There are two main systems of recording and reporting social, economic and environmental benefits currently being used by social economy organisations in the UK: social accounting and audit (SAA) and social return on investment (SROI). Neither system is widespread. SAA has been practised since 1993 and has a more established network in the UK. SROI is relatively new in the UK – the network was set up earlier this year – but has been used for several years by social enterprises in the USA.
The OTS with be appointing a contractor in October to oversee the project. The guidance notes refer repeatedly to SROI and no mention is made of SAA. Privately some social auditors are furious. Especially because in April the leaders of the SAA and SROI networks had held a two-day meeting to identify the similarities and differences between the two systems and explore how the they could offer a ‘converged approach’ to help social economy organisations ‘prove and improve’.
They agreed six core principles covering stakeholder perceptions, scope, understanding change, making comparisons, transparency and verification. SROI has an additional principle of using financial proxies for indicators and SAA has an additional principle of embedding social accounting in the life cycle of the organisation.
The representatives agreed to disseminate these agreed principles through their networks and give consideration to developing a more formal agreement.
“Rather than talking about the differences between SROI and SAA I’d like to look at the similarities,” said Jeremy Nichols, chief executive of the SROI network UK. “We have agreed a set of common principles with a few outriders. One of those is that SROI uses a financial proxy.
“It’s too early to talk about a merger between SROI and SAA, but convergence is definitely taking place. Soon the same people could be verifying social accounts and measures of SROI.
“SROI is a good strategic planning tool that helps organisations to align objectives and outcomes. It forces you to focus on what you are actually achieving.
“We need to strike a balance when using SROI. It must be a meaningful verifiable measure but it must also be relatively easy to use. ‘Keep credible, keep practical’ - that’s our aim.”
Mike Swain is chair of the Social Audit Network and chief executive of All Saints Action Network, a local regeneration partnership in Wolverhampton. He takes a different view.
“SAA and SROI are not really comparable - SAA is a process, SROI is a measure,” he said. “We are a bit disappointed by the OTS and Scottish government initiatives. We are frustrated and envious that funding has been made available to develop one narrow aspect of social reporting. We wish the government had cast the net wider to capture the years of expertise developed by SAA.
“Social accounting and audit is a superb business planning tool. It provides your organisation with a framework that helps you plan, consult with your customers, staff and other stakeholders, report on what you are doing, and get it independently verified. And at the end of the process, your organisation has a valuable report, which shows what you have done over the last year, what you plan to do in the future and how your customers and others stakeholders have influenced that process.”
John Pearce, a long standing practitioner of social accounting and audit, feels there is a fundamental difference between SAA and SROI.
“SROI aims to put financial values on social outcomes. SAA says that there are some outcomes you can’t financialise.
“It’s not, or at least it shouldn’t be, a case of either SAA or SROI. My catch phrase is: ‘As well as not instead of’. If you are providing training or creating employment or reducing landfill then there clear financial benefits to the social and environmental outcomes and it’s worth doing the sums. But if one of the main outcomes of your social enterprise is that people are happier or more confident how do you measure that?
“My biggest concern is that SROI is about using the language of business. It’s adopting the corporate sector approach of generating the maximum return for shareholders – for the people who put the money in. In third sector organisations this is most likely to be the government. This quickly suggests that the government is the most important stakeholder.
“Remember the co-operative principle that labour should hire capital – go too far down the SROI route and you’ll have capital hiring labour. Or the government hiring the third sector.”

www.sroi-uk.org      www.socialauditnetwork.org.uk