What Factors Go Into Calculating Social Return on Investment (SROI)?

Social return on investment (SROI) is a method for measuring values that are not traditionally reflected in financial statements, including social, economic, and environmental factors. They can identify how effectively a company uses its capital and other resources to create value for the community. While a traditional cost-benefit analysis is used to compare different investments or projects, SROI is used more to evaluate the general progress of certain developments, showing both the financial and social impact the corporation can have.

How Social Return on Investment Works

SROI is useful to corporations because it can improve program management through better planning and evaluation. It can also increase the corporation’s understanding of its effect on the community and allow better communication regarding the value of the corporation’s work (both internally and to external stakeholders). Philanthropists, venture capitalists, foundations, and other non-profits may use SROI to monetize their social impact, in financial terms.

• Social return on investment (SROI) is a method of accounting for the social, economic, and environmental value created by a company.
• Companies issue financial statements that show investors the revenue, sales, net profits, debts, and other key metrics, but SROI is not a factor.
• The purpose of issuing SROI is for corporations to be able to look at their social impact in financial terms.
• The factors that go into calculating the SROI are the social impact value and the initial investment amount.