Social Return on Investment (SROI) was designed specifically for organisations that create social value in ways that conventional financial accounting cannot capture. For non-governmental organisations, SROI offers a methodology that meets the rigour expected by institutional funders, government commissioners, and impact investors — while remaining grounded in the lived experience of the people the organisation serves. Conducted properly, a SROI analysis does not just satisfy funders: it generates the insight NGO leaders need to make better programme decisions.
Why Funders Now Require Outcome Evidence
The shift from activity-based to outcome-based funding has accelerated significantly since 2020. EU programmes including the European Social Fund Plus (ESF+) and the Asylum, Migration and Integration Fund (AMIF) embed outcome indicators into grant frameworks. National government commissioners using Payment by Results and Social Impact Bond structures make payment contingent on verified outcomes. Large private foundations — including the Wellcome Trust, the Bill and Melinda Gates Foundation, and the European Climate Foundation — require detailed theory of change documentation and impact evaluation designs as part of funding applications. NGOs that cannot demonstrate outcomes credibly are systematically disadvantaged in these funding processes.
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Step 1 — Define Scope and Identify Stakeholders
The first step in any SROI analysis is establishing the scope: which programmes, activities, and time periods are included, and which stakeholders are affected. Stakeholder identification should be exhaustive — including not only direct beneficiaries but also their families, the communities they live in, the public services that would otherwise support them, and the funders investing in the programme. Stakeholder engagement — consulting directly with the people most affected — is a core SROI principle and distinguishes it from purely desk-based impact assessments.
Step 2 — Map Inputs, Outputs, Outcomes, and Impact
The theory of change is the analytical backbone of SROI. It maps the logical chain from inputs (money, staff time, volunteer hours, in-kind contributions) through activities and outputs (services delivered, people reached) to outcomes (changes in knowledge, behaviour, circumstances) and ultimately to impact (the lasting change attributable to the programme, net of what would have happened anyway). For NGOs, building a rigorous theory of change often reveals gaps in current data collection — which is itself a valuable output of the SROI process.
Step 3 — Value Outcomes Using Financial Proxies
The most technically demanding step in SROI is assigning monetary values to outcomes that are not traded in markets. For an employment programme helping long-term unemployed people into work, the value of employment can be estimated using data on average earnings, reduced benefits payments, and increased tax contributions. For a mental health programme, the value of improved wellbeing can be estimated using the WELLBY (Wellbeing Life Year) approach developed by the Centre for Wellbeing at the UK's Office for National Statistics. The key requirement is that financial proxies are defensible, well-documented, and conservative.
Step 4 — Adjust for Deadweight, Attribution, and Displacement
- Deadweight — what proportion of the outcome would have occurred anyway, without the programme?
- Attribution — what proportion of the outcome is attributable to the NGO's work, versus other contributing organisations or factors?
- Displacement — does the programme's success displace equivalent negative outcomes elsewhere (e.g., a housing programme that places one household may displace another)?
- Drop-off — how does the outcome reduce in value over time as the initial impact diminishes?
Step 5 — Calculate and Report the SROI Ratio
The SROI ratio is calculated by dividing the net present value of all impacts by the total investment (inputs). A ratio of 4:1 means that for every €1 invested, €4 of social value is created. The ratio should be accompanied by a sensitivity analysis — testing how the ratio changes if key assumptions (deadweight, outcome duration, financial proxy values) are varied. This demonstrates analytical rigour and helps stakeholders understand which assumptions drive the result. Enable Good conducts SROI analyses for NGOs across sectors — designing the stakeholder engagement, theory of change, and valuation approach to produce analyses that are both technically credible and practically actionable.
