October 2003SEEP Annual Meeting

Measuring Social Return For Social Enterprise

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October 2003

Double Bottom Line

Financial Sustainability

SocialImpact

Measures social and economic objectivesMeasures social and economic objectives

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October 2003

Objectives are Aligned

Vision

Social ImpactObjectives

Social ImpactObjectives

Sustainability Objectives

Sustainability Objectives

Mission

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October 2003

Objective Examples

Social Impact Scale

Services rendered Clients served

Jobs created Client income New tax revenue Public assistance

saving

Sustainability (Enterprise Performance) Operating

efficiency Net profit/loss Donor

dependency Sales volume Gross margin

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October 2003

Measuring Social Objectives

Select impact measurements early and do a baseline study.

Build information system to collect and measure impact

Collect anecdotes evidencing hard-to-measure social impact.

Budget for social impact monitoring. Social impact measures depend on

the mission.

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October 2003

Financial sustainability objectives are easier to set and quantify, than social objectives

Business issues can overwhelm social objectives.

Insufficient funds, inadequate, timeskills/systems to measure social impact.

Unaccustomed to measuringsocial returns in “business”terms.

Measurement Challenges

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October 2003

Social Impact and Social Return

Social impact - measures qualitative and quantitative social impact based on social objective and type of organization

Social Return on Investment (SROI) - measures the social value the social enterprise creates in financial terms as a ratio of the investment.

*Investor= donor, taxpayer, sponsor or private contributor.

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October 2003

Investment-oriented View grants and subsidies as investments in

relation to the overall capital structure of the social enterprise.

“Double-bottom line" value proposition A successful SE business model must balance

social purpose and enterprise value creation.

Practical Tool To be effective, SROI must be designed to inform

the work of practitioners over time: ongoing measurement and assessment tools are a critical element.

SROI Framework

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October 2003

Understanding Value Creation

Investment

Mission-Led Market-Driven

Social Enterprise Business Plan

SocialValue

EconomicValue

Blended Socio-EconomicValue (basis for SROI)

UnquantifiableSocial Value

T0

Tn

Investment and value creation over time...

DoubleBottom Line

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October 2003

Understanding Value Creation (2)

Economic Value Traditional value creation in for-profit businesses

(profit)

Social Value Traditional value creation in non-profit

organizations, leading to improvements in the lives of individuals or society as a whole.

Socio-Economic Value Builds on the foundation of Economic Value by

adding Social Value that can be quantified and expressed in economic terms (monetized), either as cost savings (e.g. reduced need for public assistance) or increased revenues (e.g. increased tax paid).

Unquantifiable Social Value Place SROI in larger context of value creation that

include qualitative aspects not included in the SROI analysis (e.g. quality of life issues)

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October 2003

Measuring and Monetizing Value

Excess Cash Generated,not including:

• Grants and Subsidies• Expenses directly

associated with social mission=

Enterprise Value

Blended Value

MonetizedSocial Impact

- Expenses directly

associated with social mission=

Social Value

(Remove Long-Term Debt)

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October 2003

Blended Value

Ble

nd

ed

Valu

e

Economic SocialValueValue

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October 2003

SROI Examples

Job created=cost savings on public assistance

Fair wages = increase in taxable income

Income-generated by enterprise = savings to donor

Enterprise profit = investment $ for other social

programs

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Examples of SROI formulas

Economic impact = Public assistance savings + earned income

Program costs

Return to tax payers =Reduced government funding + increased tax

paymentsProgram costs

Program impact= Total employees

Total target employees

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October 2003

For More Information…

Roberts Enterprise Development Fund

www.redf.org Blended Value Map

www.blendedvalue.org

National Social Venture Competition (www.socialvc.net)

International Finance Corporation (www.ifc.org)