Students in Mumbai recently won $10,000 in an international competition. No, not for winning Indian University Challenge, but for designing a Rs.5 (about 7p) meal for slum-dwellers. The meals are prepared by slum-dwellers themselves, who earn a good wage, meaning the project has even more positive impact on the community. Other brilliant ideas submitted included pedal-powered telephones for Nicaragua, and cheap solar ovens for Africa.

But with such a diverse range of projects, how did the judges manage to choose which one was best? One major criterion was Social Return on Investment (SROI). You can use SROI to put a cash value on how much impact any activity has on society.

Roughly, you do this by finding measurable ‘indicators’ which represent the impact the activity has. So one indicator for a homeless charity might be the number of people which it helps get into housing. The next step is to find out how much that indicator is worth. In the homelessness example, that could be the average rent paid by the newly homed person. All you need to do then is calculate your ‘social return’ in pounds. Comparing this to the amount of cash ‘invested’ to achieve this social return gives you an idea of how efficient the charity, or project, is.

Or so the theory goes. Some people are unsettled by the idea of pinning a financial value on the delicate task of getting people off the streets. But it seems to me that charities and donors have to make that sort of decision all the time, when they choose to spend money on one cause rather than another.

By co-incidence, at Intelligent Giving we have been studying ways to compare charities, and we’ve been examining the nuts and bolts of how SROI works. It seems to me to be a very useful tool for judging progress in a project, or comparing near-identical projects. But is it useful for comparing different charities?

We thought it would be fun (and potentially useful) to see what score Intelligent Giving got - how much money we 'return' on each pound given to us. The trouble is, the figure you end up with can vary enormously, depending on which indicators you choose, and how you value them. A rough, back of the envelope calculation showed that  Intelligent Giving’s social return might be anything from £7,400 to £16 million on the initial pound given.

Looking at some helpful guidance on SROI, I can’t see anything actually wrong with either calculation. You might say that the ‘true figure’ lies somewhere between the two. But what would count as the ‘true figure’? If there are several legitimate ways to measure and value social goods financially, on what grounds could we say that one is better than the other? It’s a little like trying to measure how far away a rainbow is: you can use triangulation, or see that it ‘comes down’ in a village a mile away, or pace out to the pot of gold. But in a sense, none of these measures is better than any other.

So it seems there’s a fair amount of judgment in calculating SROI. It will take an experienced and skilled user to apply SROI to diverse activities in roughly the same way, and the more diverse the projects are the more difficult comparing them fairly will be (again, what would count as ‘fair’ comparison?). Which leads me to hope that there are other ways of comparing charitable activities and social impact, and other ways of showing why providing cheap food-packs for the poor is such a cracking idea.


 

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