Measuring social impact and return on investment

Measuring social impact and return on investment – The growing pressure for evidence:  A unique South African Perspective:


Measuring SROIHow to measure the value and results of corporate social investment remains one of CSI Practitioners’ greatest challenges. Social and business benefits are often long-term or intangible, which make systematic measurement complex. And yet: Corporate grantmaking and investment faces increasing pressures to show it is as strategic, cost-effective, and value-enhancing as possible. The industry faces a critical need to assess current practices and measurement trends, clarify the demands practitioners face for impact evidence, and identify the most promising steps forward in order to make progress on these challenges.

Corporate social investment and involvement in socio economic development activities is as vital as ever to business and society, but it faces steep pressures to demonstrate that it is also cost-effective and aligned with corporate needs.

Indeed, many corporate giving professionals cite measurement as their primary management challenge. Social and business benefits are often long-term, intangible, or both, and a systematic measurement of these results can be complex. Social change takes time. The missions and intervention strategies involved are diverse. For these reasons, the field of corporate grantmaking has been unable to determine a shared definition or method of measurement for social impact.

Similarly, the financial value of enhancing intangibles such as a company’s reputational and human capital cannot be measured directly and may not be converted into tangible, bottom-line profits in the near term. Corporate investors and grant recipients often use less formal, anecdotal methods to convey impact. While stories may vitalize and publicize a program’s successes, it is more systematic measurement that brings rigor and discipline to the field. Data-based evidence quantifies the positive effects of corporate grantmaking, thus making a more persuasive case for why companies should engage in socio economic development causes.

If corporate grantmaking is to make progress in meeting these challenges, the industry must meaningfully assess current practices and measurement trends, clarify precisely what is needed in terms of impact evidence, and then identify the most promising and practical steps forward. This report is designed to aid that critical agenda.

Key terms:

The paper uses some terms that may be new to practitioners – here’s a quick jargon-buster:

Impact assessment: is any technique that enables an objective assessment of the social, community or environmental impact of the outcomes of your work – i.e. what your work achieves.

Outcomes: outcomes are the changes, benefits, learning or other effects that happen as a result of your work (whereas outputs are the things you deliver).

Social Return on Investment (SROI): an SROI analysis is the process of understanding, measuring and reporting on the social, environmental and economic value that is created by an organisation. The SROI approach usually involves calculations that provide a ‘SROI ratio’ – a monetary measure of the social value that has been created, compared to the investment required to achieve that impact.  Social Return on Investment (SROI) is a type of economic analysis that provides a framework for measuring social value. The SROI ratio represents the social value created for each R1 invested. Integral to this is the process of listening to stakeholders and understanding and valuing outcomes, either using evidence that a charity has already collected, or forecasting potential future returns.

While impact assessment does pose some genuine difficulties for many funders in terms of method, approach, time, capacity and resources, it is also increasingly clear that doing nothing is not an option. Building up your skills in this area is an investment in your organisation’s future and now is the time to get started.

Should you carry out an SROI?:

Putting a financial value on social outcomes can help funders to find out if an organisation is worth investing in, understand the impact that grantees are having, and identify where organisations need help.

For SROI to be really useful, funders have to consider whether they find value expressed in financial terms compelling, and whether their grantees’ and other stakeholders will find an SROI analysis useful. Many organisations undertake an SROI to attract funding, but it is worth checking first that other potential funders would be interested in the charity’s results being presented in this way.

Funders can also apply SROI to themselves, as a way of understanding the value they add to their grantees beyond the money they disburse. Yet as funders’ impact can be difficult to quantify, they have to consider to what extent their full value will be captured by an SROI, and may choose instead to use elements of the SROI framework to highlight particular areas of impact.

Impact assessment for beginners – getting started:


Impact assessment is essentially about two things: first, it is about identifying the key outcomes you try to achieve through your work; and second, it is about finding ways that these outcomes can be measured and reported on so that your stakeholders, other funders, partners, users and of course your own staff and volunteers can have a better understanding of your performance.

