Briefing Paper 13 Embracing Social Return on Investment (SROI)

Transcription

1 Briefing Paper 13 Embracing Social Return on Investment (SROI)

2 What are Briefing Papers? Briefing Papers aim to set out thinking, briefing or possible forward action on a specific topic or question. They provide in-depth information and can outline ways to tackle issues. This Briefing Paper has been published to support the Mixed and Sustainable Communities learning network which is managed by the Scottish Centre for Regeneration in the Scottish Government. The Briefing Paper has been written Karen Neary of Neary Consultants and published in partnership with Employers in Voluntary Housing, EVH. The views expressed in Briefing Papers are not necessarily shared by Scottish Government. Introduction This Briefing Paper, Embracing Social Return on Investment (SROI), builds on the work of the recent EVH report, Unlocking the Potential, which underlines the important role that RSLs play in regeneration throughout Scotland. The paper aims to is to raise awareness of successful complementary non housing activities already being undertaken by the housing sector and look at the measures used to assess the value of these to organisations and communities. The paper will assess, through focus groups, the level of understanding of the concept of SROI within the RSL sector as one option for measuring the impact of regeneration activity and offer practical guidance for addressing the perceived barriers to embracing SROI principles and techniques. The input from the Reference Group and Consultees, drawn from a wide range of interests, has been invaluable in putting this paper together. 2

3 Social Return on Investment Introduction Contents Page Executive Summary 1. Impact Matters 1.1 Background 1.2 Purpose of the Paper 1.3 What is Social Return on Investment? 1.4 Current State of Play 1.5 The SROI Project 1.6 SROI and National Strategy 2. SROI and RSLs 2.1 Relevance of SROI 2.2 Impact Measurement 2.3 Learning Curve 2.4 Organisational Benefits 3. Using SROI 3.1 New Processes 3.2 SROI Reports Before or After 3.3 The Six Stages of SROI 3.4 Comparing Social Return 4. The Way Ahead 4.1 Issues 4.2 Awareness and Demand 4.3 Mainstreaming SROI Appendices Appendix 1 Consultees Appendix 2 References Appendix 3 National Performance Framework 3

4 Executive summary A Third Sector Division has been established within the Scottish Government, with 63m of funding ( ) and a key task for this Division is to promote the wider adoption of Social Return on Investment (SROI). The Third Sector Division is promoting a new impact measurement model, SROI, to inform the allocation of public resources for a range of projects and initiatives across the third sector in Scotland. This model aims to demonstrate the social value created from public investment and the primary targets for this are third sector organisations, funders, commissioners and accounting bodies. The model is highly relevant for RSLs involved in broader regeneration activity, as this is a key area for the application of SROI. This reflects the growth of the third sector in response to demand for its services. The SROI model relies on independently assured reports on projects to describe the process, outcomes and impact on communities (either after a project is underway an evaluative report, or in advance of it starting a forecast report). Reports distil the information into a ratio confirming the actual or anticipated monetary value of projects i.e. the amount invested and the social return achieved or expected from that investment. The benefits for RSLs of using SROI include improved accountability and organisational effectiveness and as a relatively new model, there is scope for RSLs to be involved in its development and refinement. Increasing RSLs understanding and engagement in SROI will involve commitment and resources from the RSL sector itself, and support from intermediary bodies and Scottish Government. 4

5 Embracing Social Return on Investment 1. Impact Matters 1.1 Background EVH s report, Unlocking the Potential 1, published in 2009, emphasised the important roles RSLs play in regeneration and developed the case for enhancing this contribution in support of the Scottish Government s national performance framework. A number of the report s recommendations are now being implemented to provide practical support to RSLs active in regeneration and this paper is the latest of these measures. This paper reinforces the Scottish Government s outcomes based approach to achieving national strategies and aims to raise awareness about the Social Return on Investment (SROI) model of impact measurement. The SROI model is designed to demonstrate the social return on public investment and has been introduced by the Scottish Government to help inform decisions about the allocation of public resources for a range of projects and initiatives within the third sector. For RSLs active in regeneration, understanding, embracing and using SROI may be critical to their ability to secure funds for vital projects in future. 1.2 Purpose of the paper The purpose of this paper is to set the SROI model in context for RSLs. It aims to explain what the model is by outlining the key principles and steps in the SROI process and underline the model s role in national strategy as a tool to influence resource allocation. The paper also explores the model s potential to support RSLs to enhance their accountability, to improve organisational effectiveness and to access public resource for broader regeneration activities. 1.3 What is Social Return on Investment? There is a long history of social accounting, from Pigou's Economics of Welfare (1920), through cost benefit analysis (1950s), to Environmental Impact Assessment and environmental economics (1980s). The current leading processes to account for and measure the impacts and added value of voluntary and third sector organisations, are Social Return on Investment (SROI) and Social Accounting and Audit (SAA) 2. 5

