What is SROI?

How can we be sure that we have made actual impact? We employ the Social Return on Investment (SROI) method. It allows us to gather key insights for the people, projects, and organisations we partner with and more importantly; analyse and prove their effort. Start quantifying and evaluating the economic and social outcomes of your own initiatives by learning more right here.

How to measure SROI.

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. Measuring the ratio is not about increasing earnings. Finding your ratio helps you in ensuring that actual change can be attributed to your initiatives and that this change is sustainable for your specific audiences — also in the long run.

The 7 principles of effective SROI assessment.

To make sure that you are working efficiently with SROI, you will need to consider your approach. We recommend starting with examining the seven principles of SROI. It starts with involving key stakeholders, developing a theory of change, and ends with evaluating your results. It is important not to over-claim and to stay transparent throughout the process: Would the change have happened anyway?

01: Involve stakeholders

Involve beneficiaries and other stakeholders when planning what to measure and how.

02: Understand what changes

Develop a theory of change and gather evidence of positive and negative change.

03: Value the things that matter

Rate the importance of different outcomes by valuing economic, social, and environmental benefits and costs (not captured in existing financial accounting value).

04: Only include what is material

Report on everything relevant and significant – but no more.

05: Do not over-claim

Compare your results with what would have happened anyway.

06: Be transparent

Explain all your evidence and assumptions clearly.

07: Verify the result

Have others to check and validate your results.

Theory of Change.

To ensure coherence between target group, activities, and outcomes, it is crucial to make sure that there is a clear logic between what you do and what you expect to happen. This happens by establishing a Theory of Change: A description of how and why a desired change is expected to happen. Start by using the canvas provided (including a concrete example) and collect information through conversations with stakeholders.

Your research design matters.

Randomised controlled trial.

Participants are randomly assigned to either the control or treatment group by the researcher. If participants were allowed to choose whether to participate, there would be a risk that those who opt in differ systematically from those who opt out. As a result, any observed effect might be due to these pre-existing differences rather than the intervention itself. Random assignment eliminates this risk by ensuring that any differences between the groups are due to chance, thereby strengthening the validity of the measured effect.

Quasi-experiments.

Participants are randomly assigned to control and treatment groups by naturally occurring events without the researcher’s intervention. Thus, it is as good as random with no self-selection into the treatment group. Here, the randomisation also ensures that differences between control and treatment groups are not causing the effect, while isolating the effect of the treatment.

Longitudinal study.

Non-experimental evaluations, where data is collected for both treatment and control group, at least twice over time. The treatment effect is isolated by keeping several different characteristics of individuals (for example gender, age, educational level, etc.) in the data constant over time allowing for improved chances of establishing cause and effect.

Cross-sectional study.

The measurement of several data points at a single point in time. Here, you’ll ask the respondents about their situation before and after receiving treatment. A control group can be identified by finding the ‘typical’ development for persons similar to the treatment group. Since you’re measuring one point in time, cause and effect can be difficult.

To make a causal assessment of the impact we aim to make, we’re including control groups when it is practically possible. This provides information on the counterfactual outcome and can be used to isolate the effect. It requires that the control group is representative of the target group, so they are comparable

— Michael Svarer, Board Member, Lind Foundation

Apply the SROI method.

To use the SROI method efficiently, we recommend using the six research steps. Your analysis takes its starting point in an identification of the individuals affected by your social project and a definition of the purpose of the analysis. After this, input and outcome are assessed, leading to a calculation of the SROI ratio. Finally, a sensitivity analysis and outlining biases or pitfalls concludes your analysis.

 

01: Analysis purpose and stakeholder identification

  • Determine the purpose
  • Identify stakeholders
  • Decide stakeholder involvement

02: Statement of results

  • Construction of effect-diagram
  • Identify inputs
  • Evaluate monetary value of inputs
  • Specify outputs
  • Account for results

03: Adding monetary value

  • Develop result indicators
  • Collect data involving the results
  • Determine duration of results
  • Add monetary value to the results

04: Statement of measured effect

  • Deadweight
  • Displacement
  • Attribution
  • Drop-off
  • Calculation of effect

05: Calculation of SROI

  • Calculation of future effect
  • Calculation of present value
  • Calculation of SROI ratio
  • Sensitivity analysis
  • Payback period

06: Report, use and implementation

  • Report and share results
  • Implementation and evaluation of learnings

Start exploring data points.

