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The Growth of Social Return on Investment

Many social enterprises are analyzing the impact of their services using a framework called Social Return on Investment. Like all evaluation, it takes effort to do well. However the multi-stakeholder perspectives inherent in the process is starting to shift the discourse.

It is often argued that social enterprise, as a new(ish) form of business, is concerned with using the medium of business to effect social change. The objective is not to exploit a market for the sake of a financial return but rather to create a market to support social change. And while other types of businesses create markets by generating desire for their offering, only social enterprises are concerned with generating desire for social change that one or more types of customers will pay for. A social enterprise needs not only the willingness of those who could pay for change to pay the social enterprise, but it also needs the trust of those who could be supported to change to allow social enterprises to help them.

There are thus many tensions for the social enterprise to navigate. A common issue is that the group of people who will be most affected by the initiative are the least able to pay for the change or they may even be resistant to the change. In the UK, The largest potential customer for social enterprises that focus on disadvantaged populations will often be the public sector. 

For example take chronically excluded adults with multiple needs; people who have two or more problems such as substance misuse problems, mental-ill health, prolific offending and have been excluded from services because of problem behaviour. This group need to change their behaviour, for their own sake as well as for society. However, they tend to lack belief that change is possible, have had a poor experience of statutory services and are generally hard to engage. In addition, the potential paying customer in this case is the public sector, not the service user.

Alternatively an organisation could seek to fundraise to cover costs, but a social enterprise would tend to approach this in terms of market development.  This is harder to do in some countries than others depending on attitudes towards approaches to public service provision.

A further tension is that the operating costs necessary to achieve the desired outcome may exceed the price that a single public body expects to pay. As the organization may be used to paying for only part of the problem, paying for the whole problem to be completely resolved can appear expensive.  To develop a market for a service that deals with a whole person, a social enterprise will have to deal with a public sector market that is fragmented, with each only taking responsibility for and willing to pay to address a part of the problem.

Any social enterprises engaged in this type of work will find there is a gap in their paying customers’ understanding of value that requires tenacious efforts on their part to resolve. Many are turning to analysis of their services using a framework called Social Return on Investment. Like all evaluation, it takes effort to do well. However the multi-stakeholder perspectives on theory of change of an intervention, coupled with assessment of quantities and value of change is starting to shift the discourse. 

A dozen or so of the thousands of adults facing chronic exclusion in the UK benefited from an intensive supported accommodation service set up by a social enterprise with just such tenacious efforts. The first SROI analysis undertaken over its first year of operation highlighted what the short to medium term changes were for the service users and many other stakeholder groups, including voluntary groups and many different public sector bodies. It addressed the issue of how important this change was to the different parties; how it affects public sector resources (less use of crisis services) but also the significance of development of a “normal life” for people who have rarely experienced one before. The public body who had taken the lead on paying on behalf of the whole public sector had sufficient evidence to continue the service and others have started to question whether this model of service would be appropriate in their location. But the real winner is the public since in the face of concrete examples of what value for money really means in public services, commissioners start to change their idea of what a good result is. 

Social enterprises need customers who are prepared to pay for social value. But society needs social enterprises who are prepared to develop a market for it. 

Jenni runs VIE, a research and evaluation consultancy. She helps public sector clients and social enterprises to buy and sell social value. She works across the UK, evaluating innovative public services and supporting the development of public sector commissioning practice. She is… [Read more about Jenni Inglis]

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