6 Case study West Whitlawburn Housing Association, South Lanarkshire West Whitlawburn Housing Co-operative believes it is important to demonstrate to stakeholder s the impact they are making maintain the organisation s accountability. This reflects the principles of social accounting: establishing a framework for ongoing monitoring, evaluation and accountability to internal and external stakeholders. Involving customers, service users, or clients in the social accounting process ensures that their perspectives are fed into the organisation s planning and measurement process. This helps individuals and groups to know more about organisation 3. WWHC decided to measure their social, economic and environmental impact (using the SAA model) to : assess the degree to which the organisation was still honouring its original objectives ensure transparency about their activities and be accountable to tenants test the degree to which their activities represented value for money for tenants beyond the traditional concept of financial value for money for core services learn more about undertaking and maintaining social accounting processes to ensure it would be embedded as an ethos within the organisation As a result of this impact assessment, West Whitlawburn Housing Co-operative: Has more information about what its tenants see as priorities for the area and has been able to work towards meeting these priorities Has improved systems for monitoring the impact of its work and therefore is able to ensure that resources are directs to areas that make real differences to local people Can confidently justify operating costs and their relationship to high levels and standards of service Has improved internal management planning procedures to better take account of the needs of tenants Has increased internal and external understanding and knowledge of the breadth of work undertaken by WWHC The Scottish Government s Third Sector Division initially funded research and development projects into both SROI and SAA. It says, the results of its pilot project, Investing in Impact, demonstrated the ability of SROI to combine softer qualitative reporting (telling the story of the impact of given projects) with the accessibility of headline financial ratios (calculations showing the cost against the overall return on investment of given projects). The Scottish Government has therefore selected SROI as its preferred impact measurement model, as has the UK Government 4. Nonetheless, the pilot emphasised that not every single impact is or should be financially quantifiable, and that financial ratios themselves cannot tell the whole story. As a result, SROI measured projects have a headline ratio figure which is backed up with a detailed report. The Scottish Government says that in order to avoid sending confusing messages it chose to focus resources on just one methodology, SROI (although, work continues to amalgamate SROI and SAA). 6

7 The SROI process helps organisations to measure change in ways that matter to the people that experience or contribute to it. It is a means of helping organisations communicate the impact they create to those within the organisation (to improve what they do) and to its stakeholders (to prove what they do). It tells the story of the change being created by describing the outcomes for those involved in words and monetary values. As well as a thorough assessment of the impact projects will have on stakeholders, the process measures the costs and benefits of proposals. This is similar to a cost/benefit analysis or business case that RSLs might normally carry out for new proposals. And from this, a ratio is calculated, for example, a ratio of 3:1 indicates that an investment (cost) of 1 delivers 3 of social value (benefit). Considering the social return on investment helps organisations to make informed decisionsabout projects, such as whether the anticipated outcomes represent the best use of limited resources or whether a more significant impact can be made for stakeholders through a different project State of Play The Scottish and UK Governments recognise the increasingly important role the Third Sector plays in society and the economy and have adopted SROI on the basis of two key drivers. Firstly, that SROI will help to demonstrate and enhance the contribution of the third sector to economic growth, and secondly to inform Governments allocation of resources to third sector projects in challenging economic times. Key Drivers "The Scottish Government highly values the contribution of the Third Sector to increasing sustainable economic growth in Scotland. The SROI project will complement the action we are taking - by increasing funding by 37 per cent and publishing an Enterprising Third Sector Action Plan - to help the sector become increasingly enterprising. This project will be a valuable tool in demonstrating the effectiveness of the Third Sector and the positive impact it can have on the lives of people around Scotland." 6. Jim Mather, Enterprise Minister, MSP the social and environmental value of the impact being made (by voluntary organisations) is often underplayed. As we face tough economic times, it is now more important than ever that we allow for better recognition of those who create social and environmental value, leading to more efficient movement of resources to the right people, in the right place, at the right time. 7 Kevin Brennan, Minister for the Third Sector, MP There are serious financial pressures ahead and the whole of the public sector must quickly find ways of making informed decisions about competing priorities. Robert Black, Auditor General 8 The Scottish Government recognises that the Third Sector has contributed to increasing sustainable growth in Scotland and expects that contribution to be enhanced. Accordingly, it has established a new Third Sector Division to deliver their Enterprising Third Sector Action Plan (June 2008). 7

