©2004 social venture technology & consulting (svt). all rights reserved. sroi : : an overview...

©2004 Social Venture Technology & Consulting (SVT). All rights reserved.

SROI : : An OverviewWorkshop on Social Impact Measurement

Social-Impact International Hyderabad, March 12-13, 2007

Sara Olsen Social Venture Technology Group

©2006-2007 Social Venture Technology Group. All rights reserved.

Social Return on Investment

Agenda:

• Importance

• Method

• Example

• Future

Importance Method Example Future


Tri

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Gross World Product, 1950-2004



The world was simpler


Now it’s complex

©2005 SVT Consulting. All rights reserved.


“Perfect information”


Brief history of valuation

1400AD 2000AD futureprehistory

INTUITION

financial accounting

environmental and social accounting

SYSTEMS

STORIES


Capital markets see a fraction

Cosmic raysGamma rays

X-rays Ultraviolet Visible light

Infrared Heat Radio waves

…of the value that is there


The result

YOU can’t get the money you need


So how can we…

…measure the full value ecosystem?

…use this information to make strategic

management decisions?

…enable investors/funders to see the full

value?




Definition:

“The non-financial value created by an organization relative to the

investment required.”

“SROI”



Goals of SROI Analysis

• Align investment with value

• Assess actual value created

• Inform management decisions

• Help you maintain the integrity of your work!




| Method |



EASY HARD

• Sales revenue• Capital assets• Investment returns• Dividends • Etc.

• Life• Freedom• Dignity• Happiness• Etc.

• Goodwill • Insurance• Depreciation• Liability• Projected revenues• Emission credits • Income changes • Education access• Earnings potential• Technology benefits• Etc.

• Health• Safety• Biodiversity• Clean air• Safe water• Education results• Political stability•Cultural Advancement• Etc.

TYPE I TYPE II TYPE III TYPE IV

Quantifiability : : Visibility

Importance Example FutureMethod


Types of Information about Value

Five basic ways of articulating value:

• Financial (accounting: cash in, cash/work out)

• Monetizable (translating non-financial value into

monetary equivalent)

• Quantitative (numbers: size, magnitude or degree)

• Qualitative (description: kind, type, or direction)

• Narrative (storytelling)



…SROI Analysis Framework

1. Define goals, audiences and scope2. Map the impact value chain3. Decide on metrics, datapoints and sources of information;

develop work plan and assign roles4. Collect data5. Conduct analysis

– Monetise indicators of outcome– Analyse income and expenditure– Calculate social return ratios– Develop quantitative, qualitative, narrative summaries

6. Develop report7. Track information going forward



Synthesis of Many Approaches…A

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1Understanding organisation Analytical framework Define goals

Mission and venture coherence

2 Stakeholder analysis Stakeholder analysis

3 Scope of Analysis Scope of Analysis

4Income and cost analysis Measure costs

Brainstorm non financial impacts

Cost evaluation of inputs

Quantify non financial impact

Analyse costs

5 Impact value chain

Articulate theory of change and 3 key, practical indicators

Theories of change and impact value chain Impact value chain

6Identify and collect data

Translate impacts into financial terms Tracking Monetisation

Identify and collect data

7 Projections Projections Projections

8 SROI calculationCalculate enterprise value SROI calculationCalculate social purpose value Sum the cashflowsCalculate blended value

Discount the cashflows

Calculate enterprise returns Calculate SROI

9 SROI reportingGenerate SROI report Reporting SROI reporting

10Evaluation and monitoring

Effectiveness measures Evaluating

Implementation and integratio


Builds on existing frameworks

Inputs Activities Outputs Outcomes

What is put into the venture

Venture’s primary activities

Results that can be measured

Changes to social systems

Goal Alignment

Activity and goal adjustment



Impact = differential change


What is put into the venture

Venture’s primary activities

Results that can be measured


Goal Alignment

Activity and goal adjustment

What would have

happened anywayEssential!

= IMPACT

-




Technical inputs- i.e. SystemsTrainingCoaching FacilitatingTechnical / Functional supportEtc.

Primary activities conducted in the consultancy –business planning, board expansion, accounting systems, process design

Results that can be measuredi.e. product developed in consultancy: bplan, strategic planCapitalization strategyNew financial management

Changes to Organization

(minus)

Goal Alignment

Adjust activities and goals to outcomesConsulting may enter a new phase or execution may continue by org.

