Social Return on Investment; A brief introduction

Transcription

1 Social Return on Investment; A brief introduction November, 2012 Context, international cooperation Utrecht, Netherlands Cornelis Houtmanstraat 15, 3572 LT Utrecht, the Netherlands, phone: + 31 (0) fax: + 31 (0) info@developmenttraining.org internet:

2 Context, international cooperation Context, international cooperation is a social enterprise that provides business development support to social investors, social entrepreneurs and development actors that want to transform into a social enterprise at both strategic and operational level. 1 Context provides support with regard to subjects such as design and strategic positioning of social businesses and development organisations; value chain development; facilitating active involvement of citizens in value chains; formulation of business plans; impact assessment through the Social Return on Investment (SROI) approach. Context also offers various training programmes including a leadership development programme for social entrepreneurs. Context positions itself in between civil society, policy makers, corporate sector and academic community. The concept of social business A business that seeks, above all, to make a better world a business for a common good. (Lynch & Walls) Context, international cooperation promotes a social entrepreneurial approach to change processes, in which not shareholder value comes first; but rather efforts to create multiple ( blended ) values that are relevant for society at large ( impact instead of profits ) is what counts. This implies that the business is financially viable. Blended value creation could mean work and income for the poorest, change in power relations, an improved environment and access to basic social services such as health and education. In short, the essence of a social business approach is that a social enterprise is primarily committed to creating blended value for the society instead of only financial value, which is relevant to the society as a whole. 2 Impact investment approaches What gets measured gets done (Peter Drucker) Many social enterprises, social investors, development actors and private businesses create value beyond financial return; their actions and activities have a social, economic or environmental impact that affects people, their communities and the environment. To that end, different measurement methods have been developed over the past years to measure a combination of financial and non-financial returns on investment. 3 BACO, Balanced Scorecard, ESG, GIIRS and SROI have in the meantime become well known examples/approaches Ref: F. van der Velden, Social business: a novel approach to socio-political change, in: Fons van der Velden (ed.), New approaches to international development cooperation, Utrecht: Context, international cooperation, 2011, pp K. Maas, Corporate Social Performance: From Output Measurement to Impact Measurement, Rotterdam: Erasmus University, 2009 ( 1

3 The Best Available Charitable Option (BACO) quantifies a potential investment s social output and compares it to the universe of existing charitable options for that explicit social issue. The BACO ratio compares the impact investment to a philanthropic alternative based on cost and impact. The adapted version of the traditional Balanced Scorecard measures and improves a company s performance relative to social and environmental standards through an online survey, database, and report. The balanced scorecard is used to align business activities to the vision and strategy of the organisation, improve internal and external communications, and monitor organisation performance against strategic goals 4. Environmental Social and Corporate Governance (ESG) combines financial factors with environmental, social, corporate governance, and sustainability factors, when considering investment in a company. ESG is used for investors seeking to capture the returns associated with the shift from an industrial economy to a sustainable economy. Global Impact Investing Rating System (GIIRS) measures the impact scale made by institutional investors and financial services intermediaries. GIIRS ratings allow for comparable measurement of impact across businesses, and they reduce due diligence costs for impact investors and the communication burden for companies. Social Return on Investment Some people always know the price, but not the value (Oscar Wilde) Social Return on Investment is an alternative approach to planning, monitoring and evaluation, incorporating social, environmental, financial and economic values into decision-making processes. Context, international cooperation embraces this particular impact investment methodology as it is a participatory approach, involving stakeholders during the whole process. It has the potential to bring values to the surface which seem at first hand difficult to trace. Dignity and health, for instance, are values that should be taken into account in an analysis, in order to make better decisions. SROI attempts to do so, assigning monetary values to such aspects as well as through a narrative that explains the story behind the change. Hence, by combining the ratio with the narrative, SROI provides a framework that can be used for measuring and accounting the broader concept of value and places a value on the things that really matter. SROI originates from the United States. It was first introduced in 2000 by the Roberts Enterprise Development Fund (REDF), a social investor from San Francisco. The method was later refined by the New Economics Foundation in the UK and further developed by many actors including the SROI Network and Context, international cooperation. In the wake of these first initiatives, an international network of SROI practitioners emerged (SROI Network). Within this network, agreement was reached on a number of 4 See 2