8 What is meant by the Third Sector? The Cabinet Office defines the third sector as the place between State and the private sector... voluntary and community groups, social enterprises, charities, cooperatives and mutuals (large and small) 9 It has been described as diverse, active and passionate, and sharing common characteristics: non-governmental value-driven principally reinvests any financial surpluses to further social, environmental or cultural objectives. 8 The Division s role is to enable social enterprises to contribute to national strategic objectives, with 63 million having been allocated in for Third Sector development, as well as a further 30 million for direct investment through the new Scottish Investment Fund. This is a clear indication of the direction public resources are expected to follow in future. However, there is also a clear commitment that this should be done in ways that take account of the social return on investment The SROI Project The Scottish Government has now instigated a project to develop, promote and support the use of a standard form for measuring social return on investment (SROI). The project is being undertaken between and aims to: develop widespread awareness and knowledge of SROI among third sector organisations, funders, commissioners and accounting bodies; promote the increasing adoption, acceptance and use of SROI as a reporting method by third sector organisations; support increasing numbers to have the ability and understanding to take forward SROI on their own behalf; enable third sector organisations to demonstrate their impact clearly; assist funders and commissioners to make more intelligent investment or purchasing decisions; increase the accessibility of SROI for all parties; and ensure that the SROI methodology is robust, while taking on board the best of other impact measurement methodologies, such as social accounting. The commitment to develop the measurement of social return was made within the Enterprising Third Sector Action Plan, published by the Scottish Government in June The Scottish Government has set SROI within the context of its overarching purpose, targets, objectives, outcomes and performance indicators. 1.6 SROI and National Strategy The Scottish public sector is becoming increasingly aligned to a single overarching purpose with performance management systems set to support a single, clear and consistent set of priorities. The SROI model is designed and continues to be developed to support the delivery of the Scottish Government s national strategy. This makes it increasingly important for the public, third and private sectors to be aware of the Scottish Government s National Performance Framework 11 : its purpose, targets, strategic objectives, outcomes and performance indicators. This provides greater

9 clarity on the Scottish Government s priorities and therefore, in the case of RSLs, gives a clearer understanding of opportunities to contribute to regeneration, which in turn, informs organisational strategy. The Scottish Government s National Performance Framework is summarised in appendix 3. RSLs are continuing to broaden their range of activities in the communities they serve. This is in response to growing demand for services and the additional value they provide in helping to create mixed and sustainable communities. These broader regeneration activities include projects to support/deliver employment, training, community facilities, care, arts, youth development, carbon reduction, environmental improvements, financial inclusion, improved health etc. RSLs regeneration activity aimed at creating mixed and sustainable communities has the potential to support a large number of the Scottish Government s outcomes. And many RSLs could play a central role in the delivery of these with direct benefits for the communities they serve as well as for their organisation. This is a significant opportunity for many RSLs to strengthen their communities, and their own position, given their close proximity to the customer base they serve, in light of their relationships with and direct access to many disadvantaged households and communities. Clearly, for the Scottish Government, impact matters in the achievement of national strategy. And for RSLs, demonstrating the impact achieved, and the social return on investment of initiatives, will be crucial in securing public funding for broader regeneration activity in future. The potential for RSLs to match their organisational objectives to national outcomes and their ability to demonstrate the impact for people and communities will create better conditions for securing resources. RSLs are well placed to meet the key criteria of SROI - involving stakeholders, identifying and prioritising need and service delivery This potentially puts RSLs in a strong position to demonstrate the need, deliverability and value of local projects critical factors in attracting resources. 2.0 SROI and RSLs 2.1 Relevance of SROI Not only is the SROI model highly relevant to RSLs in a national context, it also offers considerable strategic potential to individual organisations. As well as supporting the Scottish Government s National Performance Framework, the key steps in the SROI process can help RSLs demonstrate their accountability and improve their organisational effectiveness. There is currently limited understanding of the detail of SROI within the RSL sector, however, there is a strong identification with its ethos and recognition of its relevance to RSLs. There is a general awareness of SROI and significant demand for more information about it. In response to a recent questionnaire, issued by EVH and involving 38 RSLs from across Scotland, 71% said they believed SROI was relevant to their organisation and 76% said they wanted more information. 9

