Health Economics Metrics

Topic 27 of 76 · Economic analysis types

Social Return on Investment (SROI)

SROI extends ROI to outcomes that markets don't price — wellbeing, social connection, environmental impact — by monetizing them with financial proxies, for all stakeholders affected.

Why it matters

Much of what health and community interventions produce never touches a budget line: reduced loneliness, carer relief, employment gains, dignity. SROI, governed by Social Value International's seven principles (involve stakeholders, value what matters, don't over-claim, be transparent, verify…), produces statements like "£3.20 of social value per £1 invested." UK public procurement's social-value requirements make SROI-style evidence commercially relevant: bids for public contracts (including NHS) score points for demonstrated social value.

The math

SROI ratio = PV(monetized social outcomes) / PV(investment)

For each outcome:
  value = quantity × financial proxy × attribution × (1 − deadweight) × (1 − displacement)

deadweight   = would have happened anyway
attribution  = share caused by others
displacement = benefit moved from elsewhere rather than created
drop-off     = decay of the outcome over years

The adjustment factors are the method's integrity: without them, SROI is fiction with a currency sign.

Worked example

A befriending app connecting isolated older adults to volunteers; program cost £200,000/year; 1,500 active pairs.

Outcome: reduced loneliness for 1,500 people
  proxy: wellbeing valuation of "relief from loneliness" ≈ £1,800/person/yr
  deadweight 25% (some would have found connection anyway)
  attribution 80% (some credit to other services)

Value = 1,500 × 1,800 × 0.80 × 0.75 = £1,620,000

Outcome: reduced GP visits, 1,500 × 1.2 visits × £42 = £75,600 (payer-real)

SROI = (1,620,000 + 75,600) / 200,000 ≈ 8.5 : 1

Note the ratio is 96% proxy-valued wellbeing and 4% hard cash. That's legitimate SROI — but it must be presented as social value, never allowed to imply £1.7M is bankable.

Software engineering connection

SROI is the honest framework for engineering work whose beneficiaries are outside the paying team: open-source maintenance, accessibility improvements, platform work consumed by other teams, developer-community investment. The transferable mechanics: identify all stakeholders, monetize with stated proxies, and apply deadweight/attribution discounts (would that OSS fix have happened anyway? how much of the gain is your work vs the ecosystem's?). The discipline of discounting your own impact claims is what separates SROI from a marketing number.

Pitfalls

  • Proxy shopping: choosing the most generous wellbeing valuation available.
  • Skipping deadweight/attribution — the most common inflation, often doubling the ratio.
  • Ratio comparison across studies: SROI ratios are method-sensitive; compare only within a consistent framework.
  • Presenting social value as cashable savings to a budget holder.

Sources