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Social Value is the value that stakeholders experience through changes in their lives. Some, but not all of this value is captured in market prices.
The Principles of Social Value provide the basic building blocks for anyone who wants to make decisions that take this wider definition of value into account, in order to increase equality, improve wellbeing and increase environmental sustainability. They are generally accepted social accounting principles.
The Principles are not individually remarkable; they have been drawn from principles underlying social accounting and audit, sustainability reporting, cost benefit analysis, financial accounting, and evaluation practice. There are other guides available on the process of measuring and reporting social value and impact that also refer to principles, such as the Social Investment Taskforce Guidelines for Good Impact Practice. However, the Principles of Social Value can be distinguished by their focus on what underpins an account of social value, and on the questions that need to be addressed so that the information can be used to better inform decisions.
An account of social value is a story about the changes experienced by people. It includes qualitative, quantitative and comparative information, and also includes environmental changes in relation to how they affect people’s lives.
By applying the Principles, it is possible to create a consistent and credible account for the value that is being created or destroyed. The outcomes, and the measures and values of outcomes, can remain specific to the context, activity, and the stakeholders involved.
When applied, the Principles also create an account that recognises that the level of rigour required depends on the needs of the audience and the decisions that will be taken.
The application of the Principles will require judgements. Therefore the information produced using the Principles needs an appropriate level of independent verification or assurance. As a result, the requirement for verification is also a principle. More guidance on making judgements can be found in A Guide to Social Return on Investment.
Adopting the Principles will sometimes be challenging as they are designed to make invisible value visible. Value is often invisible because it relates to outcomes experienced by people who have little or no power in decision-making. Applying the Principles will help organisations become more accountable for what happens as a result of their work, and means being accountable for more than whether the organisation has achieved its objectives.
measured and valued in an account of socialvalue by involving stakeholders.
Social Return on Investment is a framework which applies all of the Seven Principles to account for social value, with the added condition that Principle 3: Value the things that matter is achieved by using financial proxies.
For more information about SROI, you can download the Guide to Social Return on Investment.
What about the social return on investment ratio?
SROI is an account of value creation and the account requires a mix of information including qualitative, quantitative and financial. In the same way as quoting a financial return on investment without any other information, the SROI ratio, by itself, has little meaning. The range of judgement that is permissible within an SROI analysis means that comparisons of SROI ratios alone are not recommended. Comparison of forecast and actual ratios provide the starting point for an understanding the reasons for the difference which will also need to draw on other types of information.
Whilst we do not believe that investors will make decisions based on a single indicator, or that commissioners would be able to use a ratio as part of their decisions, we recognise that this could become part of the information that informs and influences decisions.
We are trying to increase the coherence and unity of the sector by taking some of the other well known frameworks and methodologies that exist for measuring, reporting on and creating social value or impact, and looking at their similarities and differences with respect to the Principles.
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