Social Return on Investment: Everything You Wanted | Ashoka (2024)

How can an organization measure the social impact of its activities? Organizations and companies have focused on this question over past years through a measure called social return on investment (SROI).

The result of conducting an SROI analysis is a ratio of benefits to costs; for example, a ratio of 2:1 means that $2 of social value is created from an investment of $1. Calculating SROI can help discover impact, communicate impact, and influence strategy.

Here are a few at-a-glance takeaways on how the process of SROI works. This is from the 2009 SROI Guide.

1) SROI is outcomes-based. For example, suppose an organization provides one-on-one reading lessons to children to help promote literacy. The output of the program would be the number of lessons provided, while the outcome is how much the program helped increase literacy. The SROI Guide emphasizes that social value should focus on outcomes rather than outputs.

2) SROI is stakeholder-specific. The methodology calculates social return separately for each stakeholder. By doing it this way, it’s easy to involve stakeholders in determining and valuing outcomes.

3) SROI is denoted in monetary terms. Outcomes and investment amounts may be measured in non-monetary units, but all values in SROI should be conveyed in a common unit. Money is the most widely accepted form of measuring value.

4) SROI can be calculated for future as well as past activities. Forecasting SROI in the planning stages of a program may actually be easier than trying to calculate the impact of past activities. It can help an organization create goals that are outcomes-based and ensure that the right data collection will be in place to measure the outcomes.

The most challenging part of the process is figuring out how to put a dollar value on outcomes. In our example above, how do you value the increase in literacy resulting from reading lessons in dollar terms? The SROI Guide recommends identifying indicators of the outcome (like increased test scores by children) and then finding proxies to measure the dollar value of the indicators.

You may also ask yourself: how to separate out other factors that could have affected the desired outcome; was the increase in literacy a result of the reading lessons, or of other factors? One method to measuring this is to subtract out trends in the outcome indicators. A nationwide increase in literacy, for example, should be subtracted out in calculating the impact of the reading lessons on literacy.

If you didn’t learn everything you need to know about SROI in this post, there couple of consulting firms, such as Mission Measurement and Social Venture Technology Group that focus on helping organizations measure social impact; case studies can be found on their websites.

Social Return on Investment: Everything You Wanted | Ashoka (2024)


Social Return on Investment: Everything You Wanted | Ashoka? ›


Social return on investment (SROI) is a principles-based method for measuring extra-financial value (such as environmental or social value not currently reflected or involved in conventional financial accounts). › wiki › Social_return_on_investment
Guide emphasizes that social value should focus on outcomes rather than outputs. 2) SROI is stakeholder-specific. The methodology calculates social return separately for each stakeholder. By doing it this way, it's easy to involve stakeholders in determining and valuing outcomes.

What is the social rate of return on investment? ›

Social return on investment (SROI) is a method for measuring values that are not traditionally reflected in financial statements, including social, economic, and environmental factors. They can identify how effectively a company uses its capital and other resources to create value for the community.

What is the social return on investment measures? ›

SROI measures change in ways that are relevant to the people or organisations that experience or contribute to it. It tells the story of how change is being created by measuring social, environmental and economic outcomes and uses monetary values to represent them.

Why is social return on investment important? ›

The Importance of SROI in Decision-Making

Investors and project leaders use SROI not just to justify their expenditures, but also to make informed choices about future investments. It helps them see the real impact of their work, including improvements in people's lives and the environment.

What is the disadvantage of social return on investment? ›

Disadvantages of SROI
  • Complexity: SROI analysis can be complex and time-consuming.
  • Subjectivity in Valuation: Assigning monetary values to social outcomes involves subjective judgments.
  • Data Limitations: Reliable and relevant data might be scarce or hard to obtain.
Feb 1, 2024

Is 7% return on investment realistic? ›

General ROI: A positive ROI is generally considered good, with a normal ROI of 5-7% often seen as a reasonable expectation. However, a strong general ROI is something greater than 10%. Return on Stocks: On average, a ROI of 7% after inflation is often considered good, based on the historical returns of the market.

What is a realistic rate of return on investments? ›

The average stock market return is about 10% per year, as measured by the S&P 500 index, but that 10% average rate is reduced by inflation. Investors can expect to lose purchasing power of 2% to 3% every year due to inflation. » Learn more about purchasing power with NerdWallet's inflation calculator.

What is the difference between return on investment and social return on investment? ›

Social Return on Investment is related to value or something that cannot be realized through numbers. At the same time, ROI is related to money. Social Return on Investment also has a role in eliminating environmental degradation inequality.

How many stages are there in SROI based evaluation? ›

For SROI evaluation, According to the guidelines issued by the SROI Network UK organization, this research must examine six (six) stages of the SROI analysis method. These stages will include the 2023 SROI empowerment analysis disable program results, providing an SROI value of 2.47 with criteria worth pursuing.

Who came up with SROI? ›

Among these approaches, a methodology known as social return on investment (SROI) was first developed and promoted in the nonprofit sector by the Roberts Enterprise Development Fund (REDF) in 1996 and concurrently in academia as a social impact assessment tool.

Why is SRoI important? ›

SROI is a tool for measuring the total value generated for every rupee invested in development sector interventions. Why SRoI is important? The SRoI framework helps measure change in ways that are relevant to the people or organisations that experience or contribute to it.

What is the conclusion of the return on investment? ›

Return On Investment Conclusion

The return on investment is an evaluation of how profitable an investment is compared to its initial cost. The return on investment is an analytic tool that helps investors understand how successful a business or project is (or has the potential to be).

What are the advantages and disadvantages of return on investment? ›

The biggest advantage is that it is an easy metric to calculate and easy to understand. It means that is often used to use profitability and is not misinterpreted because it has the same meaning in any context. One of the disadvantages to ROI is that it does not take into account the holding period of an investment.

What is the importance of social investment? ›

Social investing offers a much needed opportunity for investors to advance social and environmental solutions whist still being financially profitable. With an expected financial return on the investment, social capital can offer significant advantages over philanthropy.

What is social impact investing with purpose to protect and enhance returns? ›

The goal of social impact investing is to align the traditional motivation for investing—an adequate and competitive risk-adjusted financial return that meets regulatory requirements—with a secondary motivation of contributing to positive social outcomes.


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