10 The Principles of SROI SROI was developed from social accounting and cost-benefit analysis and is based on seven principles which underpin how SROI should be applied: Involve stakeholders Understand what changes Value the things that matter Only include what is material Do not over-claim Be transparent Verify the result Judgement will be required throughout an SROI analysis. Often the principle of materiality will guide judgement, so this principle is very important. Materiality is a concept that is borrowed from accounting. In accounting terms, information is material if it has the potential to affect the readers or stakeholders decision. A piece of informationis material if missing it out of the SROI would misrepresent the organisation s activities. For transparency, decisions about what is material should be documented to show why information has been included or excluded. There is no doubt that SROI is relevant for RSLs, given the increase in non core housing services. Looking at Wider Role funded projects alone, more than 100 RSLs each year (since 2007/08) have led almost 1000 broader regeneration projects in Scotland. From figures provided by the Scottish Government s Wider Role Team, this has involved 30m of Wider Role funding and an estimated 90m of match funding from other sources (including RSLs own resources). Of course, the total contribution of RSLs to broader regeneration is potentially much greater than this, when considering projects funded from sources other than Wider Role. 2.2 Impact Measurement In order to secure funding, RSLs are asked by most funders to provide an impact assessment, confirming the outcomes (and outputs) that the project will achieve. So, forecasting and measuring impact is not new to RSLs, although individual funders may have their own individual requirements and bespoke impact assessment guidance and tools. This and the fact that RSLs often rely on a cocktail of funding, requiring them to follow different assessment regimes, make it difficult to define the magnitude of the sector s social, economic and environmental impact as a whole and, therefore to recognise its value beyond key outputs and, sometimes, rudimentary outcomes. The SROI process has the potential to support that story, both for individual organisations and for the Sector as a whole. It is more important than ever to demonstrate the impact that housing, regeneration and its related activities can make to individuals, communities and the economy, especially with so many competing priorities such as health, employment, education. Demonstrating that impact has proved elusive in the past, but perhaps with tools such as SROI it will be possible not only to make the case for resources for housing and regeneration but to prove the case. 10

11 The development of SROI as a standardised impact measurement model has significant implications for RSLs that go beyond its initial utilisation within Scottish Government. The SROI Project is charged with supporting funders and commissioners to understand and reflect on SROI in their investment and purchasing decisions. With a fast growing Third Sector competing for limited resources, it is important that RSLs are at the forefront of understanding the model and its use. Benefits of SROI An SROI analysis can provide useful information, not only to the organisation itself, but also to funders, investors, and policy makers. If you are a voluntary organisation, using SROI will give you a management tool to guide resource allocation and improve performance, to monitor a project or activity and evidence impact and to communicate added value if competing for a tender. If you are a funder or investor, using SROI will give you a method of assessing the performance of an investment against your objectives, and of measuring the overall returns from the support and funding you provide. If you commission public sector services, using SROI will give you a means of assessing the value beyond the financial return of a contract, and as a means of tracking the benefits of a commission against singe outcome agreements. If you are a policy maker, using SROI allows you to measure understand and communicate the value of the third sector and the activities of organisations within it Learning Curve If the RSL sector wishes to use SROI to demonstrate added value, then it needs to learn SROI techniques, develop expertise and demonstrate positive outcomes to gain the confidence of grant givers, funders and commissioners. Using a recognisable tool to follow a rigorous process, where the results can be independently assessed and assured, will help RSLs demonstrate that they can deliver meaningful social return on investment results. And it will allow those involved in investing and purchasing decisions to make more informed choices when allocating resources. It is increasingly important for all organisations to demonstrate their added value. This supports the need for RSLs to tell a powerful story of change in light of the number and range of third sector organisations using the same SROI model to secure funding. Making a strong case will be more challenging than ever - attracting resources will rely on the quality of analysis, the power of the impacts achieved and effectiveness of the execution of projects. 11

12 2.4 Organisational Benefits Accountability As voluntary organisations in receipt of significant amounts of public funding, accountability matters to RSLs and their stakeholders. Demonstrating the impact they make in disadvantaged communities and for vulnerable households is a critical way of RSLs maintaining accountability to their customers and other key stakeholders (to prove the value of what they do). The accountability benefits of SROI, identified by RSLs, will largely be felt by key stakeholders and the communities an organisation serves. Undertaking the SROI process can produce a range of key benefits such as: o Honouring the place of stakeholders, particularly beneficiaries, through their strong involvement in the development and delivery of projects o Balancing the organisation s power and responsibility through increased transparency in its activity o Identifying social and environmental needs and costs in the context of the overall impact projects will have on individuals, communities and organisations - improving decision making o Rigorously testing proposals with stakeholders ensuring that organisations activities remain relevant to distinct communities o Demonstrating the additional value created by an organisation, expressed as a triple bottom line (social, environmental and economic value) - making it meaningful for the organisation s stakeholders o Increasing sector wide and national recognition of the added value achieved by RSLs helping to make the case for resources for regeneration through the clear demonstration of the sector s impact and the additional value it creates o Developing a clearer understanding throughout the organisation, about its purpose and what is core and what is peripheral activity by testing potential projects against the organisation s purpose 12