What would have

happened anyway

= IMPACT

-


• Description: social enterprise that develops community-based, integrated waste management microenterprises in Peru

• Goals: in business to create more than financial value-- wants to restore the environment, improve peoples’ health and cultivate community-based economic development

Example: Ciudad Saludable



What’s the value proposition?

• Financial value proposition– $$$$ revenue– $$ Costs

• Non-financial value proposition – Outputs/measurable indicators:

• #s of customers served with waste collection

• tons of garbage recycled

• # jobs created

• # people trained, etc….

– Outcomes/results: • Less disease, fewer deaths, healthier people, less domestic violence, sense of

pride and dignity • Cleaner water, restored fish populations & biodiversity

• Fewer lost work days due to illness, lower health expenses, greater incomes and economic security



CS’s operations overall are big15 environmental waste management micro-enterprises have been created that generate permanent

employment for 180 people in 35 cities in the country and benefit 3 million inhabitants. These include: plant nurseries, humus plants and compost (organic fertilizer, recycled paper and sanitary landfills. It is important to note that all of the microenterprise employees receive income between 1.5 and 2 times the minimum wage (between $180-$260) Furthermore, they receive benefits such as health, pension, vacation and worker’s compensation for the time they have worked.

We have supported and consolidated the organization of informal recyclers. (Association of Independent Environmental Workers for the Recuperation of Solid Waste, 800 workers)

We have carried out large cultural campaigns for environmental sanitation with the participation of school children, teachers and parents.

We have trained authorities and public workers in 43 municipalities on the integrated management of solid waste, and in agreement with the Catholic University (Lima) we have developed a Post-graduate Program. In this Program we have trained 58 new local authorities of municipalities and teachers of other universities and private sector technicians of many cities of Peru. And now we are beginning a new edition of the Post-graduate Program with Catholic University, improving the previous edition since we added a new module on management of industrial and dangerous waste.

Raising public awareness on environmental and health issues: over 6,000,000 people reachedTransforming the organic waste into compost. More than 200,000 pounds processed and soldCollaborated on the formulation of the Peruvian General Law on Solid Waste and the Regulation of this LawPromoted the recognition of recyclers as part of the official waste management system: Began the official

registration of micro-enterprises. In agreement with the National Council of the Environment (CONAM) we elaborated a National Plan of

Solid Waste Management. The first in all of Peru. In collaboration with the Ministry of Health, the National Council of the Environment and the Pan-American

Organization of Health we are organizing the establishment of the "Roundtable of National Dialogue on Sanitation"

Related recycling enterprise 1 Related recycling enterprise 3

Related recycling enterprise 2

City 1: Carhuaz Microenterprise Cities 2-35X Microenterprises

Cultural Campaigns n-m Trainings a-b

Ciudad Saludable


Many possible impacts

• Economic Development– Jobs created that would not otherwise

have been– Businesses created directly and indirectly– Wages earned above what would have

been earned otherwise– Number of people who move out of

poverty– Contribution to GDP

• Health:– Lives saved due to avoided infections of

hepatitis, HIV– Lives saved due to avoided diarrhea– Domestic violence incidents avoided– Instances of illness, birth defects– Healthcare costs avoided

• Environment

– Biodiversity not killed off

– Toxic emissions not released into residential areas by waste

– Trees not destroyed to create paper replaced by recycling

– CO2 consumed by trees not destroyed

• Education– People trained who would not

otherwise have been– Increase in earning potential of

these people due to education– Increase in empowerment

• Well being– Increase in reported self-esteem– Increase in aesthetic quality of life


Outputs Outcomes Monetization- Base case

Breaking Down the SROI



Outputs

Together we brainstormed all the potential impacts that result from CS’s work, and what CS wanted to measure.

CS already counted a few outputs: the number of jobs created, the revenues from customer fees, and the amount of garbage collected.

We identified a number of additional outputs and outcomes that it would be important to measure.