If you are starting from scratch, you will need to identify the outcomes that are most important to your work. You will then need to decide what indicators will most readily help you provide evidence to support these outcomes. Finally, you will need to set up effective data-collection processes so that important information about what you have achieved is not lost to your organisation. Here are some basic principles that will help you.

  • Keep it simple – fit for purpose and fit for your organisation
  • Start from ‘where you are’ and don’t try to achieve everything in one go; most of all, don’t over-complicate.
  • Look for indicators that clearly reflect the priorities of your work and which entail achievable data-collection processes.
  • Be realistic about your capacity and time.
  • Build up gradually, keeping staff, trustees – and, if appropriate, volunteers too – on-board.

Credible and repeatable:

  • Bear in mind that ideally you are looking for data-sets – and processes – that are amenable to repetition, just as your financial accounting uses standardised, repeatable processes.
  • Consistent, comparable data is central to impact assessment – indeed, to any kind of performance monitoring.
  • Initially, gathering a limited amount of data consistently against a small number of key indicators will serve you better than collecting a vast amount of information that defeats analysis or comparison.


  • Remember too that in the longer-term whatever impact assessment techniques you adopt should ideally be independently verifiable.
  • This means working from data that can be checked, rather than from subjective personal opinion, no matter how favourable that opinion might be!
  • It will also require your data to have an ‘audit trail’ – the sequence of paperwork (or computer entries) that helps to validate data by identifying where specific information has come from and how it has been arrived at.

Increasing the benefits of SROI:

Involving stakeholders and doing accurate economic analysis takes time and specialist skills, so funders should be prepared to make a considerable investment for SROI to be done well.

Funders can help to increase the benefits of SROI by investing in better measurement systems, making more of the ‘valuing outcomes’ element of SROI (understanding the value stakeholders place on different outcomes), and developing more robust financial proxies.

SROI is a useful tool, as long as it is supported by in-depth consultation with stakeholders and good outcomes measurement. Before SROI can achieve its full potential, more investment is needed to help charities to collect evidence of their impact. Funders have a key role to play here, both by funding charities to do more measurement and by encouraging charities to report on their outcomes.

The six stages of SROI:

1.    Establishing scope and identifying key stakeholders – This step relates to establishing clear boundaries about what the SROI analysis will cover, the people that will be involved in the process and the nature of their involvement.

2.    Mapping outcomes – Develop an impact map, or theory of change that demonstrates the links between inputs, outputs and outcomes.

3.    Evidencing outcomes and giving them a value – This stage relates to finding data that will show whether outcomes have occurred and then giving them a monetary value.

4.    Establishing impact – Having collected evidence on outcomes and given them a monetary value, this step involves discounting the impact by those aspects of change that would have occurred in any case or resulted from exogenous factors.

5.    Calculating the SROI – This step involves adding up all the benefits, subtracting any negatives and comparing the result to the investment made. Test the sensitivity of the ratio.

6.    Reporting, using and embedding Sharing the findings with stakeholders, responding to any questions they may have, embedding good outcomes processes and verifying the SROI report.

Guided by principles:

SROI is based on seven principles: involve stakeholders; understand what changes; value the things that matter; only include what is material; do not over claim; be transparent; and verify the result. These principles underpin how SROI should be applied, and following them is critical to completing a good SROI. Adhering to these principles is key to the credibility of SROI. Indeed, almost all of the problems with the interpretation and use of SROI stem from not following the principles properly.