The foundation of your SROI analysis is a combination of qualitative and quantitative data points, requiring you to follow your target group and the surroundings closely. The strongest data framework is based on collaboration and close dialogue as well as a combination of registry data and thoroughly designed surveys and interviews, identifying the change for the targets group.

 

You can use data sources such as:

  • Financial reports
  • Volunteer and employee working hours
  • Participants registration
  • Number of activities
  • Surveys answered by participants and volunteers
  • Interviews with focus groups and relevant stakeholders

For us, registering data is a growth engine for change. It is a joint effort, learning journey and value creation. By reflecting on data, we learn and become able to generate more value together with the people we work with. Insights and learnings from the data and impact measurements develop everyone in our programmes

— Nina Schriver, International Program Director, WAWCAS

SROI challenges.

Uncertainty, variance in representativity, and biases are a natural part of assessing the SROI. In spite of their regularity, it is important to handle these factors as they may have implications on your results and social impact. Strive to be conservative in your approach, consider the counterfactual outcome — and take the share of value that would be created in the absence of your efforts into account. 

Specially, quantifying social outcomes in monetary terms has historically been challenging, due to lack of a direct market value. Unlike financial goods, social benefits — such as improved mental health or reduced loneliness — stem from human interactions, relationships, and shared conditions. These “social goods” are essential to societal functioning, yet aren’t traded in markets, which complicates the assignment of an economic value. Despite this challenge, social values are critical for achieving sustainable change. When individuals experience enhanced wellbeing, there is a greater likelihood that financial benefits — such as increased income or reduced reliance on welfare — will endure over time. In this way, social values not only complement financial outcomes but also reinforce the long-term impact of an intervention.

 

Other SROI challenges:

  • Complexity: SROI can be complex, time-consuming, and require a significant amount of data.
  • Subjectivity: SROI can be subjective, especially social values as they rely on estimates and assumptions about the monetary value of different outcomes.
  • Lack of data: SROI calculations rely on data that may not be available or may not be reliable.

WELLBY Valuation Approach.

Our approach to valuing social outcomes is based primarily on Subjective Wellbeing Valuation. This method involves directly asking individuals about their self-reported wellbeing to estimate social outcomes.

We assess social outcomes through a range of measurement tools, capturing various aspects of wellbeing. However, in our evaluations, we always include a measure of life satisfaction, as it serves as the most effective metric for directly monetizing social outcomes. The life satisfaction question is practical for its simplicity while effectively capturing core elements of overall wellbeing. Research has shown that life satisfaction reflects a range of underlying factors, including mental health (Layard, 2018), work productivity (Oswald et al., 2015), and social relationships (Powdthavee, 2008). For this reason, we use the following question as our standard measure for social outcome valuation (Frijters et al., 2024).

The life satisfaction question “Overall, how satisfied are you with your life at the moment?” is central to our valuation approach as it enables the WELLBY (wellbeing-adjusted life year) method, which monetizes changes in life satisfaction for SROI analysis. A WELLBY is defined as a one-point change in life satisfaction (on a 0-10 scale) for one person over one year. By standardizing the valuation of social outcomes, the WELLBY facilitates comparability across diverse interventions.

We use these sources to valuate social efforts.

VIVE.

The Danish National Centre for Research and Analysis (VIVE) published a report in 2018 that
shows the public costs associated with eight different groups of socially marginalised people. The average cost per person in their use of the social security system is part of the framework.

SØM.

The Socioeconomic Investment Model (SØM) is developed by the Danish Agency for Social Services. The model calculates public budgetary effects based on predetermined target groups and outcome measures. SØM provides reliable estimates if the intervention’s target group aligns with those used in the model.

Sygdomsbyrden.

Sygdomsbyrden is a research initiative conducted by the Danish Health Authority and SDU, estimating the impact public health has on the public economy. Various conditions such as loneliness are examined and evaluated economically in detail in their latest report.

HACT.

HACT is an English organisation that is able to value persons increase in well-being and appoint a monetary value to e.g. being a member of a group, good health, and confidence. The values are based on 90 social outcomes and can be used to evaluate activities that have an unknown market price.

Getting started with SROI.

SROI should be seen as a diverse evaluation tool making it easier to map and measure financial and social outcomes. Set out with a light setup aiming to measure the essentials — then you can gradually build up your SROI and data framework. Get started today by downloading our SROI white paper or reach out to learn more.