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S ocial R eturn O n I nvestment Michael Weatherhead nef consulting (the new economics foundation) michael.weatherhead@nef-consulting.co.uk
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The Session In a nutshell… Why is it needed? The problems Where did it come from? How do you do it? Who does it work for? new economics into action
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In a nutshell… Based on traditional cost-benefit analysis Uses principle of social auditing Captures social value by translating social outcomes in financial values new economics into action
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…still in a nutshell… SROI Ratio = [value of benefits] [value of investments] E.g. ratio of 3:1 = for every £1 invested in organisation, £3 of social value generated ‘Social’ includes environmental and economic = triple bottom line new economics into action
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Problem 1 new economics into action
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Problem 2 new economics into action What matters most – social and environmental well-being – gets left out What gets measured is what gets valued We measure what we can count (often the financial) We allocate resources to those things we value
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Problem 3 new economics into action
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How does it help? Framework for measuring what matters –Triple bottom line –Giving voice to those normally excluded from decision-making Basis for debating the allocation of (scarce) resources to maximise social, environmental and economic outcomes –Organisations –Society new economics into action
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History Mid 1990s: REDF & Jed Emerson Early 2000s: new economics foundation Mainstreaming: nef consulting & others new economics into action
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How do you do it? new economics into action Engage stakeholders to develop an impact map Indicators, data collection and monetisation Model and calculate SROI Report and embed
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new economics into action Boundaries & Stakeholders Materiality check either most affected or whose influence can most directly affect the outcome
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new economics into action OutcomesOutputsActivitiesInputs Impact Map
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new economics into action Impact Map: example StakeholderInputActivityOutputOutcome Participants (32) Skills Time Trained in computer recycling IT skill set No. of recycled computers Increased self-confidence Improved mental health Sustainable employment Improved life stability Participants’ families TimeEncourage family member Continued participation Improved mental health of participants Increased income for family Less time spent on care for family member Local government N/A No. of computers recycled and diverted from landfill Reduced landfill expenditure Improved local environment National Health Service N/A Prolonged support for participants Improved skills for participants Reduction in care costs Improved mental health of participants
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How do you do it? new economics into action Engage stakeholders to develop an impact map Indicators, data collection and monetisation Model and calculate SROI Report and embed
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new economics into action Reduced social isolationParticipants are trying new things and socialising more Participants report increase in self-confidence and social skills Participants join clubs and/or develop new social networks Indicators A way of knowing the outcomes have occurred
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Monetisation For some outcomes, financial values are already available and monetisation can be a simple step new economics into action Stakeholder (beneficiary)OutcomeMonetised value Local AuthorityReduction in waste going to landfill as a result of recycling programme Cost of sending one tonne to landfill (£39, source: Local Authority) StateImprovement in mental health Saving in government spending on mental health (£20,500 for each in-patient, source: NHS)
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Monetisation cont’d Where no direct financial value is available, we use financial proxies –Definition: A proxy is a value that is deemed close to the desired indicator, for which exact data is unavailable new economics into action StakeholderOutcomeIndicatorsValue StateImproved overall physical health Reduced healthcare needs Healthcare costs (NHS) IndividualImproved physical health Reduced visit to GP surgery Participant reports an improvement in health Increase in exercise Cost of visiting private GP clinic Cost of health insurance Cost of gym membership
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StakeholderOutcomeIndicatorValue ChildImproved mental and emotional health Positive outlook and less stressed/ anxiety Cost of x no. of sessions/week of CBT ParentBetter family relationsPerception of relationship with child Annual cost of having a child (Liverpool Victoria study) Child1) Improved educational performance School performance (reports) cost: average annual salary 16-17yr old in full time work Child2) Better social (non- family) relationships More friends, better relationships with staff Amount spent on school counsellor Parent3) Reduced social isolation Frequency of interaction outside of immediate family circle Econometric calculation as to value of seeing friends Exercise: Indicators & Proxies
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How do you do it? new economics into action Engage stakeholders to develop an impact map Indicators, data collection and monetisation Model and calculate SROI Report and embed
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Deadweight Attribution Displacement – Are the benefits net benefits, or are they being displaced from elsewhere? Negative Outcomes – Is it possible that an intervention is having negative unintended consequences? Impact = Outcomes – (DW + A + D + NO) new economics into action Impact
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Deadweight – What change would have happened anyway, in the absence of your intervention? new economics into action Deadweight
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Attribution – How much credit can your organisation take for the outcomes? new economics into action Attribution
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Benefit period – the length of time over which outcomes are expected to endure –e.g. reduced reoffending will endure for ex-offenders even after they finish a training programme Drop-off – the rate at which benefits decrease over time –e.g. it is likely that some of the ex-offenders will re- offend new economics into action Future Projections
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Types –Financial – e.g. grants, sales income –Physical resources – e.g. buildings, equipment –Volunteers –Gifts in kind If just looking at one project within organisation, need to work out its ‘share’ of inputs new economics into action Inputs
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Sensitivity analysis – tests how the SROI ratio changes when key assumptions are altered (e.g. the value of proxies) new economics into action Sensitivity Analysis
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How do you do it? new economics into action Engage stakeholders to develop an impact map Indicators, data collection and monetisation Model and calculate SROI Report and embed
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How would you use SROI for your organisation/in your work? –Make the case –Prove and Improve – learning tool new economics into action Report & Embed
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Types of SROI Evaluative SROI – based on actual outcomes data to assess the value that has been created Best: When something is already up and running Forecasted SROI – based on projections of what is expected to take place if the objectives of the project/organisation are met Best: When something is in the planning stages new economics into action
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Who does it work for? Third sector –to understand the value they are creating, communicate with funders and stakeholders, and improve. new economics into action
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Who does it work for? Public sector –to maximise public benefit when allocating resources. new economics into action
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Who does it work for? Private sector –to consider more fully (beyond the financial) how business activities are creating value (or not). new economics into action
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