There are dozens of tried-and-true methods for analyzing your organization's impact. One popular impact framework both impact funders and impact producers use to do this is social return on investment (SROI). The idea behind this framework is to assign a monetary figure to the social, economic, and environmental value generated by your organization's efforts. 

Though SROI can be incredibly useful for your organization’s stakeholders and community, it's notoriously difficult to understand and measure. To help you get started, we've created this guide that will cover: 

• Social Return on Investment: The Basics
• Calculating SROI: Understanding the Process 
• How Different Organizations Benefit from SROI 
• The Challenges of Measuring SROI 

As you familiarize yourself with SROI, consider your broader impact measurement and management (IMM) strategy and how you could level up your efforts. Embracing a thoughtful approach to IMM allows you to maximize your impact! Let's begin. 

Social Return on Investment: The Basics

What is SROI? 

SROI challenges your organization to measure the intangible—the impact it generates for its community. It is determined by assigning monetary values to specific projects or programs to more objectively evaluate the social, economic, or environmental value generated by those projects or programs. 

SROI may make you think of traditional return on investment (ROI). However, there is a clear difference between the two concepts:

• Normal ROI allows you to measure only financial returns.
  • Example: "We saw a 30% return on the $5 million investment made in the solar panel company."

• SROI empowers you to quantify the value of specific projects, programs, or initiatives.
  • Example: "For every dollar invested in the company's solar panel adoption program for rural communities, we created an environmental impact valued at $4.50."  

The 8 Principles of SROI 

When calculating social returns on investment, there are certain principles all organizations must keep in mind.

Social Value UK devised the following eight principles, which are considered the gold standards in the SROI impact framework: 

1. Involve Stakeholders 

Any individual or group impacted by your work is a stakeholder. Stakeholders could include an investor who provided an SROI loan or a group that is affected in some way by an activity or program.

Pinpoint relevant stakeholders and ensure they are active participants when calculating social ROI so that you can continue building trust with them.

2. Understand Change

You must figure out what changes have occurred through the focus activity or program. These could be positive or negative changes. Organizations are also expected to distinguish between expected and unexpected changes.

3. Value the Most Important Things 

What distinguishes this process is the principle of assigning financial proxies or monetary values to generated outcomes. It enables organizations to objectively value the things that matter the most.

4. Include Material Outcomes 

When making these calculations, organizations must include only what is material. Take the time to ask how including or omitting certain information could change how stakeholders are impacted.

If a piece of information would alter the decision-making process, it should be included. This improves both transparency and credibility.

5. Avoid Exaggerations 

Your organization should only claim the value its activities are directly responsible for creating. Consider what would have changed if your activities, programs, or projects weren't in the picture. Also, acknowledge the change that was due to the actions of others.   

6. Be Transparent

Transparency and trust must apply across all aspects of the SROI accounting process. This includes tracking, communication, stated goals, prioritized metrics, data collection, and campaign analysis.

Again, this all ties into communicating with all stakeholders and involving them in the decision-making process.

7. Verify Results

Ensuring credible outcomes demands external verification of results. It’s important to show how the organization reached its conclusions and enable stakeholders to independently verify social returns.

It’s also recommended that organizations utilize the independent assurance process, which enables third-party verification.

8. Be Responsive 

Once you have verified your results, it's time to make timely, evidence-based decisions that help your organization drive more social, economic, or environmental value. All your decisions should be supported by appropriate accounting and reporting. 

Forecast vs. Evaluative SROI 

In addition to understanding the underlying principles of the SROI impact framework, you should also be familiar with the two major types of SROI calculation: forecast and evaluative. 

Forecast Analysis

A forecast analysis is a type of analysis that occurs before implementing a social impact program. It’s a type of predictive tool that enables organizations to determine potential social value from the program.

Forecast analysis helps implement relevant metrics and data collection processes before launching a campaign. It also helps leaders figure out how to most efficiently dedicate monetary resources to create the most impact.

Evaluative Analysis 

As the name indicates, this type of analysis is conducted either after a program's conclusion or after it has been running long enough to generate enough data to evaluate.

Once you have outcomes to measure, you can use that data to determine if a program is underperforming or overperforming.

It’s helpful to perform both calculations to track whether an organization is meeting its goal.

Calculating SROI: Understanding the Process

Before diving into the specifics of how to calculate SROI, it's best to understand the broader process of carrying out an SROI analysis. Here are the core steps as outlined by Social Value International: 

1. Establish a scope for the analysis. Identify the specific projects or investments you'll focus on during your SROI analysis. Also, identify which stakeholders will be involved in the process and how. Remember, a stakeholder is anyone affected by your organization's activities.  
2. Map outcomes. List all the outcomes generated by the project or investment in question, such as the reduction of carbon emissions, increased graduation rates, or improved maternal health outcomes. Remember that some outcomes will be negative and some will be positive. 
3. Demonstrate outcomes and give them a value. Gather data that provides evidence of the outcomes you've identified. Then, assign those outcomes a monetary value. 
4. Establish impact. Focus on the impact your organization was responsible for creating. This will require you to analyze your data and assess how well your programs, interventions, projects, or initiatives helped you get closer to your core impact goals. Eliminate factors such as changes that would have happened with no interventions or changes that would have happened because of other people's actions. 
5. Calculate SROI. This is where you'll use the SROI formula (explained below). You'll compare the result to the investment made in your organization and verify your results. 
6. Report, use, and act on findings. Share SROI findings with stakeholders and include them in any impact reports you create.  

