Social return on investment (SROI) is a principles-based method for measuring extra-financial value (i.e., environmental and social value not currently reflected in conventional financial accounts) relative to resources invested. It can be used by any entity to evaluate impact on stakeholders, identify ways to improve performance, and enhance the performance of investments.
The SROI method provides a consistent quantitative approach to understanding and managing the impacts of a project, business, organisation, fund or policy. It accounts for stakeholders' views of impact, and puts financial 'proxy' values on all those impacts identified by stakeholders which do not typically have market values. The aim is to include the values of people that are often excluded from markets in the same terms as used in markets, that is money, in order to give people a voice in resource allocation decisions.
While in financial management the term ROI refers to a single ratio, unlike Social Earnings Ratio (S/E Ratio), SROI analysis does not refer not to one single ratio but more to a way of reporting on value creation. It bases the assessment of value in part on the perception and experience of stakeholders, finds indicators of what has changed and tells the story of this change and, where possible, uses monetary values for these indicators. It is an emerging management discipline: a skill set for the measurement and communication of non-financial value. Therefore, the approach distinguishes between "SROI" and "SROI Analysis." The latter implies: a) a specific process by which the number was calculated, b) context information to enable accurate interpretation of the number itself, and c) additional non-monetized social value and information about the number's substance and context.
The AccountAbility 1000 Stakeholder Engagement Standard defines stakeholders as “… those groups who affect and/or could be affected by an organisation’s activities, products or services and associated performance. This does not include all those who may have knowledge of or views about the organisation. Organisations will have many stakeholders, each with distinct types and levels of involvement, and often with diverse and sometimes conflicting interests and concerns.”
Stakeholder Engagement is defined as “… the process used by an organisation to engage relevant stakeholders for a purpose to achieve accepted outcomes.”Discovering the needs and benefits of collaboration with stakeholders is an imperative for companies. Anticipating the potential in stakeholder dialogues at an early stage and following a step-by-step guide can lead to successful shared value creation.
Stakeholder engagement needs to be:
2. pro-active instead of reactive;
3. learning orientated in order to get to tangible issue-based results;
4. measurable in terms of a company's internal targets; and
5. based on a thorough methodology.
Companies need to understand why they are engaging. Good reasons include:
1. Risk management: "if we don't do it, we can't operate". For an example of this consider Shell in Nigeria or BP in Indonesia.
2. Sustainability compliance management: "If we don't do it, we won't be successful". This could be applied to sustainable coffee sourcing at Nestlé as well as to supply chain engagement at Adidas, amongst others.
3. Market development: "If we do it, we can access new markets". This is the approach taken by Danone with its base of the pyramid model.
4. Innovation: "If we do it, we will be up to speed with our products", although in practice there are few examples of this.
5. Strategy: "If we want to grow, we have to do it and it will not only save us money, but make us better". Again, there are very few companies engaging for strategic purposes, although Unilever has made some strides.
We are convinced that high quality stakeholder engagement can serve the world and business.
Does your organization need help with its sustainability strategy and/or management systems?
Fill out the short form below and we will give you a call within 24 hours (usually the same day).
Alternatively, give us a call at +30 2130380111 (between 9am - 5pm CET).
2017 © Aiphoria
Copying any section of this website for publishing
elsewhere is not allowed without permission