Social return on investment

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Menno Salverda

Social Return on Investment (SROI) is a systematic way of incorporating social, environmental, economic and other values into decision-making processes.

By helping reveal the economic value of social and environmental outcomes it creates a holistic perspective on whether a development project or social business or enterprise is beneficial and profitable. This perspective opens up new opportunities and forms the basis for innovative initiatives that genuinely contribute to positive social change and poverty reduction for all. SROI balances proving and improving or addressing the paradox between accountability and learning by placing the perspectives of the different stakeholders at the centre of the valuation process.

​SROI originated in the USA from social enterprises interested in new ways to value the contributions they were making to society. It later arrived in Europe, where there is an increasing interest in the methodology as noted by publications by Context international cooperation (PDF, 4.2MB) in the Netherlands, the New Economics Foundation in the UK and Social Value UK.

SROI is used for planning purposes in terms of designing a Theory of Change, or Business Plan, and for assessing to what extent impact is realised or changes need to occur in the Business Plan. Although the SROI approach supports the thinking along the lines of a result chain, it does not support the idea of the components being connected in a linear fashion. The SROI approach is embedded in the acceptance of development taking place in situations of complexity.

Here is a simple, illustrative example: A project aims to uplift the standard of living of people in a certain area and a beekeeping initiative is set up. As a result a beekeeper now enjoys regular meals whereas before this was not the case. In traditional cost-benefit analyses, the value of the lunch would be measured in market prices. However, after interviewing the beneficiaries, and applying some valuation tools, it turns out that the ‘real’ value is much higher than the market price; social value has been created above the market / economic value which is now being accounted for. 

Like traditional cost-benefit analysis, SROI includes a ratio; in this case a Social Return on Investment ratio. Where in traditional cost-benefit analyses the ratios would be used to compare different projects, the SROI ratio is much more seen as one element in explaining and communicating the general progress of certain developments. The number itself is not seen as the end goal. It can be interpreted as aiding the narrative of this particular initiative. 

The aspect of stakeholder perspectives is essential in the SROI approach. It is precisely the value perspectives of the stakeholders (and most importantly the key beneficiaries), assessed, not by assuming these values, but by thoughtfully and intellectually engaging the stakeholders themselves, which is at the heart of this innovative (e)valuation approach.

Linkages with other approaches and methods

  • This method compares the total costs of a programme/project with its benefits, using a common metric (most commonly monetary units), which enables you to calculate the net cost or benefit associated with the programme. 

  • "Participatory Rural Appraisal (PRA) recently renamed Participatory Learning for Action (PLA), is a methodological approach that is used to enable farmers to analyse their own situation and to develop a common perspective on natural resource management

  • Social learning is an approach to learning that focuses on how people learn through social interactions, such as modelling, making connections, sharing experiences and resources, collaboration and self-organization.

  • Other evaluation approaches which are rooted in accepting complexities , such as Developmental Evaluation, Outcome Mapping

How is it done?

There are different components that are followed (not necessarily in a linear or chronological order) which collectively constitute the SROI approach.

A. Defining the boundaries (objective and scope)

Depending on the nature of the project, programme or initiative, a specific geographic area will need to be chosen. For example it could be a value chain of a certain commodity, which would include a range of actors in a specific geographic area, over a time span of five years.

B. Identification and selection of key stakeholders

With a selection of key actors and use of participatory tools such as an ‘influence-importance matrix’, all relevant actors are identified who either will be affected by the activities within the scope or who influence the project (either positively or negatively).

C. Developing the Business Plan / Theory of Change

Representatives of all stakeholders (diversity is good) create the theory of change or business plan. This will enhance collective ownership and encourage learning from and about different perspectives and realities. It above all provides clarity regarding the key actors for whom the intention is to create value; reduce poverty, improve health, etc. This is one of the most important steps within the SROI framework: it tells the story of how stakeholders were (are) involved in the project and their perception and belief of how their lives have changed or will change.

D. What goes in (identifying inputs for each outcome) and what comes out (identifying results)

For each intended outcome there are different investments or ‘costs’ linked to the realisation of the specific outcome. There may be unintended outcomes (or investments), which can also be measured; these can be positive or negative. Semi-Structured Interviews are conducted to identify benefits (see) and investments.

E. Valuation is the process of developing indicators to turn the articulated benefits and costs into a monetary value

Some benefits and costs are easy to valuate, for example when an intervention saves time, which can be used for productive work. Other benefits, like a higher status in the community are more difficult to attach a value to. Different tools can be used for this, including value ranking, use of opportunity cost, etc.

F. Calculation of the SROI ratio

By calculating the SROI ratio a comparison is made of the investments (inputs) on the one hand and the financial, social and environmental returns (outcomes and impact of an intervention) on the other. To enhance rigour in the ratio and credibility, it is most important that good solid research data has been used, as well as the best possible estimates of deadweight and attribution. This is generally seen as difficult (also by all other evaluation approaches and methodologies). However, through semi-structured interviews compared with other research data, approximates can be arrived at.

G. Narratives are increasingly understood as the stories that complement the numbers (ratio)

They provide the context by which for example the ratio would be used. The narratives also reflect on what cannot be captured in the SROI ratio.

H. Verification is done throughout the analyses, either using triangulation or through other means

Verifying the stories / narratives as well as the quantitative data from different stakeholder perspectives is an important aspect of the complete analyses, as it further builds and maintains the trust and collective ownership of the initiative and approach.

By going through all these stages and collecting both qualitative and quantitative data, an SROI report can be created, which provides the opportunity to communicate to all stakeholders (actors) of the initiative, including managers, primary actors, funders, etc. Following the learning approach this report can be used for the next stages of development and for analysing and adjusting the business plan or elements thereof.


  • SROI can be integrated in existing M&E approaches and does not need be an add-on activity. In fact the approach could guide a participatory development model, with reflection and learning as consistent ingredients.
  • The approach has the capacity to create awareness of mutual interdependence and as such develops collective ownership and commitment. 
  • It leads to mind-shifts, for example from a perception of cost (with consequently negative associations) to the realisations that they should be seen as investments with clear results benefitting the community, individuals and households.
  • Rather than positioning initiatives within imperatives such as profit maximisation and neoliberal economic growth, SROI, allows actors to create opportunities to more directly address the creation and measurement of social value.

Critical success factors

  • The approach as described above requires knowledge of participatory options and tools and excellent facilitation skills in multi-stakeholder processes. A safe and conducive environment is required for dialogues and learning amongst a diversity of actors (with often conflicting interests).
  • For SROI to be successful as an approach, good data needs to be available. Very specific data on production technology, market price fluctuations, environmental risks, etc. may be required.




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