1.    Stakeholder engagement: Stakeholders should inform what gets measured and how this is measured and valued.

2.    Understand what changes: Articulate how change is created and evaluate this through evidence gathered, recognizing positive and negative changes as well as those that are intended and unintended

3.    Value the things that matter: Use financial proxies in order that the value of the outcomes can be recognized

4.    Materiality: Determine what information and evidence must be included in the accounts to give a true and fair picture, such that stakeholders can draw reasonable conclusions about impact

5.    Do not over-claim: Only claim the value that organisations are responsible for creating

6.    Transparency: Demonstrate the basis on which the analysis may be considered accurate and honest, and show that it will be reported to and discussed with stakeholders

7.    Verification: Ensure appropriate independent verification and assurance – Some of the claimed benefits of SROI include:

a.    Improved performance measurement, program planning and evaluation

b.    Allowing organisations to easily demonstrate the social value and impact achieved from activities and programs

c.    Facilitating the communication of the social value and impact achieved to internal and external stakeholders

d.    Raising an organisation’s profile, which can improve the case for funding

e.    Facilitating the comparison of social value creation across organisations in broadly similar areas or with similar goals (e.g. organisations that seek to place disadvantaged and socially excluded people into employment).

Based on past or future return:

SROI analysis can be done using evidence that a charity has already collected or to forecast potential future returns. In the former case, the SROI represents value that a charity has already delivered. In the latter case, the forecast could be based on evidence from another project or on historical evidence from the charity. Forecast SROIs are becoming more common as a result of the lack of outcomes data in the charity sector. Any forecast SROI should be considered alongside other organisational information that would be likely to affect its future impact.

Common misconceptions about SROI:

1. The SROI ratio represents actual financial returns:

The ‘SROI ratio’ is the final point of an SROI analysis that represents the social value created for each R1 invested. This is how much stakeholders (including beneficiaries, the government, the employees of the charity) value the service. It does not represent an actual financial return.

Some of the value a stakeholder puts on a service will be based on how it improves their emotional, social and physical well-being (e.g. feeling less lonely or in better health). Some of it will be based on cost-savings related to using fewer services (e.g. improvements to a patient’s mental health mean he or she is less reliant on healthcare), and some of it will be based on expectations of higher income (e.g. the beneficiary earning a higher wage or reducing their debt or the government collecting more tax).

Lower spending on services and higher income can represent actual financial returns. Improved emotional, social and physical well-being are valued very highly by stakeholders, and so this value is put into financial terms for the purpose of the SROI calculation. However, they do not represent real cash savings.

It is also important to note that a financial return to one stakeholder may be a financial loss to another stakeholder. For example, increasing access to benefits increases the income of the person receiving benefits, but increases the cost to the taxpayer. It is standard in cost-benefit analysis not to include cash transfers of this kind. However, it is often interesting to highlight the competing interests of different stakeholders, even if they cancel each other out.

2. SROI is a way of measuring outcomes:

Although the process of carrying out an SROI requires the measurement of outcomes, it does not say how these outcomes should be measured. Its principles state that outcomes should be measured in ways that are meaningful to stakeholders, but what is meaningful will obviously vary from stakeholder to stakeholder. Suppose a charity you support is interested in measuring what difference it makes to a child’s self-esteem. What questions should it ask? To whom should it ask these questions? When should it ask these questions? SROI does not provide any guidance here; the charity would need to use a different tool.

The need for better measurement in the charity sector, particularly for subjective outcomes is a serious one. It is a fact of life that things that are easier to measure are more likely to be counted. SROI goes some way to addressing this tendency by insisting that all material outcomes are considered. In practice, however, the practicalities mean that outcomes for which there are not established methods for measurement or valuation are likely to get less prominence.

That SROI does not solve the measurement problem is not a criticism—SROI is not intended to prescribe measurement techniques. However, good measurement is crucial to a good SROI, and more investment in helping charities to measure is needed before SROI can reach its full potential.

What can SROI tell me about my grantees?

Demonstrating the value that an organisation creates for its stakeholders can help a funder to understand the impact of its grantees, and also to identify where an organisation might need help. How useful an SROI is for you as a funder will depend on the following:

  • Do you find value expressed in financial terms compelling?
  • Will your grantees’ other stakeholders find an SROI analysis useful?
  • Do your grantees have the necessary ingredients?
  • Will the SROIs of your grantees be comparable?

