Businesses, cities, and states all over the country are making commitments to sustainability and improving their operations with environmental and social factors in mind. Even major financial institutions, such as investment management company Black Rock, are strongly encouraging ESG (environmental, social, governance) considerations from their portfolio companies. This shift in focus also requires a shift in the way the value of projects and initiatives are determined to better align with sustainability goals. Traditional financial models that are widely used today (return on investment, cost benefit analysis) do not incorporate the added social and environmental benefits of projects, and instead, focus solely on the economic benefits (or drawbacks). Life cycle analysis (LCA) has emerged as a way to determine environmental impacts of products or projects, assessing the resource use from “cradle-to-grave” (Guinee, 2011). The LCA method, however, does not incorporate non-cash or external costs and benefits that projects may include (HDR, 2011).

Sustainable return on investment (SROI) has emerged as an alternative methodology for assessing projects that incorporates value across the entire triple bottom line – economic, environmental, and social. It allows organizations to determine how their projects add value by assigning a monetary value to environmental or social benefits, and therefore incorporating non-cash and external benefits. Some examples of external benefits might include job creation or improved public health. This shifts the focus from just monetary value to total value (The SROI Network, 2012). By assigning costs and benefits to these additional factors, its possible to improve the case for funding and ensure that projects are accomplishing their goals.

Figure 1: Principles of SROI

An interesting, and sometimes challenging, aspect of SROI is that metrics are project specific and intended to change based on what the project is trying to achieve to ensure that the intended value is being measured. For example, a recycling center capital upgrade will have different metrics than a community solar garden because there are different environmental and social impacts to be measured. It can also be challenging to find appropriate financial models for the costs and benefits of these impacts. These challenges make it important to engage stakeholders in the process to determine what metrics to use and what costs and benefit values to use. A Guide to Social Return on Investment from the SROI Network outlines 7 key principles to measuring SROI, noting the importance of engaging stakeholders (Figure 1). The guide also notes that it is important to determine what changes as a result of your project and only include what is material (relevant) to the project (The SROI Network, 2012).

To calculate SROI, key costs and benefits are prioritized, and methodology is used to translate benefits into real dollars. Standard financial discounted cash flow and net present value calculations are used to calculate total SROI.

SROI can be used in any sector – nonprofit, public, or business. In the nonprofit sector, SROI can be used as a way to measure impact against the mission of an organization. It also provides a way to show donors and funding sources of the impact of their “investment”. Likewise, in the public sector, SROI for different initiatives and projects can be used to show where tax dollars and other funding are going and their associated impact. Incorporating SROI may also open up grant and funding opportunities (HDR, 2011). Private enterprises can benefit from SROI by implementing projects that better align with their company’s values.

As a brief example of SROI metrics for a public-sector project, suppose a municipality wants to upgrade their fleet to electric vehicles. The cash and non-cash benefits are shown below:

By assigning a monetary value to the non-cash benefits of electric vehicles and applying a discount rate, the total project value may look very different than if just the financial impacts were considered. A study conducted by the Vermont Energy Investment Corporation (VEIC) in 2015 analyzed both the cash and non-cash savings based on a 10-year vehicle lifetime and the average cost of electricity and gasoline in the United States, summarized in Table 1 below. The comparison assumes a 2016 Nissan Leaf with a 24-kWh battery pack and a 2016 Honda Civic. Note that these values are shown in 2015 USD and include a variety of assumptions, notably that the electric vehicle is powered by 100% renewable energy (Malmgren, 2016).


Table 1: Summary of VEIC Study: Quantifying the Societal Benefits of Electric Vehicles

Benefit Quantified Lifetime Savings Basic Assumptions
Fuel Costs $4,130 $2.00/gal ; $0.1235/kWh
Maintenance Costs $1,488 See study
Environmental Impact $866 EPA Social Cost of Carbon is $42.30
Health $1,686 Mid-range of various studies
Resiliency – Grid & National Security $7,268 See study
Economic Development $965 Mid-range of various studies
Total $16,403


The study also discusses several additional non-quantifiable benefits, such as decreased noise, microgrid creation, and insurance benefits. Range limitations are a cost that is also not quantified in this study, but electric vehicle range has increased rapidly over the last decade, by an average of 15% per year and is projected to continue increasing (McDonald, 2018). Because of the rapid increase in electric vehicle range, it will not be considered in the SROI calculations

Table 2 provides a comparison of the full sustainable return on investment (cash plus non-cash benefits), the financial return on investment (only cash benefits), and no investment (assuming gasoline vehicles), assuming the benefits shown in Table 1 are spread evenly over the life of the vehicle and a conservative discount rate of 3%.


Table 2: Comparison of ROI Analyses for EVs vs. Gasoline Vehicles

Sustainable ROI of EV Financial ROI of EV No EV Investment
Present Value of Benefits $13,990 $4,794 $0
Incremental Investment $11,3701 $11,3701 $18,6402
Incremental Net Present Value $2,620 -$6,576 -$18,640
ROI Ratio 0.23 -0.57 -1.0


The positive ROI ratio of the sustainable ROI case indicates that the non-cash plus cash benefits outweigh the investment, and therefore provides a good investment. Negative ROI ratios indicate worse investments, and the larger the value, the worse the investment. The ROI ratio of no EV investment at
-1.0 indicates a worse investment than an EV while only considering the financial ROI (as in, only considering cash benefits). The financial ROI of EVs at -0.57 compared to the sustainable ROI of EVs at 0.23 indicates that significant value is not being considered when only looking at cash benefits, and therefore these non-cash benefits also need to be incorporated.

As cities, states, and businesses make lasting commitments to sustainability, it is also time to go beyond capturing just economic value. Using SROI instead of traditional forms of financial decision making can improve the case for sustainability, operationalize sustainability across an organization, and integrate the triple bottom line into capital budgeting and investment decision making processes.

To see the full Electric Vehicle Analysis by VEIC, visit: Quantifying the Societal Benefits of Electric Vehicles

To see other case studies of SROI and to learn more, visit: Social Value UK, Applying Social Return on Investment (SROI) to the built environment, Measuring the SROI of Waste to Energy


About the Author – Melody brings 8 years of engineering, project management, and product development skills to the Brendle Group team. She uses her skills for community energy planning, sustainability planning, and developing new tools to support clients’ energy efficiency and sustainability goals. Melody is also well versed in the business case for sustainability, having recently completed her MBA with a focus on sustainability at Colorado State University.

Prior to joining Brendle Group, Melody spent 7 years as a chemical process engineer for Burns & McDonnell Engineering in Kansas City, MO conducting analyses from feasibility through detailed engineering and construction. There, she gained experience with design calculations, data management, stakeholder engagement, and business development.


Works Cited

Guinee, J. B. (2011). Life cycle assessment: past, present and future. Environmental Science & Technology, 90-06. Retrieved from

HDR. (2011, February 3). Sustainable Return on Investment: Measuring the Triple Bottom Line. Retrieved from New Partners for Smart Growth:

Malmgren, I. (2016). Quantifying the Societal Benefits of Electric Vehicles. World Electric Vehicle Journal, 0996-1007.

McDonald, L. (2018, October 27). US Electric Car Range Will Average 275 Miles By 2022, 400 Miles By 2028 — New Research (Part 1). Retrieved from Clean Technica:

The SROI Network. (2012, January). A guide to Social Return on Investment. Retrieved from Social Value UK:





[1] Assumes cost of 2015 Nissan Leaf at $29,010 plus charging station of $1,000.

[2] Assumes cost of 2015 Honda Civic at $18,640.