Social Return on Investment

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Social Return on Investment Social Evaluator

• Martin Egberink, Peter Scholten
• Social Evaluator

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Social Evaluator

• Noaber and DOB Foundation
• Social Enterprise / social venture
• Objectives
• Dissiminate SROI-methodology
• Spread Webtool Social Evaluator
• Individual accounts
• Licencies

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Consultancy on Social Entrepreneurship

• Strategy and Business Planning
• Performance management (SROI)
• Earned Income strategies
• Capacity Building

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Alice in Wonderland
Alice asked Cheshire catwould you tell me,
please, which way I ought to go from here?
That depends a good deal in where you want to
get to. If you dont know where you are going,
then any road will take you there, said the cat.

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Why measure?

• For yourself !
• Are we (still) doing the right things
• Are we doing the right things right
• Learning and development
• Secondary (external) reporting and accounting
• If you cant measure it, you cant manage it

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Social Impact Assessment tools

• Hundreds of tools, methods, scorecards,
  instruments
• Many selfmade-tools
• No standardization (GAAP) for SIA

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Google

• Performance Measurement 53.800.000
• Impact Assessment 93.300.000
• Social Impact Assessment tool
  32.000.000
• Dutch language
• Social impact 280.000
• Performance measurement 31.200

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Different background

• American models Acumen, NewProfit, etc.
• American models, European version SROI, BSC,
  Nesst,
• European models EU Evaluation models SCBA, NPC,
  Social Audit,
• Other models

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Different sectors

• Sustainability / environment / infrastructure
• Social / welfare, employment, community
• Development 3rd world / micro-finance

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Different purposes

• Results (impact) oriented SROI, SCBA
  quantitative (monetised)
• Process oriented BSC, AA1000, SA qualitative
• Quality TQM, EFQM, ISO etc.
• Research and Academic
• combinations

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Methods Catalogue

• American Example
• Authors Clark, Rosenzweig, Lang and Olsen
• Rockefeller Foundation www.rockfound.org
• Double Bottom Line Project Report assessing
  social impact in double bottom line ventures
• Assessment of 9 methods

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Tools overview Europe

• Balanced Scorecard-based models
• Nesst, NPC, New Profit / Monitor Group, etc.
• Quality Management models
• Social Accounting models
• Value based models
• Cost-benefit-analysis
• Social Return On Investment

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Balanced Scorecard (Kaplan)

• Finance
• Innovation
• Internal organisation
• Customers
• Mission
• Calculating lives touched

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Cost Benefit Analysis

• Mainly environmental and infrastructural projects
  (at this moment)
• Not a management tool
• Not stakeholder-driven
• Apply investment-selection-methods DCF.

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Social Return on Investment

• A quantitative measure of social impact from a
  capital investment
• Results-oriented instead of process-oriented
• subsidies and grants are capital investments

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Blended Value - theory

• Every enterprise profit and nonprofit creates
  value financial and social / ecological
• These values may be positive or negative
• Social and Financial Profits
• Optimize the mix

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But..

• We do measure already so many things
• Output (within organisation) vs. Impact
• Process (BSC, EFQM) vs. Results
• Fear for burocracy
• mission allignment do the results tell
  anything about the progress related to your
  mission

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Nature Conservancy USA
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Nature Conservancy

• Bucks and acres didnt measure the progress
  related to their mission
• In the same period the number of species
  (animals, plants) decreased also in the areas
  they owned.

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Return on Investment (ROI)

• Every investment requires a profit
• Profits are in the future investing is
  risk-bearing
• Forcast costs and benefits, based on assumptions
• Select best option

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Hockeystick
Income
0
Years
Costs
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Goals of SROI-research

• Management-tool for (social) entrepreneurs
• Track financial and social performance of a
  social enterprise
• Attract (new) investors
• PR/marketing and reporting
• Instrument for (social) investors
• the (future) value of their investment

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SROI Methodology

• Projectdescription / scope
• Theory of Change
• Stakeholder-analysis
• Impact and indicators
• Verification
• Monetisation and projections
• Reporting and monitoring

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Project description / Scope

• Name, objectives, country, sector.
• What are you analysing? A single project, the
  whole organization? No double-counting!
• Time-horizon (3, 5, 10 years)
• Goal of research?
• From whoms perspective?

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Theory of Change

• What exactly are you trying to change, prevent or
  influence?
• What are the results / objectives?
• How big is the issue? (magnitude)
• Urgency (or wish)?
• What value added do we create?

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Examples

• Selfconfidence / Empowerment
• Poverty
• Social cohesion
• Integration
• What exactly is the change you are aiming for?
• how verify whether objectives are achieved
  indicators (impact no output)

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Objectives must be SMART

• Specific
• Measurable
• Acceptable (Attractive)
• Realistic
• Time

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Stakeholder-analysis

• Who are your stakeholders
• Align stakeholder goals and expectations with
  business strategy
• Potential investors and Benificaries
• Social results often benefit stakeholders that
  dont have any input!

