Whilst I spend a lot of time focusing on measuring the impact of corporate social investment (#CSI), corporate social responsibility (#CSR), grantmaking and humanitarian programs, a similar amount of time and effort is also spent on determining business or social return on investment.
And whilst there is a lot of evidence that investments in social and community programs yield significant return on investment (#ROI #SROI) many practitioners are not always clear on how to determine this return.
Inherently most companies, donors, philanthropists, grantmakers, social and impact investors want to create #sharedvalue and/or #blendedvalue – and whilst the primary focus is always an impact first approach, equal attention should be paid to the #socialreturn aspect, quite simply because resources, assets, time, products, services and skills are also part of the financial commitment. As such, social and community investors have a responsibility to show the value generated by their social and community investments.
Using our impact management and measurement approach we have been able to identify several return-on-investment dimensions that can be measured. Some of these include:
- Strategic: Enhance and support strategic objectives and strategies such as shared value creation or purpose statements relating to company values
- Talent Retention & Recruitment: Support specific operational strategies such as employee involvement and volunteerism or skills development
- Operational: Enhance the funders ability to become more effective through better resource allocation, asset management, procurement and supplier or enterprise development
- Profitability and competitiveness: Enhance the funders ability to become more competitive and profitable through new customer acquisition, new product development or new market entry or expansion in underserved markets
- Social: Enhance and support social objectives of funder such as social inclusion, or promoting the local economy
- Environmental: Enhance and support environmental objectives of funder such as efficient resource consumption
- Economic: Enhance and support economic value of the funder such as reduction of capital costs and increased investment
- Transformation and empowerment: Support and enhance empowerment and transformation objectives of funder for example improve BBEEE rating
- Risk: Enhance and mitigate risks for funder such as social unrest or climate risks
- Financial: Deliver savings to funder – such as legal costs avoided or capturing market value from new financing opportunities (green and social bonds, better financing conditions because of improved ESG ratings, etc.
- Reputational / Brand: Enhance the funder’s reputation and brand awareness for example augment/support/enhance business marketing, communication and branding strategies
- Intellectual Capital: Identify opportunities for innovation or research and development.
- Stakeholder relationships: Enhance and deliver value to the funders stakeholders such as government, suppliers, customers, business partners.
- Governance and Compliance: Support and enhance the funder’s compliance and governance obligations and requirements such as King V or GRI or IIRC reporting requirements
- Sector: Enhance funders contribution to efficiency, transformation and empowerment of the sector in which they operate for example ensure financial inclusivity or crossing the digital divide
- Sustainability: Enhance the funders ability to become more sustainable and innovative by anticipating changes in customer demand and concerns regarding sustainability, leading to increased market share and number of customers
- Legal requirements: Preserve or protect social licence to operate (i.e. SLP requirements in Mining Sector)
The value of social investment strategies also increases as it:
- Supports other company strategies most notably sustainability and shared value strategies
- Supports and enhances other development strategies such as skills development, and enterprise and supplier development interventions
- Supports company purpose and value statements such as diversity, inclusion and equality
- Strengthens other commitments to company stakeholders such as improved livelihoods, reduction of poverty, contribution to economic development and of course, creating jobs and reducing unemployment
However, we do want to point out that return on investment does not just happen, nor is it guaranteed. If social investment and development strategies are not designed with return-on-investment aspects in mind, if clear objectives and targets are not defined, if the business case has not been outlined for specific strategic, operational and programmatic alignment and if performance metrics and indicators are not appropriate, the expected and anticipated returns may not materialize. For this reason, equal attention must be paid to both aspects in the impact management and measurement process – impact as well as social return on investment.
If you want to learn more about social and business return on investment from your social and community investments, donations and sponsorships, corporate investment, enterprise and supplier development programs, please reach out and connect or visit our website for evidence of our work: www.nextgeneration.co.za