Measuring the return on investment of a business initiative presents a concrete problem even before opening a spreadsheet: most projects do not include any measurement system at the scoping stage. ROI is then calculated retrospectively, based on incomplete data, with varying cost scopes from one project to another. This difficulty explains why a significant portion of corporate projects are halted due to a lack of demonstrable ROI, particularly in the field of artificial intelligence.
Visible Costs and Hidden Costs in ROI Calculation
The classic ROI formula (net gains divided by the total cost of investment) gives an illusion of simplicity. The real issue lies in the scope of what is included in the denominator.
A training project, for example, generates direct costs (service provider, platform, materials) and indirect costs that are rarely accounted for: unproductive work hours during training, coordination time between managers and HR, and gradual skill development that delays actual returns.
| Type of Cost | Often Included in Calculation | Rarely Included |
|---|---|---|
| Acquisition Cost (tool, service) | Yes | – |
| Internal Coordination Time | No | Yes |
| Ramp-Up Period | No | Yes |
| Opportunity Cost (delayed projects) | No | Yes |
| Maintenance and Updates | Sometimes | Yes |
An overestimated ROI almost always comes from an incomplete denominator, not an inflated numerator. Before seeking to improve a project’s profitability, it is essential to ensure that the cost scope is realistic.
Several organizations have begun to document the return on investment with Business Ethique by integrating these hidden costs from the scoping phase, which significantly alters the trade-offs between competing projects.
Profitability Indicators Beyond Financial ROI
The ROI expressed as a percentage is not sufficient to compare initiatives of different natures. A digital transformation project and a recruitment campaign do not share the same time horizon or success metrics.
Complementary Indicators to Cross-Reference with ROI
- The Internal Rate of Return (IRR) allows for comparison of projects with cash flows spread over different durations, where gross ROI oversimplifies everything into a single period
- The payback period indicates the time required for cumulative gains to cover the initial investment, shedding light on cash flow more than final profitability
- Operational impact indicators (employee retention rate after training, reduction in processing time of a process) reflect gains that financial ROI does not directly capture
Cross-referencing these measures provides a more reliable picture. A project may show a modest ROI but a short payback period, making it relevant for a company under cash flow constraints.
Double Materiality and CSRD: ROI Becomes Extra-Financial
The European directive CSRD (EU 2022/2464), in effect since 2024 and gradually applied over the 2024 to 2027 fiscal years, changes the game for large companies. It imposes structured sustainability reporting, verified by a third party, based on ESRS standards and the principle of double materiality.
This regulatory framework means that a business initiative can no longer be evaluated solely on its financial profitability. Environmental, social, and governance impacts fall within the scope of return on investment evaluation.
What CSRD Changes in Project Evaluation
A project training employees in digital skills, for example, produces a measurable financial ROI (productivity, error reduction). It also generates a social impact (skill development, employability) that the company will need to document in its ESRS reporting.
Finance and CSR departments are now building frameworks where sustainable performance is explicitly integrated into ROI analysis. This convergence requires the collection of data that was previously ignored: carbon footprint of a project, effect on gender equality, contribution to the circular economy.
On the other hand, the recent simplification of ESRS standards eases the reporting burden, making the system more accessible to SMEs that are gradually entering the scope of application.
Defining Measurement Before Launching the Project
The most common mistake is to define success indicators after the project has started. At this stage, baseline data has not been collected, and any before/after comparison becomes approximate.
Three steps structure a reliable measurement system:
- Set indicators at the scoping stage, distinguishing financial metrics (ROI, IRR, payback) from impact metrics (employee satisfaction, adoption rate, time reduction)
- Collect the baseline before deployment: measure the initial state of each indicator to have an objective point of comparison
- Plan for interim measurement points, not just a final evaluation. ROI measured only at project closure masks deviations that occurred along the way
This sequencing may seem obvious on paper. In practice, the pressure of launching pushes teams to postpone the implementation of the measurement system, which mechanically degrades the quality of the final evaluation.
The actual profitability of a business initiative depends less on the chosen calculation formula than on the rigor applied to the cost scope and the collection of baseline data. A project with a measurement system integrated from the scoping phase produces an actionable ROI, whereas a retrospective evaluation often yields only an estimate.
