Measuring Social Return For Social Enterprise 1

Measures social and economic objectives Double Bottom Line Financial Sustainability Social Impact Measures social and economic objectives 2 2

Objectives are Aligned Vision Social Impact Objectives Sustainability Mission 3 3

Objective Examples Social Impact Scale Services rendered Clients served Jobs created Client income New tax revenue Public assistance saving Sustainability (Enterprise Performance) Operating efficiency Net profit/loss Donor dependency Sales volume Gross margin 4 4

Measuring Social Objectives Select impact measurements early and do a baseline study. Build information system to collect and measure impact Collect anecdotes evidencing hard-to- measure social impact. Budget for social impact monitoring. Social impact measures depend on the mission. 5 5

Measurement Challenges Financial sustainability objectives are easier to set and quantify, than social objectives Business issues can overwhelm social objectives. Insufficient funds, inadequate, time skills/systems to measure social impact. Unaccustomed to measuring social returns in “business” terms. 6 6

Social Impact and Social Return Social impact - measures qualitative and quantitative social impact based on social objective and type of organization Social Return on Investment (SROI) - measures the social value the social enterprise creates in financial terms as a ratio of the investment. *Investor= donor, taxpayer, sponsor or private contributor. SROI can be measured in social and/or financial benefit, and capacity building or systemic change and is quantified in dollar terms. (SROI is the social “bottom line” for social investors. SROI measures the social value The Program creates in financial terms as a ratio of the investment. Financial returns in the for-profit sector are measured in the increase of value of the stocks of an enterprise held by shareholders [private gain]. Social returns are different in that the gains are public. For example, a project to reduce airborne pollution levels in a community can produce social returns in terms of reducing pollution-related illnesses, as well as general increase in the quality of life. Social returns too, can be measured in financial terms. Reductions in pollution related illnesses usually mean lower medical expenses, and fewer days taken off work. Both medical expenses, and a day of labor can be measured in monetary terms.) !! Quantitative determination (in currency) of what the investor* is getting in return for funds expended on social programs. *Investor= donor, taxpayer, sponsor or private contributor. 7 7

SROI Framework Investment-oriented View grants and subsidies as investments in relation to the overall capital structure of the social enterprise. “Double-bottom line" value proposition A successful SE business model must balance social purpose and enterprise value creation. Practical Tool To be effective, SROI must be designed to inform the work of practitioners over time: ongoing measurement and assessment tools are a critical element. 8 8

Understanding Value Creation Economic Value Traditional value creation in for-profit businesses (profit) Social Value Traditional value creation in non-profit organizations, leading to improvements in the lives of individuals or society as a whole. Socio-Economic Value Builds on the foundation of Economic Value by adding Social Value that can be quantified and expressed in economic terms (monetized), either as cost savings (e.g. reduced need for public assistance) or increased revenues (e.g. increased tax paid). Unquantifiable Social Value Place SROI in larger context of value creation that include qualitative aspects not included in the SROI analysis (e.g. quality of life issues) 9 9

Understanding Value Creation (2) Economic Value Traditional value creation in for-profit businesses (profit) Social Value Traditional value creation in non-profit organizations, leading to improvements in the lives of individuals or society as a whole. Socio-Economic Value Builds on the foundation of Economic Value by adding Social Value that can be quantified and expressed in economic terms (monetized), either as cost savings (e.g. reduced need for public assistance) or increased revenues (e.g. increased tax paid). Unquantifiable Social Value Place SROI in larger context of value creation that include qualitative aspects not included in the SROI analysis (e.g. quality of life issues) 10 10

Measuring and Monetizing Value Monetized Social Impact - Expenses directly associated with social mission = Social Value Excess Cash Generated, not including: Grants and Subsidies Expenses directly associated with social mission = Enterprise Value Blended Value Enterprise Value = economic value of the enterprise. Cash flow analysis of business performance. Social Value = direct demonstrable cost saving and revenue contributions Blended Value = enterprise value + social value – debt (Remove Long-Term Debt) 11 11

Blended Value Blended Value Social Economic Value The concept of “blended value” arises from the notion that value has within it three component parts: economic, social, and environmental. While traditionally people have thought of nonprofits being responsible for social and environmental value and for- profits for economic value; in fact both types of organizations generate all three value sets. The rise of social enterprise, corporate social responsibility, social investing, and sustainable development are all examples of how various actors are pursuing a blend of financial, social, and environmental value. The blended value proposition is drawn from the belief that “value” is inherently whole; hence this school of thought is moving from measuring multiple bottom lines to focusing on a single value sign—blended value—or “total value” creation. 12 12

SROI Examples Job created Fair wages Income-generated by enterprise =cost savings on public assistance Fair wages = increase in taxable income Income-generated by enterprise = savings to donor Enterprise profit = investment $ for other social programs 13 13

Examples of SROI formulas Economic impact = Public assistance savings + earned income Program costs Return to tax payers = Reduced government funding + increased tax payments Program impact= Total employees Total target employees 14 14

For More Information… Roberts Enterprise Development Fund www.redf.org Blended Value Map www.blendedvalue.org National Social Venture Competition (www.socialvc.net) International Finance Corporation (www.ifc.org) 15 15