CBA vs SROI – Which is the better social impact measurement approach?

There are a number of methodologies commonly used to measure social value and we are going to compare Cost-Benefit Analysis (CBA) and Social Return On Investment (SROI). CBA is the oldest and most widely endorsed methodology around the world, with the strongest evidence base and guidance supporting it. SROI is actually a derivative of CBA which focuses heavily on the involvement of stakeholders in the measurement process.

Cost-Benefit Analysis (CBA)

Cost-benefit analysis is a weighing-scale approach to understanding your social value. All the pluses or benefits are put on one side and all the minuses or costs are put on the other. The result is a ratio of cost to benefit. Ultimately you want to know, did you, or will you, create a net benefit to society through the planned program.

Changes in people’s welfare are measured in monetary terms either by preference valuation methods and increasingly through wellbeing valuation methods. It uses experimental and quasi-experimental statistical methods for assessing causality. Long-term impacts are adjusted for inflation and discounted to account for the fact that impacts in the future are less valuable to current generations.

Social Return On Investment (SROI)

Social Return on Investment (SROI) is an outcomes-based measurement tool that helps organisations to understand and quantify the social value they are creating.

SROI is a combination of elements from CBA and accounting principles. There are seven principles to measuring social value through SROI. At its heart is the intention to involve stakeholders throughout the evaluation including the creation of the financial proxy values for outcomes. While it aligns with CBA in the creation of financial values for outcomes, there is some debate over what exactly is being valued within the SROI methodology.

SROI calculates a ratio score which outlines for every dollar invested in the program, how many dollars of social return have been created. Any ratio where the return is higher than 1:1 is worth doing, but the larger the difference in the ratio in favour of social benefit, the larger your impact has been.

Which one can I use with the ASVB?

The Australian Social Value Bank (ASVB) wellbeing values are compatible with both methodologies. The ASVB Value Calculator conducts a CBA calculation using the wellbeing valuation approach to monetise the improvement in participants’ wellbeing, achieved through the outcomes. We currently have 62 wellbeing values across the following outcomes domains: health, education, home, social and community, drugs and alcohol, crime and employment.

You can use the ASVB as a complete impact measurement methodology using our set of pre-defined indicators and data collection templates in conjunction with the ASVB Calculator and wellbeing values.

Alternatively, if you want to carry out your own CBA or SROI evaluation project you can use the ASVB values when you come to the point where you need to monetise the value of your outcomes.

One of the major benefits of using the ASVB outcome values is that they have been calculated using national datasets. If you choose to carry out primary research to calculate your outcome values it will be costly, time-consuming and lack the same level of rigour, due to the smaller sample sizes in your methods.

Which methodology should you use?

There is no single methodology for measuring impact which is suitable for every organisation’s measurement needs. However, you should consider who the audience for your impact measurement activities is and what approaches they expect you to be using. Currently, both CBA and SROI are recognised approaches endorsed by practitioners and funding bodies, however government currently uses only CBA when assessing their own large scale investments.

Get in touch if you would like to explore your methodology options or join our next introductory webinar to learn more about the ASVB