In our experience, the most common reason for charities to undertake an SROI is to attract funding. If you are funding a charity to undertake an SROI for this reason, it is worth checking that other potential funders would be interested in the charity’s results being presented in this way. SROI is often most powerful where a charity delivers outcomes that fall across traditional policy boundaries (for example, mental health and employment), or delivers outcomes beyond those it is contracted to deliver. SROI is a good way to highlight these benefits if they are not already being valued by funders. However, there must be a client-driven perspective, not only to ensure the time and enthusiasm throughout the project. A funder should consider whether SROI would be a useful way of improving a charity’s capacity for understanding its own impact. SROI can, and should, be used as a management tool, to help staff to understand the difference they are making and improve their services. To ensure this does happen, it is important to consider whether the organisational culture would allow SROI to be embedded into everyday practice. It is worth reiterating that a funder should not think that SROI will solve a charity’s measurement problems on its own.

SROI does not tell you how to measure outcomes, and so the charity may need additional support in this area. It is also worth checking whether the beneficiaries of the charity would find an SROI useful.  Given the principles of SROI it follows that the findings of an SROI analysis should interesting and relevant to beneficiaries.  Going through the SROI process in a transparent way makes an organisation more accountable to those it is trying to help.

Do your grantee do an SROI?

The first ingredient needed for an SROI is the ability of the charity to engage its stakeholders. If the charity’s beneficiaries are very far removed from the charity (as is the case for many campaigning charities) or they have serious communication problems, then the charity may struggle to involve these stakeholders throughout the necessary steps.  Asking vulnerable beneficiaries to access their ‘willingness to pay’ might not be appropriate.

The second ingredient needed is quantitative data to back up the charity’s theory of change. The data requirements to assess past social return are quite demanding.  Ideally the charity needs quantitative date on inputs, outputs and outcomes, which is collected systematically.   This data should reflect the priorities of stakeholders. The charity should also have data that gives some idea of ‘what would have happened anyway’, allowing for the fact that some change would have been achieved without the charity’s help.

The final ingredient is whether the charity has outcomes that can easily be given financial values. It is fairly straightforward to give financial values to outcomes that can be linked to cost savings. For example, if the outcome is reduced offending, then criminal justice system costs are saved. Outcomes that generate income can also usually be given a financial value.  For example, if the outcome is someone getting a job, then income is generated for the individual and the state.  But it is much harder to give other outcomes, particularly more subjective outcomes such as an elderly person feeling safer, a financial value. The current state of research means that many of these outcomes are undervalued, or not valued at all.

The better the ingredients of the SROI, the more accurate the analysis would be. In practice, charities with good data and outcomes that are easy to put in financial terms can produce analysis that helps them to understand where they are creating the most value and where they can improve. If the SROI is being performed for an external audience, accuracy will need to be higher than for an internal audience. If all of the grantees in a particular funding programme have the necessary ingredients for SROI then funders can add up the individual SROIs to get a feeling for the overall social return of a grants programme.  This is one major benefit of expressing all outcomes in the same terms.  The experience of funders in attempting to do this kind of analysis is that it works best with strategic grants for concrete, long-term projects with well-defined and simple objectives.

Will the SROIs of your grantees be comparable? There are three main sources of error in the final SROI ratio: error from not including all important outcomes; error from measuring outcomes; and error from placing financial values on those outcomes.  Even in the best case scenario, these errors introduce so much uncertainty into the calculation that any funder should be very wary of using SROI  ratios to compare charities. However, SROI is more than this final ratio and funders can still use SROI analyses to compare different charities’ most important outcomes and how they are viewed by their stakeholders. If two charities are measuring their outcomes in the same way and using the same financial proxies for these outcomes then a comparison of ratios may be more meaningful. Even so, any difference would have to be large before it could be considered to point towards a genuine difference in social value created. Also how and what a charity measures in an SROI is determined by stakeholders, so it might be considered a bit of a coincidence if two charities did end up with the same outcomes in the same way. Funders may wish to consider relaxing some of the stakeholder requirements, or getting the stakeholders of different charities together to think about how outcomes should be measured, if they wanted to ensure that different charities are measuring and valuing the same outcomes in the same ways.

