Measuring Program with SROI Method

SROI Overview

The phenomenon of increasing awareness of the community about the impacts created by the company’s activities around them has encouraged the increased involvement of organizations, creditors, and governments that provide financial assistance in the third sector, giving demand to create a triple bottom line (profit, person and planet) in the company’s activities.

Investors in non-profit organizations and companies are more selective and specific about the funds they spend to implement a program that is expected to give benefit all parties, the company, the environment, and the surrounding community. In line with the company’s existence in running a business, the main goal is to seek profit. Thus, the implementation of CSR should ideally be interpreted as a form of social investment made by the company. Just like an investment, it must be measurable and is expected to bring benefits in the future.

In other words, there is an increasing demand to count the social, economic, and environmental values ​​generated by the company’s activities. An understanding and management of the concept of value are becoming increasingly important for the public and private sectors. Related to this social pressure, activities or projects carried out by companies are mostly measured by the financial value they create for the company because the creation of financial value is actually the main goal of the projects being carried out (Maldonado and Corbey).

Primary Data Collection

To be able to achievethis, requires complete, reliable, and accessible data regarding the social value achieved by using the funds that have been invested. In the business, people only knew about Return on Investment (ROI), now people are starting to question the social impact of investments made or known as Social Return on Investment (SROI)

The idea of ​​SROI rise on the basis that investments should not only see the monetary value of what they generate as direct shareholder value but should cover a wider range of benefits. The SROI compares the present value of the benefits with the present returns of the resources invested but aims to do so by taking into account the entire range of values ​​generated.

Definition

As a tool in social reporting to measure the financial value of the impact of the program. Social Return on Investment (SROI) method will help to get the value of the financial achievements of the implemented programs, both apply to direct and indirect beneficiaries. One of the reasons companies conduct social reporting is for strategic reasons (Rusdin, 2016) so companies are increasingly aware of the importance of CSR programs as part of their business strategy. The implication of this is more companies are disclosing corporate social responsibility (CSR) information in their annual reports.

This makes the assessment of impact-oriented more important than outcome-oriented. SROI will support the realization of sustainable development because each program will be measured its effectiveness by referring to the impact generated after the program is running.

SROI Principles

The SROI concept is not a new concept, pioneered in America in the early 1990s, then developed in the UK in 2008. Experts in the UK (Nicholls et al, 2009: 9) propose that there are 7 SROI principles that can be used in building the framework:

1. Engage stakeholders,
2. Understand what the changes are,
3. Value the things that matter
4. Include only clear material,
5. Avoid excessive claims
6. Must be transparent
7. Verify the results.

SROI Calculation

The value projection is attempted as close as possible and reasonable, by providing assumptions and examples of similar things or using the size and standard of prices prevailing in the community in accordance with the context of the program. Furthermore, the data is analyzed to obtain the calculation of the impact value, the financial value of the impact to obtain the present value, then proceed with calculating the value of the SROI ratio.

The data obtained are then processed as follows,

NPV =  [Present value of benefits] – [Value of investments]

SROI Ratio =  [Present Value] / [Value of Input]

Based on the results of the calculation of the sample program implemented, obtained SROI Ratio 3.70, which means every Rp. 1, – investment gets an impact or benefit of Rp. 3.70,. If viewed from the socio-economic side, the program can be said feasible and successful.

Source:

Santoso MB, Adinegara R, Ismanto SU, Mumajad I, Mulyono H. 2018. Penilaian Dampak Investasi Sosial Pelaksanaan CSR Menggunakan Metode SROI. Jurnal Pemikiran dan Penelitian Administrasi Bisnis dan Kewirausahaan, Vol.3, No. 2. pp 153-167.

Santoso MB, Humaedi S, Raharjo ST, Bauw IZ. 2020. Social Return on Investment (SROI) pada Program Corporate Social Responsibility (CSR). Sumedang: Niaga Muda Press.