Outcomes Monetization- Base case

Ex: Ciudad Saludable SROI Analysis


Measurable results of daily activities

Changes in the world related to those outputs


Outputs Outcomes

Internal data collection took place:• staff• microentrepreneurs• local health authorities

Research of “proxy studies” also took place: • disease and death caused by exposure to garbage in

similar regions• costs of waste management if provided by the

government in similar regions• environmental impacts of pollution and waste

Monetization- Base case





CS assumed “what would have happened otherwise” (if CS did not exist):

• what microentrepreneurs & CS staff would have earned• what the incidence of children’s deaths from diarrhea in the region

would be• what it would cost for the government to collect the garbage

instead of CS• where the garbage would be if not collected by CS

Ex: Cuidad Saludable SROI Analysis



Outputs Outcomes

SVT monetized a subset of CS’s impacts using the dollar value of:

• The increase in microentrepreneurs’ earnings

• The relative savings to taxpayers of having CS do the waste

management rather than the municipal government

These values were calculated relative to the investment required to create them.





Selection from SROI AnalysisSROI SummaryBack to Table of Contents

2005 2001-2005 Total

Investment in Carhuaz Project by Ciudad Saludable (USD) 655,147$ TBDInvestment in Carhuaz Project by Ciudad Saludable (soles) 2,234,051 TBD

POVERTY ALLEVIATION IMPACTS AND CONTRIBUTION TO GDP

Changes in Peruvian Poverty rates 2005 2001-2005 Total

# of people in Carhuaz now above poverty line due to CS work (who would not otherwise be) 0.000012

people moved above the poverty line per sol of 2005 investment 27

Effective change in Carhuaz poverty rate from CS involvement* -0.056%Effective change in Peru poverty rate from CS involvement -0.00010%

Total Growth in GDP for Carhuaz

GDP contribution from Carhuaz to Peru (soles) 910,257,202 407soles GDP contribution per sol of 2005 investment TBD

% of Carhuaz Contribution to Peru GDP that comes from CS-created MEs and related jobs created 0.02% TBD

COMMUNITY ECONOMIC DEVELOPMENT IMPACTS

Ciudad Saludable and Microenterprise Employment

Net increase in annual earnings due to CS employment (soles), 2005 49,104Net increase in annual earnings due to microenterprise employment, 2005 45900Net increase in annual earnings due to additional job creation in recycling, 2005 69760

Total net increase in earnings, 2005 (soles) 164,764 0.074

soles that would not otherwise have been earned per sol of 2005 investment

NPV of cumulative total net earnings 263,378

ENVIRONMENTAL IMPACTS

Environmental Protection

Total waste not put into environment at large (tons/yr) 4,015 0.002tons of waste safely managed per sol of 2005 investment TBD

Recycling and Related Value

Total recyclable waste not put into environment at large (tons/yr) 3,285 0.001tons of waste recycled per sol of 2005 investment TBD

Percentage of total waste that is recycled 82%

HEALTH IMPACTS

Reduction in Disease

Avoided cases of diarrhea in children under 5 avoided due to CS 739 0.0003cases of diarrhea avoided per sol of 2005 investment TBD

Deaths avoided

Estimated deaths avoided (diarrhea in children under age 5 only) 192 0.00009deaths of children avoided per sol of 2005 investment TBD

Reduction in Domestic Violence

Total instances of domestic violence overcome TBD 12Reduction in prevalence of domestic violence: SVT estimation TBD -93%Reduction in prevalence of domestic violence: CS estimate TBD -100%

SROI breakdown (Units of return for amount invested, 2005)

POVERTY ALLEVIATION IMPACTS AND CONTRIBUTION TO GDP

Changes in Peruvian Poverty rates 2005

# of people in Carhuaz now above poverty line due to CS work (who would not otherwise be)Effective change in Carhuaz poverty rate from CS involvement* -0.056%Effective change in Peru poverty rate from CS involvement -0.00010%

Total Growth in GDP for Carhuaz

GDP contribution from Carhuaz to Peru (soles) 910,257,202% of Carhuaz Contribution to Peru GDP that comes from CS-created MEs and related jobs created 0.02%


15 environmental waste management micro-enterprises have been created that generate permanent employment for 180 people in 35 cities in the country and benefit 3 million inhabitants. These include: plant nurseries, humus plants and compost (organic fertilizer, recycled paper and sanitary landfills. It is important to note that all of the microenterprise employees receive income between 1.5 and 2 times the minimum wage (between $180-$260) Furthermore, they receive benefits such as health, pension, vacation and worker’s compensation for the time they have worked.

We have supported and consolidated the organization of informal recyclers. (Association of Independent Environmental Workers for the Recuperation of Solid Waste, 800 workers)

We have carried out large cultural campaigns for environmental sanitation with the participation of school children, teachers and parents.