If grantees are measuring their outcomes in the same way, this will also make it easier for them to share information with each other and learn from each other’s experiences.

Any decisions made on the basis of SROIs should be rigorously tested using a sensitivity analysis to ensure that funders are aware of which assumptions might be driving their results.

The cost of conducting a SROI:

Involving stakeholders and conducting accurate economic analysis takes time and specialist skills. This makes SROI resource intensive.

It is difficult to come up with a general estimate for how much an SROI costs but some important factors influencing price include:

  • the scope of the SROI analysis;
  • the skills of the staff within the charity or funder;
  • whether the charity or funder does the analysis itself or hires an external consultant;
  • data availability on outcomes and benchmarks;
  • current measurement processes;
  • timescale over which outcomes are measured;
  • and the audience for the analysis.

For SROI to be done well, funders should prepare to make a considerable investment over a long time period, possibly several years. However the time investment into SROI must stand in proportion to the project investment.  It will take time for a charity or funder to develop a measurement system that that truly captures its social impact in a robust way.  The organisation undertaking SROI must be willing to undertake intensive interaction with stakeholders and incorporate any lessons learnt from the project.

The most important consideration is how to use SROI in such a way that it maximises the benefit for the organisation. SROI can help a charity or funder better understand its impact, its cost base and the value it delivers. A charity or funder that understands these things is in a better position to improve its services and make a strong case to its stakeholders.

In conclusion:

Next Generation Consultants (NGC) has long sought to increase the level and quality of evidence in the social development sector, and we have experience of doing several types of economic analysis.  We believe that SROI has an important role to play in encouraging the collection and analysis of evidence. SROI’s emphasis on stakeholder perspectives resonates with NGCs believes that charities should be judged by what they achieve for their beneficiaries.

SROI is useful to funders that want to express the impact of their grantees in financial terms, to help build the capacity of grantees to think about their impact, or to think about how they increase the impact of their grantees beyond disbursing grants. However, SROI needs to be supported by good outcomes measurement and in-depth consultation with stakeholders. The cost of an SROI will depend upon whether a charity already does those things, or even with effort, the nature of its work allows it to gather sufficient data. If a charity does not have these things, SROI may not be appropriate. SROI is also not appropriate for comparing the effectiveness of a number of organisations because of the wide range of approaches currently used to create SROI ratios.

In order for SROI to achieve its full potential, first we need to invest in helping charities to collect evidence of their impact. This is particularly urgent in the case of measuring subjective outcomes. Funders have a key role in improving measurement in the charity sector, both by funding charities to do more of it and by encouraging charities to report on their outcomes.

To increase the potential for SROI to improve organisations, the expression of outcomes in terms of financial values should be used to gain a deeper understanding of the value of each element of a charity’s work. More work needs to be done with funders to understand the most effective ways for them to use SROI.

To increase the credibility of SROI, the use of financial proxies should be standardised, and more research is required into proxies for subjective outcomes.

Each of the elements of SROI have something to offer charities and funders in terms of understanding their value. Depending on the data and resources available, a complete SROI analysis will not be suitable for everyone. But NGC believes that funders and charities should take advantage of those elements of SROI that are most useful to them. Whatever approach is taken, organisations should adhere to the principles of SROI to ensure the credibility of any analysis they do.

Philanthropic initiatives and corporate grantmaking provide novel channels through which companies can meet core business goals and create long-term financial value—by increasing employee engagement, customer loyalty, reputational capital, and market opportunities. These improvements are most effective when corporate giving teams work in concert with existing company operations.

