Using Social Return on Investment SROI to purchase

Using Social Return on Investment (SROI) to purchase public benefit: the case of waste management Eva Neitzert Aniol Esteban nef (the new economics foundation)

NEF • Independent ‘think-and-do’ tank concerned with promoting innovative solutions to promote economic well-being – Environmental sustainability – Social justice – Well-being • Long-standing relationship to third sector – e. g. Social Enterprise Partnership, Performance Hub, Social Enterprise Ambassadors Evaluation etc. • Measurement matters – Tool development - Social Return on Investment (SROI) and LM 3 nef (the new economics foundation)

Why SROI? • Valuing mission-driven organisations • Captures social value by translating outcomes into financial values • SROI Ratio = [value of benefits] [value of investments] eg. Ratio of 2: 1 means that for every £ 1 invested in organisation £ 2 of social value are generated • Social includes the environmental and economic = triple bottom line nef (the new economics foundation)

More than a ratio… • Participative framework for finding out about how an organisation creates value • 4 -stage process – Stage 1: Boundary setting, stakeholder engagement and impact mapping – Stage 2: Data collection – Stage 3: Modelling and calculation – Stage 4: Reporting and embedding nef (the new economics foundation)

Doing an SROI Stakehol der Input Activity Output Outcome indicator/proxy Participa nts (32) Skills Time Trained in computer recycling IT skill set No. of recycled computers Increased selfconfidence Improved mental health Sustainable employment Improved life stability # gaining employment and average wage earned (£ 13, 500) -ATTRIBUTION -DEADWEIGHT Local governm ent Not applicable No. of computers recycled and diverted from landfill Reduced landfill expenditure Improved local environment, # of tonnes diverted/ cost per tonne (£ 39) DEADWEIGHT National Health Service Not applicable Prolonged support for participants, improved skills for participants Reduction in care costs Improved mental health of participants Reduction in use of mental health services – unit cost of in-patient mental health care (£ 20, 500) nef (the new economics foundation)

Case-study… • Social enterprise that provides bulky waste collection in Lancashire • Context: ongoing research on benefits of TSOs in waste management activities • Contract with council to collect domestic bulky waste • Organisation reuses / recycles materials, trains disadvantaged people and sources goods to poor families. nef (the new economics foundation)

Stage 1… • Boundary setting: local (area in which contract is developed) / beyond local • Stakeholder engagement: limited // only interviews with organisation and LA’s • Impact mapping based on interviews nef (the new economics foundation)

Impact map Stakeholders Local Authoriti es Households in need Volunteers Needs Activities Outputs Divert waste from landfill Reuse and recycling bulky waste Waste diverted from landfill Savings to LAs (*) Reduced environmental impact Contribution to council targets Low cost furniture 2 nd hand furniture showroo m Furnished homes: cost savings Reduced debt Increased well-being Increased community cohesion Training / Training and Improved skills Personal supervisi and developmen on employabili t meaningful Learning new ty use of time skills Increased self. Working as a esteem part of a and team confidence Outcomes Improved well-being Employment Reintergration with family and community

Stage 2: data collected 150 tones diverted from landfill 90 volunteers, 67 obtained qualifications, and 11 got a job after one year 5, 436 people assisted in 2007 - £ 260 k estimated savings compared to the cost of buying second hand good 250 k Money spent locally nef (the new economics foundation)

Stage 3: calculation Avoided landfill tax: Carbon savings Reduced env. impacts landfill Savings to families in need Improved human capital Benefits to individuals nef (the new economics foundation) £ 3, 600 £ 1, 413 £ 750 £ 138, 705 £ 132, 000 £ 24, 750

Stage 3: calculation Benefits to Local Authorities Benefits to Local citizens and communities Wider benefits (national and global citizens) £ 69, 600 £ 164, 205 £ 67, 413 Cost of scheme is covered with grants and with revenue from sales of reused material. The total public investment in the Bulky Waste collection programme amounts to £ 185, 000 (165 k contract / 20 k grants) nef (the new economics foundation)

Stage 4: Each public £ invested scheme has generated: • £ 0. 37 of added value to LA’s • £ 0. 88 of added value to Local citizens and communities • £ 0. 36 of added value to national and global citizens Total SROI £ 1. 61 per public £ invested 1. 61 : 1 nef (the new economics foundation)

Stage 4: Previously council would pay £ 110, 000 to take all bulky waste to landfill (no additional benefits created). Value per additional investment of £ 56, 710: • £ 1. 23 to LA’s • £ 2. 9 to local citizens and communities • £ 1. 19 to national and global citizens Total: £ 5. 32 per additional public £ invested SROI: nef (the new economics foundation) 5. 32 : 1

£ is only part of the story (Non-monetised): Increased environmental awareness. Reduced environmental impact at source, positive impact on local economy from 33 jobs supported by scheme and about £ 250, 000 income spent locally. stronger community cohesion through integration of socially disadvantaged people with more than 600 people taking part in events, increased well-being to families, improved well-being to individuals volunteering, innovation, replication potential nef (the new economics foundation)

Seeing half the picture Social enterprises, third sector orgs nef (the new economics foundation)

Seeing the full picture Public service contracts nef (the new economics foundation) Social enterprises, third sector orgs

The problem • Efficiency agenda – Focus on cash-able savings • Service specifications focus on: – Activities – Outcomes • Unit cost becomes driving force nef (the new economics foundation)

Sustainable Commissioning outcomes framework Commissioner & service user priorities 1. Activity 2. Output 3. 4. Service level outcomes Camden Community outcomes National outcome frameworks nef (the new economics foundation) Community strategy & Corporate priorities –social –economic –environment 5. Value –Quantitative –Qualitative –Monetizeable Where value accrues: - To Service - Camden wide - central government

Day Care Services pilot Procurement phase Innovation Service Specification - outcome focussed - Added social, economic and environmental outcomes accompanying service outcomes - Co-production principles Pre-Qualification Questionnaire Made ‘consortium/partnership friendly’ Inserted Question on wider outcomes Adjusted weighting accordingly Tender Schedules Outcome framework part of ‘provider method statement’ in Schedule 1 (double weighted) Further schedules outcome focussed - Pricing schedule – need to level the playing field nef (the new economics foundation)

Outcomes of the tender process • Consortium of 3 medium-sized locally based 3 rd sector providers • Not cheapest • Commitments to: – involve the wider community through use of volunteers – Co-production - peer led support and education initiatives and time-banking – Bulk buying of catering supplies from local sources – Recycling, walking and cycling initiatives with service users and staff • Key point: This result was achieved not just because better skills of third sector providers, but because they could use them… nef (the new economics foundation)

So … nef (the new economics foundation)

Further information • eva. neitzert@neweconomics. org • www. neweconomics. org. uk Measuring Value: A guide to Social Return on Investment (2008) nef (the new economics foundation)