Terms to Know For Your Calculation

Now that you have the context of the broader SROI process, you should also know the following terms before performing an SROI calculation:

• Attribution: Assessment of how much an individual or group contributed to an outcome
• Deadweight: The amount of an outcome that would have occurred if an initiative hadn’t taken place
• Discounting: Recalculation of how future costs and benefits can be boiled down to present-day monetary values
• Discount Rate: Chosen interest rate for discounting future costs to a present-day value
• Drop-Off: Outcome deterioration over a period of time
• Impact: Overall influence on an outcome while taking into account deadweight, third-party contributions, and outcome durations
• Inputs: Stakeholder contributions needed to enable an activity or initiative to proceed
• Net Present Value: Present-day value of currency projected in the future, with the investment required subtracted
• Outcome: Change created by a social impact campaign. Outcomes may be foreseen/unforeseen and positive/negative.
• Outputs: A method of describing an activity using stakeholder inputs in quantitative terms
• Outcome Indicator: Measure of an outcome
• Proxy: An alternative value estimator where an exact measure is unavailable or impossible to calculate
• Social Return Ratio: Preset value of an impact divided by total investment

The SROI Formula

The general formula for the social return on investment calculation is as follows:

SROI = (SIV – IIA) / (IIA) x 100%

For the purposes of this formula, SIV stands for Social Impact Value, and IIA stands for Initial Investment Amount.

An Example Calculation

The formula itself may look intimidating, but in practice, it’s a relatively simple calculation to follow. Here’s an example: 

Let’s say that a nonprofit has decided to target formerly incarcerated people through a job-readiness program. Their stated outcome is to get as many jobs for formerly incarcerated people as possible. Success is based on the income of the graduates of their job-readiness program.

During year one, the nonprofit invests $100,000 to connect with, train, and educate formerly incarcerated people. Twenty formerly incarcerated people manage to secure jobs at an average salary of $32,000 per year.

In theory, this would mean the nonprofit generated $640,000 (20 x $32,000) in income. However, six left the program early, and three secured a job via alternative channels.

Using SROI principles, only 11 formerly incarcerated people completed the program and secured jobs with the help of the nonprofit. Where did this number come from? At an extremely basic level, nine must be discounted from the calculations as deadweight, whereas 11 can be directly attributed to the actions of the nonprofit.

So, based on the nonprofit’s stated outcomes, they generated $352,000 (11 x $32,000) through their job-readiness program.

If we perform the calculation using the formula above, we come up with an SROI ratio of 252%:

($352,000 - $100,000) / ($100,000) x 100% = 252%

Let's put this in terms of real dollars: For every $1 invested in the job-readiness program, the nonprofit created a social impact of $2.52 for the first year.

Take note: This is an extremely basic example and analysis can become far more in-depth.

How Different Organizations Benefit from SROI 

So, why go through the process of calculating a program or project's social return on investment? Let's look at some of the benefits of understanding social returns for two types of organizations. 

SROI Benefits for Nonprofits and Social Enterprises 

• Assign monetary value to impact. Can you articulate the dollar value of the impact you're achieving with your funding? Attract additional investment by showing profitable social returns.
• Improve credibility. It can be difficult to communicate the impact that you're making in an indisputable way. A provable social rate of return provides you with credibility.
• Boost transparency. Be open and honest about what you do and your impact on the communities you serve.

SROI Benefits for Private Businesses 

• Improve program management. Enhance the way you manage your various initiatives. Understand what worked and what didn’t, and then make a plan for moving forward.
• Offer insight into your company's impact. You’ll be able to see the stories behind the data. How is your organization making an impact?
• Level up your marketing strategy. Social impact is a powerful tool for marketing. Provable results could elevate your brand above the competition.

A Real-World Example of an Organization Using SROI 

OnSide is a national youth charity in the UK that aims to give all young people the opportunity to shine. The organization builds youth centers in the UK's most disadvantaged areas to create spaces for young people to thrive. 

In November 2024, OnSide released an SROI report to share insights about the social value generated by its network of youth centers. The main finding of OnSide's SROI analysis is that for every £1 spent on its youth centers, the organization saw a social return of £13 in terms of young people's wellbeing. 

But the charity didn't stop there. To round out its report, OnSide collected qualitative data (including survey and interview responses) to better understand both the positive and negative effects of its centers on the youth it serves. 

The Challenges of Measuring SROI 

Though measuring and monitoring your organization's SROI offers many perks, this approach to impact measurement also has some challenges. 

For instance, many feel that SROI is inaccurate because it requires your organization to make subjective judgments and assumptions (especially when assigning monetary value to intangible things). This can lead to ethical issues if your organization overestimates its impact or its SROI insights don't reflect your community's values in a fair way. 

However, taking the right approach to measuring SROI from the beginning can mitigate these impacts and cultivate a productive, positive experience all around.

The UpMetrics Approach to Understanding Impact 

At UpMetrics, we believe that organizations can form a comprehensive narrative that details their impact in a compelling way and inspires action. Our approach is rooted in looking at qualitative and quantitative data in one place with our next-generation impact measurement and management platform. 

The first step in a thorough impact measurement strategy is to create your Impact Framework. Learn more by exploring our Impact Framework library or signing up for our free Starter Plan! 

Wrapping Up

Your organization can measure and interpret the impact it's having on the community in several ways. Studying your social return on investment is just one way, and in this guide we've given you all the information you need to get started with your own analysis. 

Remember, to get a fuller picture of your impact, look beyond the financial and social returns that your organization generates. Consider applying the UpMetrics methodology to take your approach to the next level. 

Want to continue reading about the world of impact measurement and management? Check out these resources: 

• Impact Measurement: A Full Introduction & How to Get Started
• How to Measure Social Impact Like a Pro: A Full Guide
• The Ultimate Beginner's Guide to Nonprofit Storytelling