MEASURING SOCIAL AND ECONOMIC IMPACTS

SOCIAL IMPACTS OF ENVIRONMENTAL COST

Social impact is defined as the portion of total outcome that happened as a result
of the activity of an organization. In other words, it includes anything that affects
stakeholder relationship that involves the internal and external stakeholders such as
investors, employees, customers and government agency.

Four elements in measuring social impacts which are

1. Input - Resources invested in order to make something happened and is

measured as a cost. Eg: Cost in incurred for training an online business programme.

2. Output - Direct result of the business objective or goal. Eg: The number of
participants (30 people learn on how to create an advertisement on their online
business as a result from the training programme).

3. Outcome - Changes to people resulting from the activity that would occur over a
longer period. Eg: Number of people that started an online business and improved
their personal circumstances as a result of the training programme.

4. Impact - The outcome less an estimate of what would have happened. Eg:
Number of people (20 out of 30 businessmen who are able to develop the online
application for their business as a result from the training programme).

HOW TO MEASURE SOCIAL IMPACTS?

It is important for an organization to study about the output that needs to be

measured. Therefore, the organization should have an objective and goal that include
the theory of change. Theory of change is a framework to measure social impact by
making explicit relationship between activities and desired outcomes.

Secondly, any organization needs to know the objectives of different stakeholders

and it will lead to the sources of the value equation. First to measure the value
creation, they need to identify and prioritize the stakeholders’ need then consult with
the stakeholders in order to ascertain common priorities as well as to measure
progress towards achieving the main objective. They need to understand how their
organization’s objectives match with stakeholders objectives. The organization needs
to tell the stakeholders what they are doing well where they could improve and what
the future goals are.
 The third way to measure social impact is by doing the social return on
investment (SROI) analysis. It is a way to monetize the value of social impacts of an
organization’s activity or program in financial terms. It is when the social value will be
compared with the cost of making the project happen. For example, the investors look
for evidence of the social impact that results from their investment in the project. It is a
ratio of the net present value of benefits to the net present value of the investment. It
shows the social value creation based on the initial investment which can be
calculated by dividing the value of social impact with the investment required. Through
this ratio an organization can give a simple and clear indicator of the r-value created
for its stakeholders.

WHY IT IS IMPORTANT TO MEASURE SOCIAL IMPACT?

1. An organization has to improve activity or programme management with more

effective planning and more efficient evaluation.

2. To develop the way an organization understands the impact of their work.

3. To a stronger communication of the value of organizations work towards the people

that matters such as internal and external stakeholder.

4. To enhance attention to the social value creation by the organization.

ECONOMIC IMPACT OF ENVIRONMENTAL COST

Economic impact is a financial effect that something has on a situation or a person.

Involve cost to enhance environment. Examples of cost included:

1. Cost of packaging. One of the first environmental action program basic principle is
the polluter pays cost of packaging in this term can be from switching the packaging
material from the one that can give bad impact to the environment to the packaging
that is more environmental friendly. For example, switching the users of plastic bag to
a paper bag which easier to decay and recycle. It can also be from packaging waste
cost that is rarely practiced by an organization. For instance, the shop that sells
canned drinks will pay anyone who brings bag the antique head to them for recycling
purposes.

2. Cost to minimize the amount of wastage dump to river and air emission. The
discharge from manufacturing factory. For example, the installation of electrostatic
filter in the smokestack to remove dust and scrubber. There is a water filter to remove
harmful gases companies that dump their waste into the river must obtain permission
from the environment authority on their waste content and the amount they are
allowed to release. Companies might find this troublesome and costly but it can
prevent them from paying high environment taxes or being imposed penalty.

3. Cost of water treatment plant. This cost incurred when the company decided to
make their own water treatment plant. The waste water from the factory will be
channeled to the plant and the company can reuse the water after a thorough
treatment. The test on the final product and also for the research are also included as
the cost as they are needed to develop the plant.

4. Cost of collecting and disposing waste. The waste management company they
collect our household waste, commercial waste, bulky waste and even hazardous.
With companies incurred this cost when they pay the waste management company to
collect and dispose their waste for them.

HOW TO MEASURE ECONOMIC IMPACT?

Environmental accounting method is a field that identifies resource use, measures as

well as communicates costs of a company’s or national economic impact on the
environment. Costs include to clean up or remediate contaminated sites,
environmental fines, penalties and taxes, purchase of pollution prevention
technologies and waste management costs. It enables accountants to report on the
economic impact of those decisions to stakeholders. It also allows proactive decision
making about processes that simultaneously meet environmental regulations while
adding to the bottom line.

WHY SHOULD WE MEASURE ECONOMIC IMPACT?

1. Environmental accounting serves a solid foundation for environmental

management system as well as increasing the effectiveness of an existing one.

2. Firms are able to manage environmental cost and business strategies better.

3. To achieve a more accurate cost products and processes.

4. To discover new opportunities to offset or minimize environmental cost to
environmental thinking and include potential environmental costs in appraisal
processes and investment analysis.