Once considered the gold standard for demonstrating impact, Social Return on Investment (SROI) offered funders a way to translate qualitative outcomes into rands and cents. More than a decade later, SROI is not as widely adopted as some had hoped. Reinoud Willemsen, Partner at Embedding Impact, explores the benefits and challenges of SROI in today’s impact-driven landscape.
What is SROI? Briefly describe the methodology and give an example of its application.
SROI is a framework for measuring the social, environmental and economic value created by a project or organisation, expressed in monetary terms. Its goal is to inform decision-making by mapping outcomes, assigning of financial proxies and calculating the net impact relative to the investment made. Stakeholders who experience changes – both positive and negative – play a vital role in determining the value created. Organisations such as Sasol and Exxaro have used SROI, as have more recent adopters, including Sibanye-Stillwater, Thungela and companies in the renewable energy sector. The Development Bank of Southern Africa has also adopted the methodology within its Innovation Unit, providing support to decision-makers in project management.
What distinguishes SROI from other forms of impact measurement, and what value does it offer in the context of South African development work?
SROI translates social and environmental outcomes into monetary values, creating a standard unit of measurement across development sectors. Unlike traditional metrics that focus mainly on outputs or financial returns, SROI emphasises stakeholder engagement and the long-term impact of interventions. In South Africa, it helps organisations demonstrate the material benefits of their work in underserved communities, such as improved livelihoods, education and health outcomes. This is especially useful for projects funded through community trusts or public-private partnerships, where accountability and transparency are crucial. An SROI ratio is not a literal financial return; however, it serves as a proxy for the value stakeholders place on outcomes such as improved wellbeing, safety, or opportunities.
With a hard ROI value, businesses tend to compare across projects – is such a comparison relevant in terms of the SROI methodology?
Comparing SROI ratios across projects can be tempting, especially for businesses accustomed to evaluating initiatives based on financial ROI, but such comparisons must be approached with caution. The SROI value is context-specific, shaped by stakeholder priorities, local conditions and the types of outcomes being measured. For example, an SROI of 1:3 in a rural education project may reflect a deeper long-term impact than a 1:5 ratio in an urban food distribution programme, depending on the community’s needs and the sustainability of outcomes. What makes SROI powerful is not the number itself, but the story behind the number, how stakeholders perceive value, what outcomes matter most and how change is experienced. In South Africa, the SROI ratio should be used as a conversation starter, not a definitive ranking. It helps funders and implementers reflect on whether they’re investing in the right places, but it should always be interpreted alongside qualitative insights and stakeholder narratives.
Does measuring marginal SROI help prioritise ongoing CSI investments, such as incremental funding for early childhood or livelihoods programmes?
Yes, measuring marginal SROI – the additional social value created by incremental investment – can be a powerful tool for prioritising ongoing Corporate Social Investment (CSI) funding. It helps decision-makers assess which programmes yield the greatest additional impact per rand invested, rather than relying solely on average SROI across entire projects. This is especially useful in domains such as early childhood development or livelihoods, where small increases in funding can lead to significant improvements in outcomes, including school readiness, household income and community resilience. By focusing on marginal returns, CSI teams can strategically allocate resources to interventions that are not only effective but also scalable (making projects larger or smaller, or diversifying into other projects early on) and responsive to the evolving needs of the community.
What recommendations do you have for companies and nonprofits that would like to use SROI, and are there any specific resources you would recommend?
The most important recommendation is to be trained and start immediately – get your hands dirty, engage stakeholders and ask for help. Nonprofits should clearly define why they want to use SROI. If it’s just to show a high ratio, it’s not for them. But if they want to understand the value their organisation creates, track progress in maximising positive and minimising negative impacts and report transparently to stakeholders, then they should consider it. Additionally, software systems, such as SoPact and Envoy, enable continuous measurement. Still, it’s advisable to (a) get trained in Impact Measurement and Management (IMM) and SROI principles; (b) seek expert help in setting up the software; (c) obtain support for regular reporting; and (d) allocate budget for independent verification of reports.
REINOUD WILLEMSEN | Partner at Embedding Impact | reinoud@embeddingimpact.co.za | www.embeddingimpact.co.za