13 Case study, Organisational Effectiveness Fairfield Housing Co-operative, Perth As well as providing and maintaining good quality homes, Fairfield Housing Co-op in Perth is committed to adopting practices that encourage economic activity and learning while contributing to the sustainability of the organisation. The Co-op considers these to be critical to sustain the community and believes that their Toolkit Project puts these commitments into action. The project provides young people with work placements in a variety of sectors, from construction to administration, and a mentor supports them in preparing for full time employment. This proved to be a good market development opportunity as the Co-op is now the lead co-ordinator in Perthshire for the Workrite Project on behalf of Perth College. Gains for the community include training and employment opportunities for local young people, an increase in economic activity locally and a financial return from the College (which supports further activity to sustain the community). The Co-op believes that the Toolkit Project has helped enhance its profile and influence key decision makers when considering partners for projects. Recent examples include involvement in the Muirton Regeneration Project and receiving the Business in the Community Award from Perthshire Chamber of Commerce. The organisation is keen to use the SROI evaluation model to measure the impact of Toolkit on individuals and the community. By having the impact of the project formally assessed and validated, the Co-op expects to build further on their success for the benefit of the local community Organisational Effectiveness RSLs are often closest to the ground in many disadvantaged communities, where there will always be competing pressures for organisational and financial resources. The SROI process helps organisations rigorously analyse and plan projects, and challenge themselves internally to identify and target the best use of their resources and explore ways to enhance the organisation s sustainability. The principles of SROI can be used to improve organisational effectiveness (to improve what they do). The organisational benefits of SROI will largely be felt by the Committees of Management and their staff in terms of improved prioritisation, effectiveness, efficiency and motivation. The SROI process can help RSLs to: o o o Improve information for decision-making Enhance image management and credibility Identify market development opportunities that fit with the organisation s purpose 13

14 o Minimise overlap/duplication of projects and reduce the risk of double counting impact o o Test the benefit of supplementing/replacing current activities e.g. Development Benefit from a wider range of funding sources where support is determined by the confidence funders have in outcomes and impact actually being achieved o Secure sufficient funding up front to see projects through their forecast life based on a robust assessment of the case for and social return from the project o o Identify and ring fence risks Achieve a degree of self regulation through using an accepted and accredited methodology o Reduce the duplication of effort required for funding applications through one robust case And through the rigour of the SROI process, it may be possible for RSLs to: o o o More accurately cost products or services Identify appropriate sources of funding to support justified activity based on need Work with other RSLS in developing projects using standardised and accepted processes o Better define partners roles and responsibilities The SROI process can be used on a project by project basis and/or to integrate the processes within the organisation as a whole to maximise efficiency and effectiveness by better informing resource allocation decisions. 14

15 3.0 Using SROI 3.1 New Processes Many of the foundations of the SROI process are already in place within RSLs as part of their business as usual activities (see Six Steps to SROI below). However, these may require some adaptation to fully support the SROI process. There are benefits for organisations in adopting a new process such as refreshing previously tried and tested methods and introducing robust new linkages between various elements of a project s development and implementation from idea, to plan to practice. SROI is a relatively new model of impact measurement and the Scottish Government intends that it continues to be developed to ensure its integrity, improve its accessibility and refine its processes. Embracing SROI at this early stage gives RSLs the opportunity to influence the model s further development. In the meantime, two Scottish RSLs, Cunninghame Housing Association and Link Group have been in the vanguard of embracing SROI, and they have shared some of their experience in the brief case studies in this paper. Case Study Cunninghame Housing Association 13 North Ayrshire Fab Pad : CHA wanted to reduce repeat homelessness in order to stabilise communities and improve organisational performance. They developed the Fab Pad project with Impact Arts, aiming to help vulnerable people with chaotic lifestyles settle into a new tenancy minimising the risk of tenancy breakdown. The Fab Pad project offers participants arts, design and practical skills training and supports them to take up other opportunities in education, training and employment. Stakeholders : Cunninghame HA, Impact Arts, North Ayrshire Council, North Ayrshire Community Planning Partnership, Communities Scotland (now Scottish Government), Referral Agents, Staff, Participants and their families, UK Government. Benefits of the project: For communities and individuals, benefits included improved self esteem, improved budgeting skills, stability in home life, improved health and increased training and employment opportunities. For the organisation, benefits included reduced housing turnover, repairs costs and void loss; reduced anti social behaviour, reduced tenancy sustainment costs, improved rent recovery and a positive profile for further business opportunities The overall impacts created through Fab Pad include: Reductions in homelessness Reduced tenancy support costs Improved health and well- being of participants and greater family stability Reduced agency support Increased training and employment opportunities Movement into the local labour market 15

