• Strategy

How to Implement and Quantify an SROI Strategy?

Garratt Wooton
Garratt Wootton
Business Development Manager
Write to Garratt

Ready to get started with a social value strategy for your business? In this article, we’ll cover:

  • The 7 principles of social value
  • The equation for identifying the Social Return on Investment (SROI) 
  • Methods to evaluate the outcomes of this type of strategy 

How to Implement SROI Strategies?

In our previous blog, we established that social value is the value of a business’s decisions on the social, economic, and environmental well-being of its community. Whether your business considers the long-term effects of its production decisions on the local environment; develops a charity program that feeds directly back into members of its local municipality; or provides resources for underprivileged entrepreneurs, it’s using a social value strategy. 

The best roadmap for implementing this type of strategy is via the 7 Principles of Social Value:

  1. Involve stakeholders: It’s not just investors that act as your stakeholders, it’s the community. Make sure you inform everyone who will be affected on what gets measured and how; so everyone is aware from the get-go.
  2. Understand changes: Design a well articulated proposal of how things will be affected by your choices as well as intended and unintended results and show how it will be evaluated through gathered evidence. 
  3. Value the things that matter: Existing financial equations for ROI don’t go as in-depth. An SROI is where you will rank the value-add of social, economic, and environmental benefits from your business based on stakeholder preferences. Preferences are determined by the relative value of different outcomes in an SROI forecast. 
  4. Only include what is material: Report on things that are relevant. This is established through understanding what details and evidence must be included in the analysis to give a true picture of results, all of which should be based on the stakeholder preferences. 
  5. Do not over-claim: Find the data to show whether your forecasted outcomes have occurred, then demonstrate their financial value, including those initiatives and outcomes that don’t have a price attached. If you go a step further and compare your SROI results to a forecasted regular ROI result, you can ascertain how differently or how much more value the business added without inflating numbers.
  6. Be transparent: Be honest and clear on the success of your strategy. Be sure to clearly demonstrate why the analysis can be considered accurate, and ensure that it is properly reported to and discussed with community stakeholders.
  7. Verify the result: Ensure results are appropriately verified in line with the decisions being supported. When results are reported to stakeholders and are supporting community decision-making, always enlist third party or independent assurance. And then share in the positive results! 

How to Quantify SROI Strategies?

“The core and result of any SROI analysis is a ratio describing the relation between what you have invested (the input) and the financial and social value of a change (the outcome) — measured in monetary value.” You want to add value to your community, but you also need to be smart. Understanding the ratio of your value helps confirm the value-add your business initiatives created, and how sustainable it is for this target market over a longer period. 

The Lind Foundation has outlined the equation for determining your ratio as the following: 

Change that occurred  x  Financial value of that change  What we cannot attribute to us  ÷  Cost to create the impact  = Total impact

There are also two types of SROI strategies that can tap into this equation: Evaluative SROIs and Forecasted SROIs. 

They are essentially self-explanatory, with Evaluative SROIs being conducted post strategy implementation, and are based on actual outcomes over a specific period. They’re beneficial when a project is in progress, allowing for the availability of outcomes data. 

A forecasted SROI is applied during the planning stage to pre-assess impact without outcome-related data.

Using the two types of SROI analysis together can offer a better picture of results for better planning in future. 

How to Evaluate SROI?

Evaluating your SROI starts and finishes by applying the 7 Principles of Social Values. It starts with inviting in your stakeholders to help make decisions, and then confirming the results with them at the end of the initiative. It involves coming up with a well-rounded theory of change, and then evaluating your results at the end based on the social, economic and environmental value it brought through both — ROI and social ROI. 

The are a myriad of benefits of implementing, analysing and evaluating a Social Value or Social Return on Investment Strategy. They can influence public entities or large purchasers to shift future contracts, to include the elements of social value, thanks to the evidence and support of data backed SROI campaigns. Or they can be used in strategic management to compare initiatives with proven monetary value, allowing them to evaluate the suitability of a new strategy to generating social returns and utilizing their resources in the most effective way possible. 

It’s the way of the future, the question is do you want to be an early adopter? 

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