Social Return On Investment - Potential Limitations of SROI

Potential Limitations of SROI

• Benefits that cannot be monetised: There will be some benefits that are important to stakeholders but which cannot be monetised. An SROI analysis should not be restricted to one number, but seen as a framework for exploring an organisation’s social impact, in which monetisation plays an important but not an exclusive role.
• Focus on monetisation: One of the dangers of SROI is that people may focus on monetisation without following the rest of the process, which is crucial to proving and improving. Moreover, an organisation must be clear about its mission and values and understand how its activities change the world – not only what it does but also what difference it makes. This clarity informs stakeholder engagement. Therefore, if an organisation seeks to monetise its impact without having considered its mission and stakeholders, then it risks choosing inappropriate indicators; and as a result the SROI calculations can be of limited use or even misconstrued.
• Needs considerable capacity: SROI is time- and resource-intensive. It is most easily used when an organisation is already measuring the direct and longer-term results of its work with people, groups, or the environment.
• Some outcomes not easily associated with monetary value: Some outcomes and impacts (for example, increased self-esteem, improved family relationships) cannot be easily associated with a monetary value. In order to incorporate these benefits into the SROI ratio proxies for these values would be required. SROI analysis is a developing area and as SROI evolves it is possible that methods of monetising more outcomes will become available and that there will be increasing numbers of people using the same proxies.