Introduction
Social Return on Investment (SROI) is a framework for measuring and accounting for the social, environmental, and economic value created by a project or organisation. Unlike traditional financial returns, SROI captures the broader impact of a CSR initiative on stakeholders and communities. It helps in understanding how much social value (or impact) is generated for each rupee invested. This tool is especially useful for CSR departments to justify and improve their investments in social programmes.
Explanation: SROI goes beyond numbers on a balance sheet. It measures the real change in people’s lives and communities, showing how CSR creates social good.
Principles of Social Return on Investment (SROI)
1. Involve Stakeholders
Stakeholders must be engaged from the beginning to understand what changes are important to them.
Explanation: For example, if a CSR project involves school children, teachers and parents must be consulted to identify what kind of learning improvements matter.
2. Understand What Changes
This principle emphasizes identifying and measuring outcomes — not just activities or outputs.
Explanation: It’s not just about building a school, but also about whether students’ performance and attendance improved.
3. Value the Things That Matter
Assign monetary value to outcomes, even if they are non-financial, such as improved confidence, reduced stress, or better health.
Explanation: This allows decision-makers to compare social and financial returns in one framework.
4. Only Include What is Material
Focus on the changes that are significant to stakeholders and the programme’s objectives.
Explanation: If a project also leads to increased local employment, this should be included if it is significant.
5. Do Not Overclaim
Attribution must be carefully considered. Don’t take credit for outcomes that resulted from other programmes or external factors.
Explanation: For example, if the government started a parallel health campaign, its impact should be separated from the CSR project.
6. Be Transparent
Explain all methods, assumptions, and calculations clearly so that the process can be verified.
Explanation: Transparency builds trust among stakeholders and ensures accountability.
7. Verify the Result
Ensure the findings are accurate and credible through stakeholder feedback or external audit.
Explanation: Verification ensures the reported SROI is trustworthy and not exaggerated.
Measuring Change Through SROI
1. Establish Scope and Identify Stakeholders
Define what the SROI will cover and whom it will involve. Engage stakeholders to determine what outcomes are important.
Example: In a women’s skill development project, stakeholders may include trainees, their families, local employers, and trainers.
2. Map Outcomes
Create an impact map showing how activities lead to outcomes and long-term changes.
Example: Training → Skill gain → Employment → Increased income → Better family health and education.
3. Evidencing Outcomes and Giving Them Value
Collect data on outcomes through surveys, interviews, or focus groups. Assign financial proxies to outcomes.
Example: If women report increased confidence, a proxy could be the cost of a confidence-building course.
4. Establish Impact
Adjust for deadweight (what would have happened anyway), attribution (other contributors), and displacement (if others were negatively affected).
Explanation: This helps isolate the real impact of the CSR intervention.
5. Calculate the SROI
Divide the total value of outcomes by the investment.
Formula: SROI Ratio = Total Social Value Created / Total Investment
Example: If a ₹10 lakh investment generates ₹30 lakh in social value, the SROI is 3:1.
6. Reporting and Embedding
Share the results with stakeholders and use the findings to improve decision-making and strategy.
Explanation: A high SROI ratio can help justify expanding the project or replicating it elsewhere.
Conclusion
SROI is a powerful method to assess the effectiveness of CSR programmes. It brings a structured, evidence-based approach to understanding how social value is created and helps businesses demonstrate accountability and commitment. By applying the principles of SROI and properly measuring change, CSR departments can make more informed and impactful investment decisions.