Mea­sur­ing SROI

Element - - Business -

Your year-end fi­nan­cials show just one thing; whether or not your busi­ness is op­er­at­ing prof­itably. If it isn’t, changes need to be made. If it is – job done – right?

More and more busi­nesses have come to the re­al­i­sa­tion that the bot­tom line tells only part of the story.

What if your cloth­ing busi­ness is mak­ing good prof­its, but you have high staff turnover – they’re leav­ing in droves be­cause they don’t agree with the way your gar­ments are pro­duced in a sweat­shop with toxic dye leak­ing into the nearby river? Is your busi­ness a suc­cess?

Con­sumers’ buy­ing power, or even the threat of con­sumer back­lash, is show­ing the im­por­tance of trans­par­ent and re­spon­si­ble re­port­ing prac­tices. For ex­am­ple, last year Ox­fam pub­lished a re­port ex­pos­ing behaviour from large sugar com­pa­nies who were forc­ing small sub­sis­tence farm­ers from their land. This prompted a speedy re­sponse from Coca Cola, promis­ing an over­haul of its sup­ply chain, and a trans­par­ent re­port­ing process. “The Coca-Cola Com­pany will con­duct third-party so­cial, en­vi­ron­men­tal and hu­man rights as­sess­ments be­gin­ning in Brazil, Colom­bia, Gu­atemala, In­dia, Philip­pines, Thai­land and South Africa,” re­sponded the drinks gi­ant.

Closer to home, Cad­burys fu­ri­ously backpedalled on its de­ci­sion to in­clude palm oil in its choco­late as a re­sult of the public re­ac­tion to the ef­fect palm oil plan­ta­tions were having on the habi­tats of en­dan­gered an­i­mals such as the orang-utan.

New Zealand in­cu­ba­tor Ak­ina de­fines SROI thus: “SROI anal­y­sis en­ables or­gan­i­sa­tions to eval­u­ate their im­pact on stake­hold­ers; put a price on the so­cial and en­vi­ron­men­tal value they cre­ate, and iden­tify ways to im­prove per­for­mance rel­a­tive to in­vest­ments.

“In prac­tice, this in­ter­na­tion­ally recog­nised method­ol­ogy tells the story of how change is be­ing cre­ated, places a value on that change and com­pares it with the cost of in­puts required to achieve it in or­der to de­ter­mine an in­vest­ment ra­tio.”

It can also help you man­age risks and iden­tify op­por­tu­ni­ties and raise fi­nance, and may high­light po­ten­tial im­prove­ments to ser­vices, in­for­ma­tion sys­tems and the way you gov­ern your busi­nesses.

Ak­ina (for­merly The Hiku­rangi Foun­da­tion) con­tracted Dawn Bag­ga­ley from The Na­ture of Busi­ness and So­cial Ven­tures Aus­tralia to pro­duce a SROI study for the Bikes in Schools ini­tia­tive.

Bikes in Schools has pro­vided a com­plete cy­cling pack­age in more than 25 schools across New Zealand so far, and is now part of Ak­ina’s in­cu­ba­tion pro­gramme to pro­mote rapid scal­a­bil­ity.

The pack­age in­cludes a fleet of new bikes, hel­mets, bike tracks, bike stor­age and bike train­ing within the school grounds.

The aim is to en­cour­age chil­dren to be­come more ac­tive and healthy, help them de­velop var­i­ous bike skills, build their self es­teem and con­fi­dence, all while in a safe and familiar en­vi­ron­ment.

Ap­prox­i­mately 3500 pupils par­tic­i­pated in the Bikes in Schools pro­gramme over the three years mea­sured, bik­ing at least once a week. 46% of pupils cy­cled three times or more each week. “We see this high par­tic­i­pa­tion as a re­flec­tion of how much kids sim­ply en­joy cy­cling. Over 80% of pupils said they had fun and felt hap­pier as a re­sult of bik­ing within school, and we see this as a key fac­tor for the suc­cess of the over­all pro­gramme,” says Paul McAr­dle, founder of Bikes in Schools.

More specif­i­cally, the study found that Bikes in Schools de­liv­ers a long list of in­ter­re­lated out­comes, which in­cluded in­creased fit­ness lev­els, con­fi­dence and stamina; bet­ter con­cen­tra­tion in the class­room; and chang­ing long-term trans­port be­hav­iours, among many oth­ers.

On the cost side of the equa­tion, the study found that a to­tal of $610,000 was in­vested over the first three years of Bikes in Schools, de­liv­er­ing pro­jects for 12 schools. The anal­y­sis con­cluded that this in­vest­ment cre­ated a Present Value of $2.38m in the three-year pe­riod from 2010 to 2012, re­sult­ing in an SROI ra­tio of 4:1.

Paul McAr­dle, founder of the Bikes in Schools pro­gramme.

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