We believe that the social value an organisation creates is just as important as the financial value, and should therefore be treated accordingly. Why? We all agree that it’s normal that every business publishes their annual reports and is transparent about their financial performance. To do this properly requires processes, such as audits, accounting and reporting. If businesses perform financial accounting, why shouldn’t organisations aimed at creating social value perform social accounting?
Running a business and being accountable to shareholders is unthinkable without having an accountant on board to check the financial administration and the annual accounts. Although an increasing number of organisations integrate some form of social value in their annual reports, submitting these reports to independent assurance of the claimed social impact or underlying data is still highly uncommon.
This is peculiar, as making social accounting the norm will greatly benefit the decision making process for social investors. For social purpose organisations social accounting holds the potential of improving social performance due to increased transparency and the ability to make better-informed management decisions.
Would you invest your money in a business when you are not certain it is financially viable? Can you run a business without any knowledge of your profit and loss account? No. When an organisation’s goal is to create social value, the same principle applies: in order to maximize overall social value, resources should be allocated to those initiatives that create the most value. Projects or activities that have no impact or even a negative impact can be stopped or improved. Impact measurements (including a social profit and loss account) combined with independent assurance and audits can establish which initiatives are creating the most value. These insights can in turn be applied to increase social performance of other organisations by serving as a benchmark.
Due to its principle-based nature, SROI is one method of social impact measurement that can serve as an appropriate basis for this form of social accounting. The standardized SROI method provides a consistent approach to impact measurement, which allows assurance by an independent third party.
We encourage you to become familiar with the idea of social accounting and the SROI principles, as they can help you make better managament decisions as well as drive improvements in the entire sector. To recap, take into account two important principles:
- Be transparent – Demonstrate the basis on which the analysis is considered accurate and honest
- Verify the result – ensure appropriate independent assurance to show decisions made are reasonable
Interested to learn how SROI can serve as a method of social accounting for your organisation? Download the guide.
Want to read an assured analysis? Download the case of “A Balanced Family”: