Government drives effort to standardise social impact reporting

A three-year programme of work to create a standard tool to measure Social Return on Investment (SROI) of third sector organisations has been launched by the Office of the Third Sector (OTS).
 
SROI is a tool that has been developed to measure the social, environmental and economic value of a project so that the total impact of both financial and non-financial measures can be identified.
 
A round-table discussion with social investors organised by OTS in February 2008 concluded that government needs to take on a leadership and co-ordinating role in standardising this tool because there is not enough collaboration amongst organisations currently operating in this field, and they are therefore failing to develop a “holistic” approach.
 
The OTS is keen to drive efforts to standardise social impact reporting because it is consistent with Government’s commitment to ‘evidence-based policy making’ and allows social value to be measured from a cost-benefit analysis perspective.
 
The OTS also believes a standardised methodology will increase third sector organisations’ access to more “suitable”, sustainable finance because a clear and consistent reporting mechanism that proves impact, should attract more funding. The Department of Health has also agreed to implement the SROI process and the OTS hopes it will eventually become a mainstream practise.  
 
Jeremy Nicholls, Chair of SROI-UK, believes there should be a set of SROI principles in place, similar to financial accounting principles, to ensure standardised practice in calculating social returns.  Nicholls is also a Fellow of the New Economics Foundation (nef), a think tank which is pioneering the SROI tool in the UK, building on the work of REDF, the US-based venture philanthropy fund.
 
Nicholls claims that organisations tend to overlook analysing social impacts because most funders currently request information on financial measures and specific outcomes, rather than the ‘big picture’ of total impact.
 
One of the biggest challenges in calculating SROI is that organisations have rarely recorded the necessary information from the outset, and to do so retrospectively is both costly and time-consuming.  However once organisations start to implement SROI and record the right information from the start, it is described by proponents as a relatively straightforward process.

Kevin Robbie, former Chief Executive of Forth Sector and currently on secondment to the OTS, believes that the new tool will enable organisations to bridge the gap between strategic planning and good evaluation, allowing them to prove impact more holistically.  Robbie argues there must be a shift in culture, “away from anecdotal evidence and towards proving the social value of what you do and providing evidence to back this up.  It will be more about what is collated and collected”.

The project to develop a standard tool to measure SROI will go out to tender this summer and the OTS, who will manage the project from within government, predicts the programme will be operating towards the end of the year. The three-year term will be a development and testing period, analysing the tool in different circumstances so it will be ready to be used at the end of the programme.
 
In a related development, SROI practitioners across Europe have formed the European SROI Network (ESROIN) , and the first Annual SROI Exchange was jointly hosted by SROI-UK and ESROIN on 30th May in Manchester. This event brought together practitioners and academics to share their experiences, agree basic principles and launch a new network dedicated to consistent and effective use of SROI.
 
At this event, Nicholls announced the creation of a new software package, ‘SROI Online’ to make the reporting process more user-friendly, especially for those who struggle with understanding the financial aspects.  This software has been funded by Liverpool City Council, the Social Enterprise Support Centre in West Yorkshire and by Nicholls himself. It will be tested amongst charities so that improvements can be made before it is launched nationally.
 
Lucy Fairfax is an intern at Philanthropy UK.