S ocial R eturn O n I nvestment Michael Weatherhead

1. Social Return On Investment Michael Weatherhead nefconsulting (the new economics foundation) michael.weatherhead@nef-consulting.co.uk

2. The Session • In a nutshell… • Why is it needed? The problems • Where did it come from? • How do you do it? • Who does it work for? new economics into action

3. In a nutshell… • Based on traditional cost-benefit analysis • Uses principle of social auditing • Captures social value by translating social outcomes in financial values new economics into action

4. …still in a nutshell… • SROI Ratio =[value of benefits][value of investments] E.g. ratio of 3:1 = for every £1 invested in organisation, £3 of social value generated • ‘Social’ includes environmental and economic = triple bottom line new economics into action

5. Problem 1 new economics into action

6. Problem 2 We measure what we can count (often the financial) What gets measured is what gets valued What matters most – social and environmental well-being – gets left out We allocate resources to those things we value new economics into action

7. Problem 3 new economics into action

8. Why SROI? Why now? • Framework for measuring what matters • Paradigm shift in thinking about value and power • Triple bottom line • Giving voice to those normally excluded from decision-making • Basis for debating the allocation of (scarce) resources to maximise social, environmental and economic outcomes • Organisations • Society new economics into action

9. Where did it come from? REDF & Jed Emerson, mid 90s Mainstreaming (SROI-UK, OTS etc) nef, early 2000s new economics into action

10. Engage stakeholders to develop an impact map Indicators, data collection and monetisation Model and calculate SROI Report and embed How do you do it? new economics into action

11. Boundaries & Stakeholders • Materiality check • either most affected • or • whose influence can most directly affect the outcome new economics into action

12. Impact Map Inputs Activities Outputs Outcomes new economics into action

13. Impact Map: example new economics into action

14. Engage stakeholders to develop an impact map Indicators, data collection and monetisation Model and calculate SROI Report and embed How do you do it? new economics into action

15. Indicators • Away of knowing the outcomes have occurred new economics into action

16. Monetisation • For some outcomes, financial values are already available and monetisation can be a simple step new economics into action

17. Monetisation cont’d • Where no direct financial value is available, we use financial proxies • Definition: A proxy is a value that is deemed close to the desired indicator, for which exact data is unavailable new economics into action

18. Exercise: Indicators & Proxies

19. Engage stakeholders to develop an impact map Indicators, data collection and monetisation Model and calculate SROI Report and embed How do you do it? new economics into action

20. Impact • Deadweight • Attribution • Displacement – Are the benefits net benefits, or are they being displaced from elsewhere? • Negative Outcomes – Is it possible that an intervention is having negative unintended consequences? Impact = Outcomes – (DW + A + D + NO) new economics into action

21. Deadweight • Deadweight – What change would have happened anyway, in the absence of your intervention? new economics into action

22. Attribution • Attribution – How much credit can your organisation take for the outcomes? new economics into action

23. Future Projections • Benefit period – the length of time over which outcomes are expected to endure • e.g. reduced reoffending will endure for ex-offenders even after they finish a training programme • Drop-off – the rate at which benefits decrease over time • e.g. it is likely that some of the ex-offenders will re-offend new economics into action

24. Inputs • Types • Financial – e.g. grants, sales income • Physical resources – e.g. buildings, equipment • Volunteers • Gifts in kind • If just looking at one project within organisation, need to work out its ‘share’ of inputs new economics into action

25. Sensitivity Analysis • Sensitivity analysis – tests how the SROI ratio changes when key assumptions are altered (e.g. the value of proxies) new economics into action

26. Engage stakeholders to develop an impact map Indicators, data collection and monetisation Model and calculate SROI Report and embed How do you do it? new economics into action

27. Report & Embed • How would you use SROI for your organisation/in your work? • Make the case • Prove and Improve – learning tool new economics into action

28. Types of SROI • Evaluative SROI –based on actual outcomes data to assess the value that has been createdBest: When something is already up and running • Forecasted SROI– based on projections of what is expected to take place if the objectives of the project/organisation are metBest: When something is in the planning stages new economics into action

29. Who does it work for? • Third sector • to understand the value they are creating, communicate with funders and stakeholders, and improve. new economics into action

30. Who does it work for? • Public sector • to maximise public benefit when allocating resources. new economics into action

31. Who does it work for? • Private sector • to consider more fully (beyond the financial) how business activities are creating value (or not). new economics into action