Measuring the SROI index, Social Return on Investment, allows companies and/or organizations to measure the impact of their investments or corporate welafre projects in terms of social performance.
The concept of social impact has received increasing attention in recent years, especially from social enterprises and third sector organizations that wish to know, evaluate and communicate the consequences and the generated changes of their activities in the context in which they operate. Together with the theory of change, the SROI methodology allows to construct a story of social change generated through a participatory, qualitative and quantitative process.
The SROI analysis also allows companies and organizations with a social impact to improve their communication and accountability strategies, increase transparency in the use of resources and donations and attract new capital by being able to demonstrate the validity of their work.
The SROI index can therefore be interpreted as an index of efficiency, as it measures the capacity of an organization to transform the resources invested into actions that generate a social return. The index is also useful to measure the social return of corporate welfare projects promoted by the organization itself.
In practice, the SROI methodology is based on the identification of activities using an input-output-outcome model. Data collection takes place by focusing on the involvement of stakeholders who play an active role in identifying the changes generated. The participatory method in the analysis is fundamental to avoid the self-referentiality of decision-making processes and to give greater robustness to the analysis.
The result of the analysis is an index that is obtained by the valorization of product outcomes and the invested inputs ratio. This way, the index identifies the social value generated for each euro invested: an index of 3 means that € 1 invested in that particular intervention generates a social return equivalent to € 3, thus tripling the initial investment.