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Stakeholder verification

• Identify most important stakeholders
• What impact do they expect?
• How do they define success
• Verify with stakeholder
• Questionaires base case
• Change what change is expected / what change
  really happened

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Input

• What is the contribution (input) of each
  stakeholder?
• Express all inputs in money-value
• Time (x hourely rate)
• In kind donation (comparable market-price)
• Money
• What are total costs of the project?
• Hidden costs, overhead, dubblecounting

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Activities

• Every stakeholders with an input performs an
  activity
• Participation
• Funding / controlling
• Execution
• Activities are always directly related to the
  input

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Output

• Output is a measurable unit
• Number of clients
• Number of courses
• Number of treatments
• Directly related to input and activity
• No input, no activity, no output
• Output is always measurable (countable) within
  the organisation

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Wat is outcome?

• Sustainable impacts (long term)
• Stakeholders with no input can do have an impact
  !
• (almost) always outside/after organisation
• More difficult to count

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Impact value chain logic model
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Impact

• Impact is outcome, minus what would have
  happened anyway
• Methods
• Identify your next best competitor
• Benchmark
• What if what would have happened if you
  would have done nothing?

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Example employment agency

• Input
• Number of unemployed people (100) money
• Activity
• Finding a job
• Output
• Number of jobs created / persons with job (50)
• Outcome
• Number of people that have a sustainable job (30)
• Impact
• outcome minus the number of people that would
  have found a job anyway(20)

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Attribution

• Are more players invoilved in the creation of the
  social change
• What share (percentage) of the social change is
  the result of your investment/activities.
• Or include other organisation in your analysis
• The investment is made because organisations did
  not create the change

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Indicators

• Set indicators for impacts
• Indicators are units, that tell whether an impact
  has been achieved.
• One impact can have multiple indicators
• Make these indicators SMART (Specific,Measurable,A
  cceptable,Realistic and Time)

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Impactmap
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Monetisation

• To put a money-value on a product or service,
  when market-prices are not available
• Purpose
• benchmarking,
• visibility of social activity
• facilitate debate on social value-creation
• investment-methods / shareholderprice and
  -value.
• Money expresses value into a number.

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Why monetarisation?

• Show added value.
• From cost to value / investment.
• Compare results.
• Communication nonprofit and forprofit.
• Show the magnitude of the value created.

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The value of a disabled.

• is not what we are monetising!
• We are monetising the magnitude of the value that
  has been created by an investment in changing an
  undesired situation

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Why percentages and symbols are not enough
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What is Value?

• Value is subjective
• It may be different for different persons
• It can vary in different situations
• Social/ecological value vs. financial value
• Something can have value without cashflows taking
  place

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Value Price - Costs
Value is in the eye of the stakeholder
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Monetisation-methods

• Cost-related methods
• Cost Benefit Analysis
• Value-related methods
• Marketing
• Insurance

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Cost related methods

• Prevention-costs (social security, hospital,
  cleaning/pollution costs, etc.)
• Travelling-costs what are people investing to
  get somewhere
• Repair-costs method
• Hedonic pricing model the value of a house

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Hedonic Method (Utrecht)

• Criminality influences the value of real estate
• An investment in crime-reduction leads to
  increase in value of real estate
• Indirect salesprice / equity housing
  corporations
• Direct real estate taxes

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Perceived Value-methods

• Contingent Valuation Method
• Create a virtual market
• Value of social change is set by asking people
• - willingness to accept
• - willingness to pay
• Ability to pay

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Several CV-methods

• Creditcard-method.
• Show pictures of new sitiuation and ask how much
  people are willing to pay (bidding game)
• Insurance-method willingness to pay to prevent
  an undesired situation

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Price-Sensitivity Meter

• Widely used in marketing-research for new
  products
• Panels, interviews, etc.
• Proxy of the perceived value of the
  product/service for the customer

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Price Sensitivity Meter

• Investigate
• When customers feel the product is cheap
• When it is expensive
• To cheap (no quality)
• To expensive (no buy).

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The Price-Sensitivity Meter
100
respondents
Cum.
cheap
expensive
pricerange
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The value-game

• Making cards (5-10) with different
  products/services from which you know the value
  (but do not show) related to the situation of
  the client
• Insert one card with the issue you want to
  monetise
• Ask people to put the cards in order of preference

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Projections

• Monetize indicators in euro-value
• Make multi-year-projection of social costs and
  benefits
• Apply investment-selection-methods
• Payback-period
• Internal Rate of Return IRR
• Net Present Value

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Discount-ratio and risk

• The percentage with which future cashflows are
  discounted to calculate present value
• Statebonds 4-5
• High risk investments (IT) 20

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SROI-ratio

• socio-economic value
• SROI ratio total investments
• SROI-ratio 1 means every euro invested
  delivers 1 euro in return
• SROI lt 1 loss of value
• SROI gt 1 value has been created

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Sensitivity analysis

• Every projection is based on assumptions
• What are the effects to your SROI when you use
  different assumptions for the major impacts
• Social Break-even Point