Benchmarking the SROI results from 200 investments and activities

As impact valuation and SROI methods are increasingly used by all organizations worldwide, informing a wide variety of decisions, the question remains: what is a good impact valuation result or SROI?

Given our experience working worldwide with various organizations and activities, we took the challenge to analyze 200 SROI results from our most recent projects over the past couple of years. We compared them according to pre-defined categorization covering the activity sectors and geographies and the types of organizations leading those activities (big businesses, NGOs, or start-ups). The following figures show the count of SROI studies per type of organization and region and the breakdown per activity sector.

In this assessment, we combined the SROI results, calculated on a yearly basis as the ratio between the societal value created and the input cost of the activities, and the IMOIC ratio, which is more adapted to equity or loan investments. The IMOIC is more adapted for equity and loans investment which lead to long term impact. The IMOIC accounts for a more extended period of time (usually 10 years) during which societal value is delivered thanks to an initial capital invested. In our work, we directly compare SROI and IMOIC ratios.

We derived five key insights:

1. Average SROI: the average SROI from all those activities assessed is 1:18. This means that for each dollar spent on an activity, 18 dollars are delivered to society. I was expecting a number much lower than this, more in the range of 1:5-10. Our work may be biased towards assessing positive impact projects more frequently than inefficient ones due to the nature of consulting activities. It is also possible that our scope of assessment is a bit wider than what is usually captured in past impact valuation or SROI studies, given that the latest developments allowed us to capture more impact drivers than before. Lastly, it is possible that the unique impact indicator we use in all our analyses, the eQALY (or change of wellbeing), is valued at a higher point than other monetized outcomes in different methodologies, particularly the SROI one.

   The following results table shows the average SROI calculated per organization type and geographical location:

   

2. Organizational differences: Although statistically speaking, we don’t have enough data points to derive conclusions, and our analysis is spread across many different activity sectors, we still can derive some interesting insights (see graph above). Start-ups seem the most efficient organizations for delivering societal value (assuming they remain in business in the future). Most of the start-ups assessed are part of impact funds, and they actively target a social or environmental issue, which helps. NGOs, representing half of the activities assessed, are close to the start-up efficiency, aiming to deliver societal value. I would have expected their results to be a bit higher. However, we discovered through our work that many of those still had some issues of overhead, lack of strategic focus, lack of organization efficiency, etc. Finally, business (multinational companies) have the lowest score. The business average encompasses the business purpose and the additional activities close to their core business (e.g., jobs creation, organization’s efficiency investments, business units or new capex investments, etc.). We noticed that business purpose SROI is significantly lower in value than other targeted business activities. This is due to the trade-off between financial and societal value creation. We noticed efficiency dropped towards 1:1-2 when we assessed entire business value chains, while it can rise significantly when specific business functions are evaluated. Note that the standard deviation can be as significant as 1:30-40 for most of the categories. Hence, those insights must be interpreted with care as specific context matters more than the organizational type.

3. Regional differences: We noticed an engaging and clear trend that showed that high-income regions had significantly lower SROI than low-income countries (see graph above). This is expected, as cost levels are higher in high-income countries, and social issues are less critical regarding well-being levels. Interestingly, some initiatives were active worldwide and showed higher levels of SROI. However, this result has to be put in context to a particular high result achieved by a health joint venture (low-cost drug re-purposing for addressing a specific type of unaddressed cancer in low-income countries).

4. Activity sectorial differences: within our limited assessment scope of 200 SROIs, the human/social capital SROI delivered lower SROI results than natural capital ones (see below figure with breakdown per activity sector and organizations). Both activity types were equally split across the 200 SROIs analyzed. This does not mean human capital investments deliver lower societal values, but they may be more costly investments. When looking at businesses, they show inverse trends while also showing extreme variability. The business venture presented above (low-cost drugs re-purposed) shows an extremely high SROI, which creates a biased average and can be considered an outlier, while other human capital activities have a much lower SROI. For natural capital, the lower SROIs come from the challenge of reconciling societal and financial values when it comes to forestry investments, energy and material businesses (renewable energy, sustainable materials, economic circularity solutions, etc. which are categorized as nature conservation in the figure below), and regenerative agriculture (this one showing a relatively higher performance). Carbon credits are also an interesting business, although their primary purpose is to deliver climate change benefits, and they are relatively low price at the moment (despite assessing high-quality carbon credits portfolios in our case). Regarding NGOs and start-ups, employment, gender inequality, and health investments show high performance in addition to agriculture and, to some extent, forestry (although this one can be considered an outlier, as relying on only one data point). We cannot conclude that one activity sector is better than another at the moment, although we see some trends appearing. Businesses are, in general, less good at delivering financial and societal value at the same time. NGOs seem performant across the board, and start-ups can be very good in some specialized sectors (agriculture, sea conservation, health, and gender, for instance). Variability is very important! Characteristics of each investment are more important than the fact of being in one sector vs. another, or being led by one type of organization vs. another. It's all about correctly designing an initiative or investment.

1. Benchmarking is essential: as we work towards redefining how we account for value, it is crucial to establish a strong benchmarking basis to analyze performance. Monetizing outcomes and impact does not guarantee that we understand the absolute performance of different investments. Benchmarking is critical to push ourselves to rethink how we invest for impact. This benchmarking does not provide definitive answers on what project type, activity, region or organization is better. The variability between projects is more significant than the variability linked to other parameters, such as geographic and activity sectors. However, comparing performance is part of the process of creating valuable insights for creating more impact. We hope this dataset will trigger discussions in this space where very few benchmarks exist historically.

With the proper standardization of impact valuation methods, benchmarking performance to derive valuable insights will be more and more possible. Unfortunately, the methodology differences between service providers and organizations performing impact valuation or SROI do not allow for a direct and fair comparison. The more we operationalize SROI and impact valuation, the more benchmarks we will obtain, and the more standardization, the more comparable we will become. Although, when applying a specific impact valuation consistently, like the eQALY one, we have already achieved a high level of comparability, as shown in this article.

What else do you notice? What do you find surprising? Let us know!