How do you balance the trade-offs between SROI and other sustainability outcomes and impacts?

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Sustainability reporting is a way of communicating your organization's environmental, social and economic impacts to your stakeholders. But how do you measure and compare these impacts in a meaningful way? One approach is to use social return on investment (SROI), a framework that assigns monetary values to the outcomes and impacts of your activities. However, SROI also has some limitations and trade-offs that you need to consider. In this article, we will explore how you can balance the benefits and challenges of SROI and other sustainability outcomes and impacts.

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1 What is SROI?

SROI is a method of calculating the social value of your organization's activities, based on the principles of cost-benefit analysis. It compares the inputs (resources, time, money) and outputs (products, services, activities) of your activities with the outcomes (changes, benefits, harms) and impacts (long-term effects, externalities, attribution) that they generate for your stakeholders. It then assigns monetary values to these outcomes and impacts, using various techniques such as market prices, shadow prices, willingness to pay, or stakeholder preferences. The result is a ratio that shows how much social value is created for every dollar invested.

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Jad DELLEL

Driving Business Sustainability from Leadership to Staff
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5 Tips to balance the SROI and sustainability outcomes: 1-Start by clearly defining your organization's sustainability goals and prioritizing those that align with your core values. 2-Use SROI as a tool to quantify the social impact, but also consider qualitative metrics like stakeholder satisfaction and long-term community benefits. 3-Engage stakeholders in the decision-making process to understand their values and perspectives. 4-Regularly review and adjust strategies based on comprehensive impact assessments, ensuring a balance between immediate financial returns and broader social and environmental benefits. 5-Transparent communication about these trade-offs is essential to maintain trust and alignment with stakeholders.

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2 Why use SROI?

SROI can help you demonstrate the value of your sustainability efforts to your stakeholders, especially those who are interested in the financial aspects of your performance. It can also help you identify and prioritize the most effective and efficient activities, based on their social value creation. Moreover, it can help you improve your accountability, transparency and stakeholder engagement, by involving them in the process of defining and measuring the outcomes and impacts that matter to them.

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3 What are the limitations of SROI?

SROI is not a perfect tool, and it has some limitations and challenges that you need to be aware of. First, it can be difficult and costly to collect and analyze the data needed for SROI, especially for long-term and intangible outcomes and impacts. Second, it can be subjective and inconsistent, depending on the assumptions, methods and sources used to assign monetary values to the outcomes and impacts. Third, it can be misleading or misused, if it is presented as the only or definitive measure of your sustainability performance, without acknowledging the uncertainties, limitations and trade-offs involved.

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4 How to balance SROI and other sustainability outcomes and impacts?

SROI is not a substitute for other sustainability outcomes and impacts, but a complement. You must consider the use of SROI in relation to other qualitative and quantitative indicators that capture the full range of your sustainability performance. Additionally, you should factor in the costs, efforts, risks, and ethical issues associated with monetizing social value when deciding whether to use SROI. To help you balance SROI and other sustainability outcomes and impacts, consider using it as a learning and decision-making tool, as a relative and comparative measure, as a participatory and inclusive process, as a holistic and integrated framework, and as a flexible and adaptable approach rather than a reporting or marketing tool, an absolute and definitive measure, a top-down and exclusive process, a narrow and isolated framework, or a rigid and fixed approach.

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5 How to communicate SROI and other sustainability outcomes and impacts?

SROI can be a powerful way of communicating your sustainability performance to your stakeholders, but it must be done carefully and responsibly. You should communicate SROI and other sustainability outcomes and impacts in a clear, accurate, credible, and relevant manner. To do this, you should explain the purpose, scope, and methodology of your SROI analysis, as well as the sources and assumptions behind your monetary values. Additionally, you should share the results, insights, and recommendations of your SROI analysis and the limitations, uncertainties, and trade-offs involved. Furthermore, you should communicate the stories, perspectives, and feedback of your stakeholders that influenced your SROI analysis. It is also important to share the actions, improvements, and changes that you have made or plan to make based on your SROI analysis. Lastly, you should communicate the links between your SROI analysis and other sustainability outcomes and impacts.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How do you balance the trade-offs between SROI and other sustainability outcomes and impacts?

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1 What is SROI?

2 Why use SROI?

3 What are the limitations of SROI?

4 How to balance SROI and other sustainability outcomes and impacts?

5 How to communicate SROI and other sustainability outcomes and impacts?

6 Here’s what else to consider

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