However, some companies do not target or measure the business benefits of their grantmaking — possibly because these benefits are intangible or not easily associated with short-term financial profits. Measurement frameworks can be introduced by leveraging models and evidence developed by related business disciplines; they can also help identify key intermediate outcomes that, if targeted, can ultimately yield desired business behaviors and benefits. Scholarly studies have found that these links are not always straightforward, however. It is hoped that the analysis in this report will spark additional research, measurement, and understanding of these mechanisms.

For example, it will be instructive to study how companies test and validate the effects of volunteer programs and other grantmaking activities on employee engagement and behavior. It will also be useful to learn from companies’ experiences with estimating cash flows, probabilities, discount rates and other model parameters that affect the valuation of growth opportunities arising from social investment projects.  Many companies already possess related data and valuable examples. There is much room for those companies to conduct and share thoughtful analyses of methodologies and frameworks without disclosing proprietary business information. This work is not merely academic; it provides actionable, research-based evidence in support of measuring value and promoting more effective alignment of philanthropic programs with core business goals.

A wide range of social impact-assessment frameworks is available in the social sector; many of these frameworks have been put forth by sophisticated private foundations reflecting their unique needs and goals. Given the diversity of missions that non-profit organisations and funders pursue, there appears to be no single quantitative or qualitative methodology against which performance of all grant types can be evaluated. Which approach a corporate giver should apply will depend on the motivation and focus of its grantmaking program. For example, the appropriate measurement strategy will depend on whether a company seeks to meet communal obligations, build a flagship program and partnership, make a few high value grants to one cause, make many one-off grants addressing multiple causes—or a combination of these. Nonprofit organisations face mounting pressure to demonstrate the effectiveness of their programs. Because they can call on internal relevant skills and experiences, companies are in an apt position to help grantees emphasize and take advantage of measurement, both to communicate and improve performance.

Measurement is not an unnecessary burden or unrecoverable cost if it adds value. Its value is maximized by organisations that harness it to build and learn from data over time. In a challenging economic period, when organisations seek to reduce overhead expenses of any kind, it is particularly important to distinguish “good” from “bad” overhead and to maintain funding dedicated to the ongoing improvement of social investment and grantmaking “bang for the buck.”

The investor community increasingly esteems companies with strong community records. Investors reason that such behavior represents the quality and foresight of management. Investors and analysts appreciate disclosures about social investment commitments that are comparable, material, and financially relevant. Absent effective industry standards, companies have an opportunity to distinguish themselves in their conversations with the investor community by proposing standards of their own. Part of such a proposal may include detailed insights into the related measurement process, which can help demonstrate understanding of what drives long-term business success, quality of management, and superior potential to create financial value.

The value of corporate grantmaking, socio economic development and social investment is measurable; as with many elements of business, however, it cannot always be measured as precisely as we would like. “What gets measured, gets managed” goes the old adage; indeed, measurement plays a crucial role in enabling companies to reach their full potential—both philanthropically and as more successful and sustainable enterprises overall.

About the author:

Reana Rossouw is the founder of Next Generation Consultants.  Next Generation Consultants is a specialist and award winning management consultancy that specialises in corporate social investment, socio economic development, enterprise development, sustainable development and sustainability reporting.

Next Generation Consultants have just developed South Africa’s first impact assessment and SROI tool which effectively measures, verifies and assures accountability, impact and return on investment of social investment and grantmaking for both donors and grantees. For more information: or

About Reana Rossouw

Reana Rossouw is the owner of Next Generation Consultants, a leading boutique Management and Business Consulting Firm with a wealth of experience in the business development environment. She is a regular speaker at national and international conferences and is regarded as one of South Africa’s leading experts in the areas of social investment, socio economic development, corporate responsibility, sustainability and sustainability reporting.
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