Social Returns on Investment (SROI): a proposed modified method for nonprofit organizations (NPO’s)

Abstract

Literature has suggested that the common practice ignores measuring or considering the social impacts associated with the return on investment in different programs. The generic trend and emphasis laid on calculating and using just the Economic Return on Investment (EROI) was challenged in this study and the importance of measuring Social Return on Investment (SROI) was identified. “Although a number of guidelines and reporting standards have been advanced since early 1990’s, no framework has yet been articulated for quantifying the value of a company’s impact on people and a community’s environment” (Lingane & Olsen, 2004). This study aims to apply engineering management skills in organization with a focus on social returns on investments. This paper took into consideration three main factors that affect the existence of an organization: stakeholders, investment by the stakeholders, and returns to stakeholders. The purpose of the study was to develop a model to measure the social returns on investments by NPO programs. The current research followed a new approach. The modified tool was used to calculate the SROI for three social service community programs conducted by Community Action Duluth (CAD), a nonprofit organization in Duluth, Minnesota. The results from Program 2 showed the SROI of 267%, compared to the EROI of 258% using the proposed method. The SROI value is higher and should be considered a more reasonable indicator of the program success. Thus, it can be stated that EROI values may not always be a true indicator of all the NPO program outcomes and returns. The current research findings support and claim that, SROI methodology is an equally and especially in case of NPOs, a better indicator of the returns on investments. The results imply that, care should be taken while assigning a dollar value to the outcomes created and in making conclusions about returns on investment, to prevent any false and artificial claims of outcomes which may not be caused because of the program. Lastly, recommendations and future work are discussed.