Social Return On Investment (SROI)
Social Return on investment is a method for measuring social, environmental and economic impacts using a principles-based method for measuring extra financial value.
Although very similar to other methods of measuring social value outcomes it uses financial outputs as its key method of assessment.
It was developed from a traditional cost-benefit analysis and social accounting and it helps organisations (social enterprises) to become sustainable, attract investors, involve stakeholders and verify results for planning and reporting purposes.
SROI: A History – online presentation
Social procurement can be understood as the use of purchasing power to create social value. In the case of public sector purchasing, social procurement involves the utilisation of procurement strategies to support social policy objectives.
There has been particular interest in social procurement as a mechanism for stimulating markets for social enterprise, as part of a wider policy framework that has involved considerable devolution of public service delivery to social enterprise and the voluntary sector (Carmel & Harlock 2008; Munoz & Tinsley 2008; Kelly 2007).
In Australia, there is increasing attention being paid to the potential of government procurement to deliver social outcomes within the context of achieving value for money. This has been seen in Victoria with the delivery of the Level Crossing Removal Authorities directives for a 3% social procurement spend for all works of 20 million or more.
The purpose of impact investment is to provide social enterprise and not-for-profit business with the necessary funds in order to achieve social and environmental impact, financial return and business growth.
Social impact investors will normally expect a financial return on their investment in addition to repayment, with the percentage of return being agreed upon by the investor.
Impact investment is becoming increasingly popular in Australia and comes in a number of forms. In some cases, social impact investors finance social services or social infrastructure.
Social enterprise brings a unique combination of legal considerations. The legal structure of the organisation can vary in a number of ways, which may have a significant impact on the business. For example, a social enterprise can exist as a not for profit, a hybrid of not for profit and a private company, an incorporated association company limited by guarantee, a cooperative or an indigenous corporation.
The Social Enterprise guide produced by ‘Justice Connect’ is a useful introduction and provides comprehensive documentation covering the legal aspect’s to be considered when starting a social enterprise.
Whilst all organisations need to develop and operate according to a strategic plan and vision, social enterprises need to incorporate the social agenda into their mission. This includes the social impact or change their organisation intends to carry out in-line with their mission statement. Because social enterprises are by nature hybrid businesses they can develop a blended income stream and in some cases be a combination of crowd funding, user pay consultancy services, products or even grants.
Social Ventures have produced an excellent business planning guide for social enterprises.
Although the basic governance requirements for social enterprise are the same as any other business or not for profit, the hybrid nature of social enterprise in the merging of social and financial outcomes can change the needs significantly.
Capital providers are an influential stakeholder within governance, and can therefore play an important role in the success of the social enterprise’s mission.
Equity investors, for instance, often strongly influence the operations of an organisation. Thus, it is important that the interests of the investors be aligned with the mission of the social enterprise. This alignment might not be problematic at the early stages of a social business or when profits are achieved at the same time as a strong social impact. However, when these two are not in alignment, the need for the impact investor to be aligned with the social enterprises social impact mission becomes much clearer.
What are the Financial Mission culture operational risk associated with Social Enterprises that differ from other types of organisation.
Benefits and Risks of Social Enterprise.pdf