4 methodological principles, and an intensive exchange between professionals was organised. Core principles of SROI Seven core principles are propagated through the SROI Network, which are as well adhered to by Context, international cooperation: 1. Involve stakeholders; 2. Understand what changes (from the stakeholder s perspective); 3. Value the things that matter; 4. Only include what is material (focus on relevant and significant issues); 5. Do not overclaim; 6. Be transparent (demonstrate findings transparently); 7. Verify the results. Narrative numeracy Context, international cooperation embraces SROI as an innovative approach to measuring results. It is an approach which acknowledges, among others, that social change may be experienced in a subjective way by different stakeholders with different realities and that mapping insights together with them leads to the most instructive and objective insights. In most social enterprises and development organisations, the importance of nonfinancial results is duly recognised and acknowledged. Yet, traditional economic analyses tend to focus only on those costs and benefits for which a market price is known. As a consequence, a very large part of the value created disappears from the analysis, not because it does not exist, but because it is difficult to determine or cannot be objectively measured. Such analyses give a distorted view of reality. SROI is in that sense an innovative approach, as it makes it possible to monetise nonfinancial returns. By using participatory methods, the changes that people experience (subjective rating) are systematically mapped. This clarifies where, when, how, how much, and what sort of value is created. There are various monetisation methods that are being used by staff members of Context, international cooperation. Based on this monetisation, an SROI ratio is determined which helps to assess the impact of a programme. The ratio allows for the comparison of results with investments (effectiveness), as well as the comparison of different types of returns of different activities. For Context, international cooperation the SROI ratio in itself is not an end goal; it reflects one element in explaining and communicating a change process. It needs however to be embedded in a narrative, which explains the story behind the change. For this reason Context, international cooperation treats and labels SROI as narrative numeracy. 5 5 See J. Emerson, The Blended Value Proposition: Integrating Social and Financial Returns, 2003, p

5 Furthermore, a SROI analysis helps to focus on results. The relation with financial and operational management contributes to the connection of impact measurement with internal processes. It also facilitates the analysis of accountability towards investors, stakeholders or the general public. Conduct of inquiry In line with the values expressed above, Context developed the SROI approach into a set of interrelated elements with which a systematic analysis can be performed. This process has been documented in an SROI manual which was developed in collaboration with client organisations from Africa, Asia and Europe and has been used since A SROI process consists of the following steps. Defining the boundaries (objective and scope). This is in all cases the first step. Together with stakeholders the key purpose of the analysis is defined and it is decided from who s perspective the assessment will be carried out. Subsequently, the boundaries of the analysis are determined. This includes the geographical boundaries, the boundaries in time, and the activities to be included. These boundaries are the reference points that decide which inputs and outcomes are included in the analysis. Identification and selection of key stakeholders. With a selection of key actors and the use of participatory tools such as an influence-importance matrix, all relevant actors are identified who are either affected by the activity, or who affect the activity themselves. Developing the Theory of Change. 7 Representatives of the key stakeholders investigate the process of change that is analysed. If the analysis is forward-looking, this means that participants sketch their activities, and the expected consequences of those activities: they develop pathways of change, which represent the kind of change that can be expected. If the analysis is backward-looking the participants are asked to reconstruct what happened. Normally, the outcome is similar to the content of a business plan or project plan. This step tells the story of how stakeholders are involved in the project and shows their perception and belief of how change has or will take place. Resources used in the activities (identifying inputs) and what comes out (identifying results). For each stakeholder different investments or costs can be linked to the activity that is analysed. Simultaneously, for each stakeholder an overview is made of all outcomes and effects that are experienced. There may be positive or negative outcomes. There may be unintended outcomes. Semi-structured interviews and group exercises are useful tools to identify the relevant costs (inputs) and effects (results). Valuation is the process of developing measures (indicators) to turn the articulated benefits and costs into monetary values. Some benefits and costs are easy to valuate, for 6 J. Brouwers, E. Prins & M. Salverda, Social Return on Investment; A practical guide for the development cooperation sector, Utrecht: Context, international cooperation,

