Insights

Social Return on Investment (SROI) is approximately 25 years old. Over this time, the SROI framework has evolved and developed to become a key tool used by practitioners to measure impact and understand the social value created through activities.

Here I outline why organisations across business, government, impact investing, philanthropy and the for-purpose sector should have increased confidence in SROI as a tool they should be using.

Social return on investment (SROI) – SROI is a framework for accounting for value. It is used to understand the social, environmental and economic value of a policy, project, activity or initiative.

The early days

When participating in a panel discussion on impact measurement, I once described SROI as ‘the best of a bad bunch’ of impact measurement tools. This was around 20 years ago when I was working in the UK. The discussion was focused on the plethora of tools being developed at the time to support mainly not-for-profit organisations to commence their impact measurement journeys. Many of the tools had only been used a few times, but some were being hyped up loudly. With the passing of time many of those tools have fallen by the wayside.

SROI has stayed the course, evolved and become a standardised approach. It is now considered by most practitioners in the Social Value International (SVI) global network as the best existing framework for social valuation in terms of adherence to the eight principles of social value.

How SROI has developed

SROI was first used by REDF in the USA as a way to understand the social value being created by the employment social enterprises (ESEs) they supported through their venture philanthropy model. The model caught the attention of social enterprises and impact measurement practitioners in Europe who were looking at ways to better communicate impact to government and philanthropic funders. Networks of practitioners were formed in different European countries as people grappled with applying the process.

As a framework, SROI is a fusion of existing disciplines including cost–benefit analysis, financial accounting, sustainability reporting, impact evaluation, impact measurement and social research. This cross-discipline influence is one of SROIs strengths, as the approach is adaptive to emerging best practice. The cross-disciplinary influence has also shaped the standardisation of the approach.

One of the most significant developments for SROI came around 2009–10 when the approach received significant funding from both the UK and Scottish governments. This funding allowed the principles of social value to be agreed, for standardised training for practitioners to be developed, for a guide on application of the approach, and an assurance process for SROI reports to be developed. Alongside this a community of practice was created to continue to evolve the approach. This community of practice evolved into SVI, becoming a global network of practitioners. Since then, practitioners have continued to improve the SROI approach with perhaps the most significant developments being the introduction of a new principle – be responsive – and the increased focus on wellbeing of people and planet.

Current developments

With the growing focus on social value and social valuation (see our article on this topic), it has been great to see SVI recently complete a worldwide public consultation on revised Social Value Standards. This will continue to drive good practice in SROI as it is likely there will be an improved assurance process for reports, updated standards for social value reporting, updated guidance on applying the principles and improved methodology. And knowing the movement, things will not stop there.

There is a common saying in SROI circles that ‘your SROI is only as good as the practitioner!’ Given this, it is good to see there are moves to update the accredited SROI training. From our experience of delivering the SROI training over the past decade, personally, I’d like to see three courses emerge from the process:

1. A short course for people who want to understand the basics of impact measurement.
2. A slightly longer course for people who want to build their understanding of SROI and how it might assist them.
3. An intensive course with days of input over a period of time for people who want to become accredited Level 3 SROI practitioners.

The good news is that after 25 years of SROI there are a good number of experienced practitioners who can support organisations to undertake SROIs. At Think Impact we have one of the most experienced teams in Australia, with seven accredited practitioners, one of the few trainers in the country and team members who sit on the SVI methodology and assurance panels.

So, why use SROI?

This brings us to the key question – why should organisations from different sectors use SROI?

1. SROI is a powerful tool to measure and communicate value

For for-purpose organisations, SROI is a powerful tool to measure and communicate the broader value of what you do. SROI has been used by the not-for-profit sector to build the business case for funding from government or philanthropy. By moving beyond outputs (the numbers of people/things) into accounting for value through a ratio (for every $1 we receive we create $3 of social value) then organisations can tangibly demonstrate and communicate their impact.

2. SROI provides evidence of impact

For funders (government and philanthropy), procurement commissioners, impact investors and the like, SROI provides evidence of impact. Commissioning an SROI as part of any form of purchasing, funding or investing will build the evidence base around the impact achieved. The approach can give stakeholders confidence and trust that a credible, structured framework has been used to analyse impact.

3. SROI can capture the ripple effect of activities

For those working in complexity or on wicked problems, SROI is suited to capturing the ripple effect of activities that are providing long-term systemic change. Applying the eight principles of social value brings a focus on understanding the ‘value chain’ for different stakeholders – this allows for a better understanding of the impact of more socially innovative or collective impact approaches.

4. The learning from SROI can help shape strategy or improve decision-making

For any organisation undertaking an SROI there is a process of learning that can help to shape strategy or improve decision-making. The SROI process of engaging stakeholders, developing a theory of change, mapping outcomes, sensemaking and analysing value leads to better understanding of what is working and why.

5. SROI provides a way to measure and disclose the ‘S’ in ESG

With ESG and sustainability reporting becoming more mainstream, SROI provides a way to measure, communicate and disclose value creation for the ‘S’ in ESG. Given this, the SROI framework could become increasingly important for private sector companies (large and small) when they report on non-financial impact. Particularly as SROI allows for measuring social, environmental and economic value.

Taking the plunge

At Think Impact we know that SROI might not be the best approach for evaluation in every circumstance, hence our wider impact evaluation practice. But SROI can be incredibly useful in the right circumstances, as attested to by our clients:

Because it’s so competitive we really need to do all we can to legitimise, substantiate and add credibility. The SROI has assisted us with that, it's been a really valuable outcome for us. We got funding for Whittlesea [youth refuge and services]. Donna Bennett, CEO, Hope Street Family Services

The SROI results have been invaluable for discussions with governments at the local, regional and state level – being able to talk in the language of dollars and outcomes. The data has also validated and reinforced the need for the Regional Food Security Alliance, with government now advocating for us. Cathie Steele, Board member and former Chair of Bendigo Foodshare and instigator of the Regional Food Security Alliance

If you want to know more or talk through undertaking an SROI, don’t hesitate to get in touch with us via hello@thinkimpact.com.au.

We are conducting online SROI training in September 2025. See full details and register here.