16 The independent evaluation of Fab Pad confirmed that for every 1 invested in the project, 8.38 is returned in added value to stakeholders and wider society. This calculation takes account of the costs avoided and savings to society as a result of the project, such as homelessness, health improvements, welfare benefits savings, reduced support needs for children, avoided criminal justice costs, reduced support input from other agencies, reduced debt and debt management. It also takes account of the income generated by participants through wages, improved education and new tax income. Cunninghame HA says that the SROI process helped the organisation focus more on outcomes, which are now increasingly sought by partners, including project funders. The organisation believes that being able to demonstrate the impact of Fab Pad has helped secure ongoing funding for the project and has positively enhanced the organisation s profile. The organisation believes that its ability to demonstrate the impact it makes played an important part in securing the Vineburgh regeneration project. CHA is now following the SROI process in Vineburgh, focussing initially on training and employment initiatives. CHA says that the initial SROI exercise was time consuming and the organisation needed good support to work through the process. They believe that having now successfully completed an SROI project, undertaking and embedding the processes for future projects will be easier. 3.2 SROI Reports An SROI analysis can take many different forms. It can encompass the social value generated by an entire organisation, or focus on just one specific aspect of the organisation s work. There are also a number of ways to organise the doing of an SROI. It can be carried out largely as an in-house exercise or, alternatively, can be led by an external researcher 14. And there are two types of SROI: An evaluative report, which is conducted retrospectively and is based on actual outcomes that have already taken place. A forecast report, which predicts how much social value will be created if the activities meet their intended outcomes. The SROI Project says that forecast SROIs are especially useful in the planning stages of an activity. They can help show how investment can maximise impact and are also useful for identifying what should be measured once the project is up and running. To enable an evaluative SROI to be carried out, good data on outcomes is needed, however, there may be a lack of good outcomes data when doing this type of SROI for the first time. On the other hand, a forecast SROI will provide the basis for a framework to capture outcomes. Organisations may prefer to start using SROI by forecasting what the social value may be, rather than evaluating what it was, as this will help ensure that the right data collection systems are in place to perform a full analysis in the future. The level of detail required for an SROI analysis will depend on its purpose; a short analysis for internal purposes will be less time-consuming than a full report for an external audience that meets the requirements for verification. 16

17 One of the objectives of the SROI Network is to develop more consistency in the use of SROI. If you have your report assured, this confirms that it has been prepared in line with the principles of SROI and is therefore to a consistent standard. Formal assurance of SROI reports is now being sought more often by funders and commissioners as a means of verifying the efficacy of the results. 3.3 Comparing social return Organisations work with different stakeholders and will have made different judgements when analysing their social return. Consequently, it is not appropriate to compare the social return ratios alone. In the same way that investors need more than financial return information to make investment decisions, social investors will need to read all of the information produced as part of an SROI analysis. However, an organisation should compare changes in its own social return over time and examine the reasons for changes. Organisations should also endeavour to educate funders and investors on the importance of putting the ratio in the context of the overall analysis. Case Study Linkwide 15 Older Persons Advice Project (OPAP): OPAP is an income maximisation and holistic advice service for older tenant households (age 60+) of partner RSLs (Abronhill Housing Association, Almond Housing Association, Link Housing Association, Paragon Housing Association, Weslo Housing Management and Wishaw and District Housing Association) and all tenure older person households resident in the Falkirk Community Planning Partnership Priority Regeneration Areas. The key funding partners for the period analysed were the partner RSLs, Scottish Government (Wider Role Fund) and Falkirk Council on behalf of the Falkirk Community Planning Partnership (Fairer Scotland Fund). Stakeholders and Outcomes During the period evaluated (July 2008-March 2009), OPAP supported351 older person households, by providing benefits advice and support, information and signposting on issues and services from fuel poverty to Care and Repair and Aids and Adaptations assessment. In its first nine months OPAP helped older person households to secure an average increased household income of 1,152. The range of outcomes being created included: Increased household income Improved quality of life (improved diet, reduced isolation, able to afford more help in the home, increase use of private transport) Improvement in long term health conditions Reduced fuel poverty 17