6 example when an intervention saves time, which can be used for productive work. Other benefits, like a higher status in the community are more difficult to attach a value to. Different tools can be used for this, including value ranking, use of opportunity cost, etc. Calculation of the SROI ratio. By calculating the SROI ratio a comparison is made of the investments and operational costs (inputs) on the one hand and the financial, social and environmental returns (outcomes and impact) on the other. To enhance rigour in the ratio and credibility, it is most important that good solid research data is used, as well as the best possible estimates of deadweight and attribution. 8 Through semi-structured interviews compared with other research data, approximates can be arrived at. Narratives are the stories that complement the numbers and the ratio. While conducting an SROI analysis, during group discussions, interviews, etc. many stories come up. Narratives are an integral part of a good SROI analysis. Verification of data is required at the end of the analysis, but it is also useful to check data as much as possible during the analysis itself. Sometimes, stakeholders are not able to produce correct data. Consequently, key data needs to be checked against additional sources. The results can be documented in a report which can be shared with stakeholders. Following the learning approach this report can be used for the next stages of development, for analysing and adjusting the business plan, or for making decisions in other activities. 9 An SROI analysis facilitated by Context is participative and interactive in nature; most of the time performed in a workshop setting in which stakeholders work actively together on the research framework, data collection, analysis and verification. There are different ways to organise a participatory analysis. Sometimes it is most practical to organise a multiple day workshop to conduct the whole analysis together from start to finish. It can also be useful to split up the process in a number of separate sessions over a longer period. This gives participants more time to reflect and provides the opportunity to collect additional information from outside the group of participants. Context, international cooperation generally works with the following assessment process. 8 Deadweight is the extent to which outcomes would have happened anyway. Attribution is the extent to which outcomes are resulting from the analysed activity. 9 M. Salverda & H. Lont, How to conduct an SROI analysis? Utrecht: Context, international cooperation,

7 No. Phase Activities 1. Preparatory stage Review of documents Inception meeting: to develop a common understanding of the Terms of Reference, fine tune the SROI methodology, develop an overview of the preparatory work to be done before the actual data collection, planning of data collection including SROI workshop Preparation for primary data collection 2. Primary data collection SROI workshop Interviews for valuation and triangulation Focus Group Discussions Online survey 3. Analysis Review of primary and secondary data, as well as information retrieved from workshop, bilateral interviews, Focus Group Discussions and online survey 4. Draft report The draft report includes the approach and methodology used; the findings and results of the assessed programme 5. Final report After the draft report has been read and approved by the organisation for which an SROI analysis has been conducted, a final report will be submitted 6. Debriefing (Skype) meeting about feedback on the process and findings (including recommendations) In short, SROI is basically a very simple, but not simplistic, approach. The methodology can make people enthusiastic and is consistent with the perception of the most diverse sets of stakeholders. The worlds of (social) investors and entrepreneurs come together. It measures change, and it creates change. Experience of Context, international cooperation Since 2008 numerous trainings ( Train the Trainer ) and presentations about SROI have been provided in Africa, Asia and the Netherlands both at strategic and operational level. By 2009, Context has facilitated nine pilot studies on SROI, in order to explore the appropriateness of this approach and to test and improve the methodology. Context, international cooperation has additionally been involved in the strengthening of M&E and Management Information Systems for several clients, in which SROI was included. 6

8 SROI case studies carried out by Context No. Country Case Organisation Date 1. India Pilot focused on Girl child Cecoedecon February 2008 education in India 2. Tanzania Pilot focused on a Grain storage Scheme in Tanzania, Project Grain storage Scheme International Child Support (ICS) Africa March India Pilot focused on farmer groups - Apple-project, Uttarkashi and Shimla district 4. Cambodia Pilot focused on grass roots groups with low level of education 5. The Netherlands The pilot was carried out to value a training 6. Tanzania This SROI exercise focused on a water project and a milk processing facility within the context of a social business 7. Kenya Pilot focused on SROI as a planning tool for a project yet to be undertaken 8. Surinam This project focused on a peanut farming project 9. India This pilot focused on a water and sanitation programme 10. India SROI analysis of coffee programme 11. Indonesia Providing support in SROI awareness and capacity development with regard to SROI and measurement of social results (M&E) Shri Jagadamba Samiti (SJS) ICS Asia, Project Cattle Revolving Scheme Project Context MasterClass OMASI, Milk processing facility and Water Project ICS Africa, Water-tanks Kenya Nationale Vrouwenbond, Surinam (ICS/ZZG) May 2008 June 2008 July 2008 September 2008 October 2008 December 2008 Gram Vikas February 2009 AOFG June 2010 PT SHGW Bio Tea October