We have trained authorities and public workers in 43 municipalities on the integrated management of solid waste, and in agreement with the Catholic University (Lima) we have developed a Post-graduate Program. In this Program we have trained 58 new local authorities of municipalities and teachers of other universities and private sector technicians of many cities of Peru. And now we are beginning a new edition of the Post-graduate Program with Catholic University, improving the previous edition since we added a new module on management of industrial and dangerous waste.

Raising public awareness on environmental and health issues: over 6,000,000 people reachedTransforming the organic waste into compost. More than 200,000 pounds processed and soldCollaborated on the formulation of the Peruvian General Law on Solid Waste and the Regulation of this LawPromoted the recognition of recyclers as part of the official waste management system: Began the official

registration of micro-enterprises. In agreement with the National Council of the Environment (CONAM) we elaborated a National Plan of

Solid Waste Management. The first in all of Peru. In collaboration with the Ministry of Health, the National Council of the Environment and the Pan-American

Organization of Health we are organizing the establishment of the "Roundtable of National Dialogue on Sanitation"

Related recycling enterprise 1 Related recycling enterprise 3

Related recycling enterprise 2

City 1: Carhuaz Microenterprise Cities 2-35X Microenterprises

Cultural Campaigns n-m Trainings a-b

Ciudad Saludable

First analysis covers part of the organization


Impacts included in first analysis• Community Economic Development

– Jobs created that would not otherwise have been

– Businesses created directly and indirectly

– Wages earned above what would have been earned otherwise

– Number of people who move out of poverty

– Contribution to GDP• Health:

– Lives saved due to avoided infections of hepatitis, HIV

– Lives saved due to avoided diarrhea of children under 5

– Domestic violence incidents avoided– Instances of illness, birth defects– Healthcare costs avoided

• Environment

– Biodiversity not killed off

– Toxic emissions not released into residential areas by waste

– Trees not destroyed to create paper replaced by recycling

– CO2 consumed by trees not destroyed

• Education– People trained who would not

otherwise have been– Increase in earning potential of

these people due to education– Increase in empowerment

• Well being– Increase in reported self-esteem– Increase in aesthetic quality of life


Impact Analysis is a Process

Source: Social Impact Assessment Project, Will Rosenzweig, Cathy Clark, David Long, Sara Olsen and the Rockefeller Foundation, copyright 2003.

Stage "Implied Impact"

"Apparent Impact"

"Proxy Impact" "Demonstrated Impact"

"Proven Impact"

STORYTELLINGINTERNAL

DATA ANALYSIS

EXTERNAL DATA

ANALYSIS

EXPERIMENTAL ANALYSIS

STRONG EXPERIMENTAL

ANALYSISThrough participant and/or customer anecdotes and our experience, we believe it works.

We define targets for outputs of the activity and compare our performace to our internal targets.

We compare our data to existing experimental or statistical data, and can predict impacts through these proxies

We conduct original experiments or primary research to demonstrate our actual impact.

We conduct or hire a third party to conduct strong experiments that prove our impact.

Definition

The “Stages of Impact Assessment”

CS before CS after SROI Analysis


Reporting: show fuller spectrum of value

monetizedvalue

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quantifiedvalue

financial value

narrative value



Results: Connect with Diverse Audiences

InternalManagement

Financial

Monetizable

Quantitative

Qualitative

Narrative

Investor 1 Investor 2



Current Evolution

• SROI Analysis “types” emerge that reflect

different geographies, industries, missions

• Greater comparability and credibility

• “Portfolio analysis” becoming possible



Innovation in Capital Markets

• New financial instruments that tap wider range of capital sources

– Packard & Sustainable Fisheries Fund

– Developing World Markets & microfinance securitization

– Sierra Gorda “gourmet package”

• New classes of investors emerge

– “Portfolio of investors” concept

• “Social asset” trading (like carbon markets)?



Future

• See and communicate value

• Optimize the work

• Achieve “network effect”

• Move money to good!



