Caveat

Social Return on Investment analysis can be a complex process and the Cabinet Office has recently provided a useful guide on how to carry out accurate SROI analysis, taking the reader through the process step by step. The Princes Regeneration Trust recommends that this guide is used when undertaking SROI analysis and advises that the information contained in this section is provided to generate new thinking about ways in which the value of social outcomes can be captured and incorporated into decision making.

What is Social Return on Investment?

SROI is a method used to calculate the value of long term social outcomes that have been, or are to be achieved, as a result of delivering a project. In many cases these social outcomes are not directly measurable in terms of their financial value and other, more tangible, outputs with clear monetary values often take greater priority during decision making. As a result, many decisions made are done so without due consideration being given to the value of these wider long term social outcomes and a decision can be made which may not deliver best value for money in the long term and may result in further subsidy being needed in the future.

What SROI does is to use money to convey the value of these long term social outcomes as money is commonly accepted as a unit that clearly conveys value. By placing a monetary value on these social outcomes it provides them with greater influence during decision making that can help local authorities make the right decisions about the long term future of heritage assets. There are two types of SROI analysis that local authorities can undertake:

Evaluative

Evaluative SROI is carried out once a project is completed and is based on the actual outcomes that have occurred as a result of the project.

Forecast

Forecast SROI is used to predict how much social value can potentially be brought about if the said social outcomes are delivered as a result of a project. Forecast SROI can be particularly useful during the decision making stage of a project and provides a clear criteria of success against which the project can be evaluated against.

Key elements of Social Return on Investment Analysis

In order to undertake thorough SROI analysis thought needs to be given to the beneficiaries of a project, the long term social outcomes that the project has brought/will bring about and indicators and financial proxies that can be used to enable a financial value to be assigned to these outcomes. Each element of SROI analysis is discussed in detail below:

Stakeholders

Identify the key stakeholders of a project, outlining how they will be involved in the project and what role they will play. In particular try to identify those stakeholders that the project is trying to reach out to and those that will be the main beneficiaries of your project.

Outcomes

By engaging with stakeholders identify what outcomes they would like the project to deliver, identifying the relationships between stakeholders and outcomes. This process will help to create the criteria of success for the project.

Indicators

Begin thinking about how you will measure your outcomes, or how you will be able to identify that your outcomes are being/have been achieved.

Value (Financial Proxy)

How will you measure the monetary value of your outcomes. This process is closely linked with identifying measurable indicators which demonstrate that your outcomes are being/have been achieved.

Deadweight

How much of the value that you have calculated using your financial proxy to measure the value of an outcome would have been generated anyway even if the project did not go ahead? At this stage it is useful to identify some comparable statistics that can be used so to see what is occurring in other areas. This helps to assess the extent at which your value reflects a national or local trend or whether it is a trend specifically occurring in the geographical area of your project and therefore is likely to be closely related to your project.

Attribution

To what extent is the project responsible for directly achieving the outcome you are measuring? At this stage consideration should be given to other projects and initiatives that may have contributed to achieving the outcome. It is important that a fair attribution level is calculated for the projects outcomes so to ensure that it is not over claiming the value of these.

Impact

What impact will the project have in the long term, and how long lasting are the outcomes going to be? A project can continue to deliver financial returns long after its completion and can be fundamental in improving the areas economic and social vibrancy. Therefore will the lasting social outcomes achieved continue to be of value in the future? This element of SROI analysis can be useful when disposing of a heritage asset at undervalue or when subsiding an asset that is in conservation deficit so to demonstrate the value of long term social outcomes brought about as a result that can often repay any public subsidy provided in the long term.

Social Return Ratio

Once the total value of the social return delivered by the project has been calculated the figure should be divided by the total investment in the project. This will provide a : ratio which will state that for every 1 invested in the project x of social return will be generated as a result of the project achieving the outcomes listed.

Worked Examples

Two worked examples of simplified SROI analysis have been undertaken for illustrative purposes demonstrating the types of outcomes that can be assign value.

Oxford Castle (PDF, 198KB)

Standard local authority template (PDF, 44KB)

A standard template has been worked up to provide local authorities with an idea of the potential social outcomes disposing of a heritage asset can bring about. This example is for illustrative purposes only so to provide local authorities with an idea of how to go about measuring social outcomes using SROI analysis. However, to expand the template further the Cabinet Offices A guide to Social Return on Investment offers helpful guidance about undertaking a robust piece of SROI analysis.