18 Increased uptake and access to services targeted at older person households Improved safety and security in the home and older people able to stay in home for longer as a result of installation of aids and adaptations Improved staff and board understanding of income maximisation and benefit uptake issues amongst older person households Reduced demand on NHS services by older person households (reduced falls and accidents, improved health, securing private community health services such as chiropody) Increased income to Scottish Economy due to multiplier effect of increased household income and resulting expenditure Impact The total present value of OPAP is calculated as 2,588,054. The total invested to generate the total present value, was 93,999. The SROI index is a result of dividing the total present value by the investment. This gives a social return of for every 1 invested in OPAP. Lessons Linkwide says that getting the scope of the project right is important and that time should be spent at this initial stage to focus on what you want to do and why. This helps organisations understand what resources will be needed and prevents the project becoming more complicated (making the SROI analysis more straight forward). It is also recommended that organisations ensure that staff involved are provided with training and mentoring, from accredited sources, to develop their skills for future SROI projects. 18

19 3.4The Six Stages in SROI This process takes a project through a forecast SROI to outcomes and impacts rather than an evaluation of a project that has already been implemented, although it is possible to adapt the steps to do the latter 19. Step 1 - Establishing scope and identifying key stakeholders It is important to have clear boundaries about what your SROI analysis will cover, who will be involved in the process and how. Decide on what activity/project you are looking to implement, over what period and why are you doing it. List all your stakeholders, decide who the most important ones are and list the outcomes that you think they will experience from the proposed project. Talk to your main stakeholders to make sure that the outcomes you listed are real for them and are not just your organisation s interpretation.interviews, focus groups and surveys are all good ways to get stakeholders views, but what you do is down to you and your organisations resources.update your impact map to include the outcomes for different stakeholders that are significant. Many RSLs already engage stakeholders e.g. Many RSLs undertake a similar scoping process in preparing business cases, business plans, and funding applications for particular projects or initiatives. Stakeholder engagement will also be familiar to RSLs who often undertake service consultations, customer satisfaction surveys, policy reviews etc. Step 2 Mapping outcomes Identify the inputs to and the outputs from your activity or project.through engagement with your stakeholders you will develop an impact map, or theory of change, which shows the relationship between inputs, outputs and outcomes. A sample of the SROI impact map is downloadable from the SROI Project website Many RSLs already do a similar exercise in preparing Internal Management Plans when they consider the detail of how the activities for the plan period will be delivered. These include stating what is to be done, why (rationale/stakeholders to benefit), when, how (in what way and with what resources), by whom and how the completion of the activity will be recognised. This is usually stated in outputs e.g. reducing void loss and outcomes e.g. more stable communities due to faster letting of homes. 19

20 Step 3 - Evidencing outcomes and giving them a value This stage involves finding data to show whether outcomes have happened and then valuing them. Once you have decided what outcomes you want to measure, you can check whether you collect some information already, or if you need to begin to collect new information. How far you go in measuring outcomes is down to the resources you have. Some outcomes are easy to value (to monetise ) while others are more challenging. Further information about the financial proxy database is available at RSLs involved with funders such as Wider Role, Lottery, Trusts etc provide an assessment of outcomes as part of their bid for funding. Also, RSLs require evidence for a range of existing purposes e.g. audit, regulation, covenants. The part of the SROI process most likely to be new to many RSLs is the monetising of outcomes, especially those involving financial proxies (an approximation of the cost or value of a particular action). Financial proxies are under continual development and there are ongoing efforts to ensure that organisations undertaking the SROI process are kept informed and up to date to maintain the integrity of these approximate measurements. Step 4 - Establishing Impact Having collected evidence on outcomes and monetised them, those aspects of change that would have happened anyway or are a result of other factors are eliminated from consideration. This is an important aspect of SROI to avoid duplication and maintain the integrity of the process and ensure clear validation before a project is assured. The SROI Project provides guidance on this aspect of the process. This part of the process may also be new to many RSLs but it is a helpful way to establish the roles of the main players/partners and the contribution they can make to achieving a good outcome for people and communities. Step 5 Calculating the SROI This stage involves adding up all the benefits, subtracting any negatives and comparing the result to the investment. This is also where the sensitivity of the results can be tested - the SROI ratio should be a range of numbers, not just one. The SROI Project provides an Excel template to assist with this aspect of the process. While the SROI calculation may be new to many RSLs, cost benefit analysis and sensitivity analysis are not this is usually part of the annual planning of budgets, business plans, business cases, rent increases and an important part of the reporting on these issues to allow Governing Bodies to make informed choices about the best route for the organisation and its stakeholders. 20

21 Step 6 - Reporting, using and embedding This last step involves sharing findings with stakeholders and responding to them, embedding good outcomes and processes and verification of the report. Critically this should include feedback to your stakeholders, so they understand the conclusions you have reached i.e. whether to proceed with a project or not. Seeking assurance of your report by the SROI Network is recommended as this quality standard will be increasingly recognised and asked for by investors and commissioners. Reflect on what the process and analysis has told you can you create more value or develop better evidence? A good SROI analysis should improve your practice. Reflecting on whether what you want to do is of sufficient benefit and value to individuals, communities and/or the organisation will help you make decisions about whether this project is a good use of your organisation s resources, or whether these would be better used for some other positive impact. Embedding sound processes will also help your organisation validate projects and outcomes not only for the purposes of SROI, but for internal performance management and external regulatory purposes too. 21

