Valuing Social Returns on Social Investments: Comparing the State-of-the-Art in the US and Europe
Michael Moody, Johnson Center for Philanthropy Grand Valley State University
Laura Littlepage, Indiana University
Over the past decade, grantmakers and other social investors – especially in the U.S. and Europe – have actively
adapted a number of concepts, methods, and strategic models from the for-profit sector for use in the nonprofit
sector, or in organizations which blur those traditional sector boundaries. The development and diffusion of these
adaptations have been documented by scholars, although the challenges of implementing specific techniques, and
the variations across cultural contexts, need much more attention.
Many of these new techniques seek to measure the performance or impact of what proponents prefer to call a “social
investment” – requiring funded entities to track and/or project outcome metrics and to document the range of value
they create. Proponents see a number of benefits of calculating such measurements of the “return” from social
investments.
For the social investor, the measures provide a standardized assessment of the full value created by their
investments – including the hard-to-measure social value that is usually the primary sort of return they seek – and
help them make better decisions going forward. For recipients of social investments, the measurements can help
them document the full public good value of their work, which they often struggle to demonstrate in definable and
comparable ways.
The challenge for those who want to try to realize these benefits, however, is that measuring something like “social
return on investment” (SROI) in valid, reliable, and useful ways is difficult and time-consuming. Emerging techniques
for measuring social returns are being developed by scholars and practitioners alike – from innovative “venture”
funders, to health care economists, to the consultants and scholars in the SROI Network. But these techniques are
not widely known or used in detail, even among grantmakers who embrace the application of ROI-type methods to a
philanthropic context.
The aspect of SROI measurement that usually presents the greatest challenge for those who want to implement this
method is the process of valuation. Valuation requires complicated methods to quantify/monetize different types and
aspects of value—e.g., present vs. future value, value for specific populations. And valuation methods usually involve
time-intensive and sensitive data gathering from multiple, sometimes hard to access stakeholders.
A range of valuation methods have been developed for quantifying the social value of social investments, including
cost-based methods such as “QALY” and DALY” metrics in health studies, and “contingent valuation methods” in
which stakeholders are asked to express their perceptions of the value of a particular philanthropic effort – e.g., their
“willingness to pay” estimates. While these methods can get at the subtle social value of a social venture, or what Jed
Emerson terms the “blended” value that social enterprises create, they require much effort and expertise to generate
such complex assessments.
The project described in this paper seeks to identify and describe the state-of-the-art approaches to valuing social
returns on social investments, and to examine in detail how a few social enterprises and grantees in the U.S. and
Europe have attempted to implement valuation methods. The project focuses in particular on advances and cases in
the health care field, which is an area of innovation in SROI measurements in both the U.S. and Europe.
The first phase of the project is a comprehensive review of current scholarship on valuation methods, and a crossnational scan of existing techniques used in health care social investments. The second phase of the project involves
four in-depth case studies of how recipients of social investments – two in Europe, two in the U.S. – have attempted
to implement methods for valuing their multiple social returns.
The four cases include two comparable social enterprises providing “e-health” services, and two innovative nonprofits
assessing the SROI of their preventative diagnosis and disease self-management services. Case analysis of all four
organizations involves on-site interviews and observations, as well as document analysis and background/contextual
research. In two of the cases, the analysis also involves following them through a process of using an internet-based
SROI measurement tool called “social e-valuator.”
Case analysis is beginning and will be completed by April. The analysis is focusing on the processes that each
organization had to implement in order to measure social returns effectively, including systems for data-gathering and
tracking, stakeholder involvement, and staff training. We are comparing the challenges faced and solutions
innovated, looking in particular for similarities and differences between the European and U.S. contexts – contexts
with different stakeholder expectations about health services, different traditions of social enterprises and venture
philanthropy, and so on.
The research is funded by a European foundation, and is being conducted through a partnership of that foundation
and two U.S.-based philanthropy research centers. The ultimate goal is to distill a set of lessons learned – instructive
failures, replicable successes – and to describe some promising innovations to help future social entrepreneurs and
social investors alike.