Working Paper

Social Return on Investment Analysis and Its Applicability to Community Preparedness Activities: Calculating Costs and Returns

Mar 13, 2017 | Carolyn Kousky, Brett Lingle, Liesel Ritchie, Kathleen Tierney

Summary

This paper provides an overview of the use of social return on investment analysis, which accounts for social and environmental benefits, to evaluate investments in community disaster preparedness.

Key Findings

  • Return on investment (ROI) analysis produces an easy-to-interpret metric that can be used to prioritize investments and allocate limited funds, to evaluate investments that have already been made, and to improve projects to generate greater returns.
  • Social ROI analysis, or SROI, expands the use of this tool to include a broader array of social and environmental benefits.
  • Few studies have attempted to quantify or value the benefits of community disaster preparedness measures—especially those that occur over long periods and involve a wide range of organizations, populations, or approaches.
  • The limited literature reflects challenges in applying SROI to this topic, notably identifying, quantifying, and monetizing all inputs and returns.
  • Those involved with managing and implementing projects, programs, and initiatives for community disaster preparedness will need to decide how much time and funding to invest in conducting a rigorous SROI study.

Abstract

Return on investment (ROI) analysis is a tool traditionally used in the private sector to evaluate and compare projects and investments. Over the past several decades, the use of ROI analysis has expanded to include a broader array of social and environmental benefits; this is termed social return on investment, or SROI. This paper examines the use of SROI analysis to examine investments in disaster preparedness. The paper outlines the basic methods and then discusses several challenges to using SROI in this context: the difficulty identifying all returns, especially spillover benefits; the challenge of separating attribution from contribution; the resources required to value nonmarket inputs and outcomes; the need to adequately address uncertainty; and the limitation of addressing distributional issues in SROI analysis.