Sara Olsen

[email protected]

Contact us


Additional Slides


Outputs

Mobius projected the amount of chemicals not consumed, extra energy required, and avoided waste

Outcomes Monetization- Base case

Ex: Mobius Technologies SROI Analysis



Outputs Outcomes Monetization

WEIGHTED-AVERAGE CHANGES IN USE OF CHEMICALSDifferential Net Change (t/y)gross % net % Mobius plant capacity (kg/h) 225

polyol -8.89% -9.80% operating hours per year 4,444 -977 polyolMobius powder 9.37% 10.04% powder production (t/y) 1,000 1,000 Mobius powder

TDI -0.11% -0.25% foam production (t/y) 9,964 -25 TDIwater -0.07% -0.09% foam market (t/y) 3,628,800 -9 water

surfactant -0.09% -0.10% market share (%) 0.27% -10 surfactantamine cat -0.01% -0.02% -2 amine cat

tin cat 0.00% 0.00% 0 tin catmethylene chloride -0.20% -0.24% -24 methylene chloride

sum 0.00% -0.46%

- Base case

©2002 Mobius Technologies and SVT Consulting. All rights reserved.

From Mobius Technologies’ SROI Analysis, 2002




Outputs Outcomes

SVT analyst quantified emission, effluent and waste associated with chemical production based on existing studies by APME and Mobius industry knowledge






Polyol TDI Polyol TDI

dust 11,214 6,944 11,214,000 6,944,000CO 3,830 6,014 3,830,000 6,014,000CO2 3,527,859 5,218,826 3,527,859,443 5,218,826,199SOX 13,612 19,990 13,612,000 19,990,000NOX 15,065 21,873 15,065,000 21,873,000Hydrocarbons 2,755 4,638 2,755,000 4,638,000methane 11,903 23,045 11,903,000 23,045,000

mg per kilogram of mg per metric ton of

Data from APME

lifecycle analysis

Builds on Mobiusand APME data

From Mobius SROI Analysis, ©2002 Mobius Technologies and SVT Consulting. All rights reserved.


Avg. savings per plant: 976.62 metric tons of Polyol per year reduction unit unit/polyol total unitsCO2 tons 3.53 3,445.37S0x tons 0.01 13.29N0x tons 0.02 14.71CH4 tons 0.01 11.62landfilled tons 0.07 67.78incinerated tons 0.01 9.05




Mobius assumed customers would not reuse scrap since there was no other technology to enable this, so they sell it for carpet backing, then it goes to landfill or incineration




Outputs Outcomes

SVT monetized a subset of Mobius impacts using the dollar value of CO2, SOx and NOx emissions credits obtained from Cantor Fitzgerald






emission price/ton sourceCO2 10.00$ Cantor Fitzgerald SF, Mike Hammond (broker)S0x 170.00$ Cantor Fitzgerald SF, Mike Hammond (broker)N0x 4,800.00$ Cantor Fitzgerald SF, Mike Hammond (broker)methane 4,000.00$ Cantor Fitzgerald SF, Mike Hammond (broker)energy kWh 0.05$ Mobiuslandfill (weight) 37.28$ CA integrated waste management board, 2000 Surveylandfill (volume) 93.79$ CA integrated waste management board, 2000 Survey

Discount rate of anticipated cost savings 15%



Values in this analysis were derived from ERC markets, tipping fees



Outputs Outcomes Monetization

MONETIZABLE BENEFITS PER CLIENT (cumulative environmental impact in resources life cycle)

Year 1 Year 2 Year 3 Year 4 Year 5Environmental benefits of reduction in Polyol 158,171 158,171 158,171 158,171 158,171Environmental benefits of reduction in TDI 6,267 6,267 6,267 6,267 6,267Environmental benefits of reduction in PU foam waste 93,789 93,789 93,789 93,789 93,789

Environmental effect of changes in energy consumption with using mobius powder recycling -4,514 -4,514 -4,514 -4,514 -4,514Annual benefit 253,712 253,712 253,712 253,712 253,712PV annual benefit 236,587 205,728 178,894 155,560 135,270SNPV (social net present value) $912,039

Investment per client -800,000"SROI" (social return on investment) 114%

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5-$800,000 253,712 253,712 253,712 253,712 253,712

"SIRR" (social internal rate of return) 18%



- Base case



Research Roles

Outputs Outcomes

Results that can be measured in operations


• Tracked regularly• NGO, Investor, Funder

• Periodic • Need data from researchers and other stakeholders



Principles

1. Useful2. Feasible3. Credible

: : Rigorous : : Replicable: : Transparent: : Avoids misuse

4. Integrative: : Open source


©2004 social venture technology & consulting (svt). all rights reserved. sroi : : an overview...

Documents

social return

simpler slide

perfect information

nonfinancial value

actual value

value ecosystem

investment agenda

investment definition