22 4.0 The Way Ahead 4.1 Context for SROI and RSLs There is interest from RSLs in SROI on the basis of securing future resources and the anticipated benefits of using a standardised measurement tool. However, if this is to be taken forward there are a number of issues which need to be borne in mind. Allocation of Resources From RSL focus group discussions it is clear that the sector needs a better understanding of the relationship between the use of SROI and the allocation of resources. In essence, to what extent will Scottish Government, Local Authority and Community Planning Partnership funding for RSLs broader regeneration activities be dependent on using the SROI model? Will the ratio be the defining factor in allocating funds? Is it possible that a narrow range of project types that produce high positive ratios will be favoured over other types of project? Will grant funding for new housing supply be subject to SROI? League Tables There is some concern that SROI will result in ratio league tables. It is clear from the guidance on SROI projects that the ratio is not intended to be considered in isolation. This recognises the potentially significant variance between one organisation s approach and that of another. Projects may be similar, but the stakeholders, inputs and impact may not, producing different but valuable (and valued) social return on investment. League tables are impractical in light of these principles. However, there is very limited experience within the sector with which to counter these concerns. RSLs will want to see evidence for themselves that league tables are not a longer term objective of SROI. Regulation The relationship between SROI and regulation is also currently unclear to RSLs. From brief discussions with the Scottish Housing Regulator (SHR), there is not currently an intention to introduce regulation focussed on SROI activity. That said, the SHR welcomes processes that support RSLs in their critical thinking around project planning, stakeholder involvement, risk management, evidence gathering, monitoring and review. The SHR believes that the SROI process supports RSLs in achieving some of the key strategic performance standards expected of the sector including robust business planning, monitoring, evaluation and review. The SHR is keen that RSLs influence the further refinement of SROI to ensure that the processes take account of the characteristics of the RSL sector and that they are continually improved. Also, that the processes are replicable across the sector and applicable throughout individual organisations as well as for their individual projects. Complexity Current perceptions are that the SROI process is complex, lengthy and costly and that while it may be manageable for larger RSLs, it will be difficult for smaller organisations to participate. It is important that RSLs understand the flexibility in 22

23 the SROI process for individual organisations and the scope that exists to influence the model s refinement in future. RSLs would benefit from gaining practical knowledge and experience of the SROI process and its application to the RSL sector if these key concerns are to be overcome. 4.2 Awareness and Demand Demand from the sector is variable. There are currently very few organisations from the sector actively engaged in SROI measured projects and only two that have SROI assurance to date. This places a significant onus on a small number of organisations, with a limited range of project types, to explain and advocate the SROI process. However, many of the benefits and opportunities of SROI will only be demonstrated to the sector through the active involvement of RSLs. If they are keen to use SROI they need to use the model, influence its development, demonstrate the costs/benefits and, ultimately, the impact that they can achieve, both as individual organisations and a sector as a whole. Importantly, active participation in SROI measured projects could help demonstrate the degree to which RSLs themselves determine the nature, scope and impact of projects, taking account of the needs of their key service users and communities. There is clear momentum behind the development of SROI across the Third Sector more generally and with the breadth and depth of the work of the SROI Project there will be a range of education, promotion and development initiatives already underway. In fact, the Scottish Federation of Housing Associations has already embarked on a programme to support six of its members in relation to SROI. There is a need to generate a greater bank of knowledge and experience of SROI. That will involve increasing the numbers and type of participating RSLs. Diversity in type of RSL is important so that peer organisations can more readily relate to the implications of undertaking the process and the potential costs/benefits arising. Given this, there could be scope to help raise awareness of SROI and how it works through undertaking a regional programme to promote SROI in greater depth to RSL Governing Bodies and Senior Staff There is also significant scope for collaboration on projects and it is critical that duplication is avoided. The RSL sector should not be seen in isolation, in fact, there are distinct benefits to be gained by working with other parts of the Third Sector on such a new initiative, not least of which will be the opportunity to develop relationships with potential partners and share ideas and skills. In this light, identifying organisations with SROI experience would be a useful first step towards developing cross sector partnerships. 4.3 Mainstreaming SROI If RSLs are keen to take forward SROI then from the outset they need to consider whether broader regeneration activity is or will be part of their organisation s strategy. If so, they then need to develop their position on SROI and integrate it 23