Map the outcomes into maps impact
  3. Collect and assign data values
  4. Reduce important data
  5. Calculate the SROI
  6. Report, Implement and implant values

Four main elements needed to measure SROI are : input, output, outcome and impact. The general formula used to calculate SROI is as follows: 

SROI = (social impact value-amount of initial investment): total initial investment x 100%