Social return on investment (SROI), including elements on cost-benefit Analysis

Abstract

The chapter deals with the theme of social return on investments (SROI), including general elements of cost–benefit analysis (CBA). In addition, some major appraisal tools for public projects are discussed. SROI is a method that aims to measure social outputs, and value of social outcomes in monetary terms (Boyd, 2004). The basic assump- tion underlying the SROI technique is that all economic organizations (whether private or public) have an impact on people, society and the environment. Thus, the technique is always underpinned by an underlying model or conception of society. Such an impact can be strictly economic, social, and/or environmental, respectively. By economic we mean all that has, by nature, an exchange value expressed in monetary terms. Other values, instead, are defined as social if they affect variables of a social, cultural or ethical nature, and as environmental if they affect physical or natural variables, mainly the depletion of non-renewable resources. However, when SROI deals with social impact, it generally refers to each of these three kinds of impacts. It assesses the added social value strictly due, directly or indirectly, to a specific activity. Relating to this focus of the chapter, CBA constitutes a broader field of methodologies within which SROI is placed. Indeed, CBA can be considered as any methodology that values every policy, investment or activity, measuring all benefits and costs related to that policy, investment or activity in monetary terms (European Commission, 2014). The added social value measured by SROI is equiva- lent to the net benefits deriving from public actions. Thus, while SROI is an innovative methodology, or group of methodologies, it remains within CBA, the more classical, widespread and established family of methodolo- gies for assessing public activity. The aim of this chapter is to provide the reader with a comprehensive survey of both arguments for non-specialists, with a focus on SROI.