What are the advantages and disadvantages of using the Social Return on Investment (SROI) method? (2024)

The main advantage of SROI is its principles; not its (comprehensive and holistic) process. The process is deliberately similar to cost benefit analysis (CBA). What sets SROI apart from CBA is a purpose, enshrined in principles. That purpose is accountability and improvement.

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The key benefit of SROI that I find is in its use to compare and contrast your impact against other projects, areas or organisations, using a like for like metric.A theory of change outlining your impact; what inputs you have for your work, what activities or interventions are carried out, and what changes towards your overall impact do they create, can be done as effectively without social value metrics (distilled to an SROI). However, having standard measurement gives consistency to your reporting..Understanding what or where creates highter SROI, then going to your theory of change to understand what inputs or activities effect that most; can therefore enable resourcing or service delivery that reflect that learning.

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The disadvantage is what I call "data shadows" - these methodologies, while good at capturing some kinds of value in a ways that is useful for some audiences, inherently "cast a shadow" on other value that isn't captured by these methods and may be as valuable or more valuable in fact.

By quantifying social value in economic terms, SROI helps organisations make more informed decisions. This can lead to the identification and implementation of more effective and efficient use of resources, ensuring that activities generate greater impact which can be measured and improve the social value of its activities to the communities and stakeholders it works with

SROI quantifies an organization's social and environmental impact in monetary terms, enhancing stakeholder engagement and decision-making. It offers a holistic view, extending beyond financial metrics to include intangible benefits, improving transparency and accountability. By showcasing the broader value created, SROI helps attract funding and investment, supporting more impactful operations. This approach underscores the importance of responsible and effective resource use.

Perspectives.Progressing an individual into employment is seen as a great return on investment. What could be wrong about gaining employment and contributing to society. Or, 70% of those supported into entry level jobs never progress throughout their working life. Employability support without career management entrenches poverty and creates a drain on society.SROI considers both the positive and negative effects. Unfortunately few would state their employment programmes entrench poverty. Few would fund programmes that entrench poverty.SROI has to compete with systems developed without candour.

The advantage is that it's Principles based, and the Principles can be applied with different levels of rigour depending on what the objective of the work is. For operational purposes, 'enough precision for the descision' is fine. Regular monitoring of outcomes based on SROI Principles means it becomes an ongoing learning/improvement process, which produces real results

Applying SROI can be complex and time-intensive, necessitating extensive data collection, analysis, and validation. Understanding the theory of change and impact pathways is crucial, making the process challenging. SROI also requires subjective judgments on valuing outcomes, attributing impact, and discounting future benefits. These judgments, influenced by diverse stakeholder perspectives and preferences, can impact the method's reliability and credibility. The complexity and subjectivity involved often make SROI demanding for organizations, potentially limiting its widespread adoption and effectiveness in measuring social and environmental impacts accurately.

To use SROI effectively, define your purpose and scope, highlighting why you're using SROI and the impact areas you aim to evaluate. Engage stakeholders to ensure the analysis reflects diverse perspectives, making your findings more relevant and credible. Adhere to established guidelines and standards to maintain quality and consistency in your analysis. Consider SROI as a tool for continuous learning, using insights to improve your strategies and operations. This approach ensures your analysis is not only about measurement but also about enhancing the impact and efficiency of your work. Transparently share your methodology and findings to promote accountability and foster a culture of improvement.

To deepen your understanding of SROI, explore resources like the SROI Network for global support and training, and the SROI Guide for comprehensive methodologies. The Impact Management Project offers tools for unified impact measurement, while the Global Value Exchange contains a vast database for valuing impact. The Social Value Portal enables measuring and reporting social value effectively. For practical applications, SROI Case Studies showcase diverse organizational uses of SROI. These resources equip you with the knowledge and tools for implementing SROI, ensuring accurate social impact measurement and communication.