9 SROI case studies carried out by Context 12. Pan Africa AWARD (African Women in Agricultural Research and Development) inception study SROI potential 13. Tanzania SROI analysis in Tanzania on farmer household level 14. India SROI baseline study for Bangalore Autorickshaw programme 15. Cambodia SROI baseline study for ECW water enterprise 16. Kenya Two ex-ante SROI analyses for ICS Project of the Gender & Diversity Program of CGIAR Three Wheels United/Enviu June 2011 June 2011 January 2012 ICS Asia February 2012 ICS Africa June 2012 SROI as part of the strengthening of M&E systems No. Country Case Organisation Date 1. Kenya Strengthening of M&E system and capacity Green Forest Social Initiative October 2009 enhancement with regard (SHGW) to SROI for SHGW 2. India Process of strengthening the planning and M&E system, including mainstreaming SROI within PME system 3. Kenya Strengthening M&E system and further capacity enhancement of staff 4. Kenya Facilitating the design of a M&E framework, including SROI, for a social business; facilitation of training on SROI, social business and value chains 5. Kenya Design curriculum for value chain SROI analysis (case of honey collection, and processing) Cecoedecon Green Forest Social Initiative (SHGW) Green Forest Social Initiative (SHGW) November 2009 March 2010 September 2010 June/July

10 In 2012 Context, international cooperation started working with the International Fund for Agricultural Development (IFAD) of the United Nations to train IFAD staff members and integrate SROI within existing IFAD impact assessment approach. Publications Brouwers, J., Prins, E. & Salverda, M Social Return On Investment: A practical guide. Utrecht: Context, international cooperation Context, international cooperation 2009 Contextual No. 9: A summative report of nine Social Return On Investment pilots, conducted in 2008 and Utrecht: Context, international cooperation Das, P., Eijkemans, C. & Van Cooten, J Contextual No. 8: Social Return On Investment; a further exploration of its relevance and applicability in the development sector. Utrecht: Context, international cooperation Eijkemans, C. & Das. P 2009 Contextual No. 6: Measuring results in the development sector: issues and challenges. Utrecht: Context, international cooperation Van der Velden, F., Tinga, E. & Baas, P Contextual No.4: Social Return on Investment: An introduction. Utrecht: Context, international cooperation Van der Velden, Fons (ed.) 2011 New approaches to international development cooperation. Utrecht Context, international cooperation Lead consultants Pol De Greve, partner and senior consultant with Context, is a development economist with an academic background in agricultural sciences (Master) and quantitative economics (MBA). In the 1980s he worked for over eight years with FAO in Southern and East Africa focusing on food security and agricultural marketing development. Later he joined the International Agricultural Centre in Wageningen as a development economist. Apart from contributing to the Centre s postgraduate programmes, he focussed on advisory services on social and economic aspects of development policies and programmes mostly for bilateral and multilateral donors. In 2001 Pol De Greve moved to a development practitioner s position joining the Non-Governmental Development Organisation (NGDO) sector first as programme manager with Plan Nederland, next with Plan Indonesia and subsequently as general director of Broederlijk Delen, a Brussels 9

11 based International NGDO. In 2012 he joined Context, international cooperation as partner. His area of specialisation is the social-economic perspective in rural development notably in relation to food security, livelihood development and value chains. He has extensive hands-on experience in complex processes underlying policy and programme development, particularly in the fields of social and economic appraisal, financial and economic feasibility analysis, organisational learning, quality management, and in programme monitoring & evaluation. Fons van der Velden, is a social entrepreneur, founder and non-executive director of Context, provides business development support to social entrepreneurs, which may vary from strategic positioning, to hands-on support and conceptualisation and theorising. He has a long track record as trainer, facilitator and (external) evaluator. He has published extensively about the concepts of social business and organisational learning. Prior to founding Context, international cooperation (1996) Fons van der Velden worked at the Centre for International Development Issues Nijmegen (University of Nijmegen), Inter Church Organisation for Development Cooperation (ICCO) and the Association for Personnel Service Overseas (two Dutch development organisations). He has lived for many years in South Asia (especially India) and East and South Africa, where he has done extensive (collaborative action) research and provided support to organisations. 10