Social Return on Investment

SROI is essentially a form of social cost-benefit analysis with a distinctive emphasis. Like cost-benefit analysis it monetises costs and outcomes and compares them, here as a ratio of social value to investment. What sets SROI apart is its insistence on identifying outcomes through engagement with the specific stakeholders who experience them, its explicit theory of change, and its principles for involving stakeholders and not over-claiming. In practice SROI tends to be more participatory and narrative, while traditional cost-benefit analysis is more economist-led; the underlying valuation logic is shared.

They prevent an activity from taking credit for value it did not create. Deadweight estimates how much of the outcome would have happened anyway without the activity, and is subtracted. Attribution recognises that other organisations or factors contributed, so only the activity's share is counted. Displacement accounts for value simply moved from elsewhere. Drop-off captures the fading of an outcome in future years. Applying these adjustments honestly is essential to SROI's credibility, since omitting them is the easiest way to inflate the headline ratio.

Generally not directly, and treating them as comparable is a common error. Because the ratio depends heavily on the scope chosen, the stakeholders and outcomes included, the financial proxies selected, the time horizon and the adjustment assumptions, two studies of similar programs can produce very different ratios for methodological rather than substantive reasons. SROI guidance stresses that the value lies in the narrative and the understanding of how value is created, and that ratios should be interpreted alongside their assumptions and sensitivity analysis rather than ranked against one another.