Social Return on Investment (SROI) attempts to capture the “blended value” generated by investments into social or community ventures. The approach uses the tools of cost-benefit analysis to assess the return of these investments. Applied to corporate social responsibility (CSR) efforts, SROI can be an important tool to demonstrate the social impact of corporate investments into communities.
SROI analysis is a method for understanding the environmental and social value being created by organizations in addition to the financial value generated. The SROI approach, like traditional ROI analysis, utilizes cost-benefit analysis techniques. It compares resources invested to benefits generated, to articulate whether, on balance, the benefits outweigh the costs. SROI monetizes the social benefits and costs relative to the financial costs, based on the net present value of the non-market outputs in dollar terms. The SROI ratio is the discounted, monetized value of the social value that has been created by an organization, relative to the value of the investment required to achieve that impact.
