Social Return on Investment Principles gain momentum as government policy continues to emphasise the importance of Social Value

Posted 14th November 2011

Social Return on Investment Principles gain momentum as government policy continues to emphasise the importance of Social Value

The need to incorporate social value, rather than just economic value is becoming increasingly important across all sectors.

Conservative MP Chris White’s Public Services (Social Value Bill) seeks to make “good practice, standard practice” by making the concept of social value more relevant and important in the placement and provision of public services by considering economic, social and environmental well-being in procurement.

Minister for Civil Society Nick Hurd said [the bill] ‘is not just about social enterprise;’ re-iterating the importance of accounting for social value in organisations across all sectors.

Additionally, the Open Public Services White Paper aims to “give power to those who have been overlooked and underserved” via reforms, wresting “power out of the hands of highly paid officials, and giving it back to the people.” It states that “spending decisions need to take into account economic and financial considerations but cannot ignore the wider social impact” and “improving the accountability of policy and spending decisions in terms of the full social value they create will be increasingly important to improve the way in which public decisions are made.”

With this, LGF, a forum of national charities, suggested that “commissioners need to work closely with civil society organisations to understand the wider social, environmental and economic benefits they bring to local services,” a view also taken by NAVCA and NCVO.

The European Commission’s Green Paper on the modernisation of EU public procurement policy expresses a similar view, stating that “public authorities can make an important contribution to the Europe 2020 strategic goals by using their purchasing power to procure goods and services with higher societal value in terms of fostering innovation.”

A recent declaration from the European Parliament concluded that “the criterion of lowest price should no longer be the determining one for the award of contracts, and that it should, in general, be replaced by the criterion of most economically advantageous tender, in terms of economic, social and environmental benefits – taking into account the entire life-cycle costs of the relevant goods, services or works.”

Furthermore, Big Society Bank, which will be launched in 2012 aims to “develop a market for investment made on the basis of positive social impact as well as financial return.”

A key objective of the BSB is to support financial innovation for organisations in the social sector, so they can be rewarded in delivering valued social outcomes.

A recent report sponsored by The Social Investment Business, and The City UK – “Making Good in Social Impact Investment- Opportunities in an Emerging Asset Class” also suggests organisations “measure what is important” in their quest for investment.

At the recent Labour party conference, leader Ed Miliband stated that businesses who deliver long term social value should be rewarded.

On the back of all of this, people are now beginning to recognise a need to incorporate and understand a broader concept of value – social, economic and environmental value from a stakeholder perspective, to give a fuller picture of how value is created and destroyed. In addressing this need, we must begin with a set of principles.

Created as part of a measuring social value consortium by The SROI Network, nef, Charities Evaluation Services, NCVO and New Philanthropy Capital, the seven principles of SROI form the basis of a key question in the impact measurement and investing market – “did we make a difference?” The development of these principles has been on-going for almost three years, developing Community of Practice in their application along the way.

These principles allow organisations across all sectors to use a standardised methodology to account for the changes and value they have created in a credible and consistent way. They provide an analytical framework to examine and assess the social, economic and environmental value and impact of their organisation, projects, or activities.

Additionally, New Philanthropy Capital with the collaboration of others including The SROI Network, have recently launched the consultation for the principles of Good Impact Reporting. These provide a framework for charities and social enterprises to use when measuring and talking about their impact.

Together, the seven principles of SROI and the principles of Good Impact Reporting form an effective method of successfully accounting for and reporting on impact.

To learn more about the 7 principles of SROI, please click here. Comments and ideas in relation to developing these principles are always welcome.

To submit your feedback for consultation on the Principles of Good Impact Reporting, please visit the New Philanthropy Capital website here.

To become a member of The SROI Network and help to develop SROI methodology via a community of practice, please click here.