It’s Time to Democratize SROI Calculation
For too long, it has cost organizations far too much to figure out their social return on investment (SROI). This needs to be democratized. Calculating SROI can be done easily and at a fraction of the usual cost.
Capitalism has long been about creating value and delivering that value to shareholders. In recent years though, we’ve come to realize that environmental and social value are of equal or even greater importance and matter to all stakeholders, not just the shareholders.
Social return on investment (SROI) is a framework for measuring and accounting for value as it relates to social impact. Unfortunately, SROI has long been viewed as difficult to determine, leaving many to avoid working such equations into their cost-benefit equations. And when they do, they turn to outside organizations for assistance, who charge between $40k — $200k for one SROI report. This shouldn’t be the case. SROI calculations can be easily accessible in real time and created for a fraction of the cost.
All companies, no matter their size, should be able to access the knowledge and tools to calculate their returns. Here are a few simple steps on how you can get started today:
- Determine your project’s outcome indicators, which assess progress against specified outcomes. For example, if the outcome you’re looking to achieve is less waste, our indicator could be less waste going to a local landfill.
- Next, determine the value of these indicators through financial proxies. In the example given above, the cost of landfill charges could be your financial proxy.
- Prep your data for SROI calculation by deadweight and displacement, which is the percentage of the outcome that would have happened naturally even if your intervention hadn’t taken place. You’ll also want to consider attribution, that is, how much for the change that you’ve observed can be attributed to something or someone else?
- When it comes time for the calculations, our guide, SROI Prep (link), will walk you step by step through the math. It’s not difficult if you put some thought into it.
- If you’ve done the above but still need assistance, we’ve designed Riddl to make SROI calculation easy. We’ll walk you through the steps above, providing clear explanations, and will allow you to easily input all of your necessary SROI data. Then we’ll do the math for you with Riddl’s SROI calculator. You’ll be provided with easy-to-read reports that will show your year over year SROI, through an SROI ratio and the value associated with it.
The Harvard Business School (HBS) recently created the Impact Weight Accounts project, which encourages businesses to list their social and environmental impact as a separate line item on all financial accounts. In the very near future, listing impact on financial statements will be a requirement, not just a recommendation. Investors are pushing for more transparency around SROI data, as are consumers. By starting the work now, figuring out your company’s SROI or leveraging the Riddl workspace to make it simple, you’ll be ahead of the game.