7 A summary of the relationship between SROI

and other approaches

Cost-benefit analysis
One difference between SROI and economic appraisal as described in HM Treasury’s
Green Book is that SROI is designed as a practical management tool that can be used
by both small and large organisations, rather than from a macro perspective. SROI
focuses on, and emphasises, the need to measure value from the bottom up, including
the perspective of different stakeholders, while the Green Book appraisal is about
valuing costs and benefits to the whole of UK society. The main similarity between
SROI and the Green Book is that they both use money as a proxy of costs and benefits
arising from an investment, activity or policy.

Social accounting
Both SROI and social accounting are approaches used to measure the creation of
social value. SROI focuses on the perspective of change that is expected or happens
to different stakeholders as a result of an activity. Social accounting starts from an
organisation’s stated social objectives. SROI and social accounting share a number of
common principles but social accounting does not advocate the use of financial proxies
and a ‘return’ ratio. SROI and social accounting can be compatible: the completion of
an SROI report is much easier if it is built on the basis of a good set of social accounts,
for example.

Outcomes approaches
The process of measuring outcomes as part of a theory of change is common to other
outcomes models, such as that used by Charities Evaluation Services. The involvement
of stakeholders is also a key feature of SROI that is emphasised, to a greater or lesser
extent, in other outcomes models. The main difference between SROI and many other
outcomes approaches is the importance of giving financial value to their outcomes.

The common ground between the initial stages of SROI and other outcomes
approaches means that organisations that have already done a lot of work on
outcomes are likely to find undertaking an SROI analysis much easier than
organisations looking at outcomes for the first time.

Sustainability reporting
SROI shares basic principles, such as the importance of engaging with stakeholders,
with approaches like the Global Reporting Initiative and AccountAbility’s AA1000
standards.1 SROI differs in that it develops simple theories of change in relation to
significant changes experienced by stakeholders and includes financial proxies for the
value of those impacts.
Resources

1 AccountAbility’s standards, the AA1000 Series, are principles-based standards that provide the basis for improving the
sustainability performance of organisations. They are applicable to organisations in any sector, including the public sector and
civil society, of any size and in any region.

A guide to Social Return on Investment

 Other methods of economic appraisal
SROI is similar to other economic analyses that attempt to value and compare the costs
and benefits of different kinds of activities that are not reflected in the prices we pay.
This approach is particularly well developed in environmental economics.

Environmental impact assessment (EIA)

EIA is a methodology for assessing a project’s likely significant environmental effects.
It enables environmental factors to be considered alongside economic or social factors.
EIA has to be completed as part of planning consent for major projects, as defined by
European Community legislation. Like SROI, the assessment of what is considered
‘significant’ is critical.
Resources

A guide to Social Return on Investment