What is Monetization and Impact Measurement?
Impact measurement or also called monetization is the conversion of various qualitative factors into financial terms in order to accurately compare environmental and economic performance of a product or service. To put it simply, monetization translates impacts into one globally understood metric — money — helping businesses develop better risk management strategies.
Monetization can be based on a variety of techniques. These include: hedonic pricing (estimating values for environmental services), travel cost models or stated preference techniques such as willingness to pay. The main four resources to consider are: Natural Capital (ecosystem resources and services), Social Capital (networks and relationships), Human Capital (knowledge and experience), and Financial Capital (economic resources).
Valuation calculations are not always straightforward. Over the last years have developed three manuals explaining specific aspects of the valuation calculations related to three specific aspects of impact assessment. We are happy to share these manuals so that then can be of general use.
- Natural capital – Ecomatters implementation guide
This implementation guide provides practical guidance on the implementation of the natural capital assessment methodology as based on the Environmental Priority Strategies (EPS) system (Swedish Life Cycle Center, 2015). The goal of this methodology is to gain insight into, quantify and monetise natural capital impacts along the product value chain.
- Financial capital assessment
The goal of financial capital assessment is to gain insight into and quantify the financial value creation along the product value chain. To ensure its applicability in a variety of settings, the assessment methodology follows a pragmatic and flexible approach. As a first step, it provides a procedure for the evaluation of financial capital creation at company level. Its modular design further allows for the extension of the assessment to cover one or multiple links of the product value chain.
- Human Capital: Expected value of incremental future earnings – assessment method
Various methods have been developed over the last decades to identify, measure and valuate societal impacts. Since social effects are highly diverse, the general approach is to assess externalities per social aspect. One of the identified social aspects of importance is the development of employees upon involvement in production, which is measured as the expected growth in salary. The created value is referred to as ‘expected value of incremental future earnings’. This paper discusses the methodology for the assessment of expected value of incremental future earnings by Ecomatters and illustrates the specific procedure using an employee-specific example.
How to get started
Overall, monetization methodologies help to put a true value on business operations. Corporate Social Responsibility (CSR) strategies commonly use monetization as a way to support the bottom line.
You can decide to focus on any or all of the following assessment types:
- Business impact: assess the costs and/or benefits to the business of its impact on capital
- Societal impact: assess the costs and/or benefits to society of the company’s impact on capital
- Business dependencies: assess the costs and/or benefits to the business of its dependencies on capital
Our 4 Dimensional Profit and Loss project shows a practical application of impact measurement. This project was based on the Environmental Priority Strategies (EPS system) 2015 method.
We are experienced at Ecomatters in helping CSR, sustainability, and accounting departments monetize qualitative factors. We can take over the entire process or support you in calculating and monetizing your impact. Our focus is on helping you go beyond the numbers to understand what the results mean for your business. We also offer support in communicating these conclusions clearly and simply. To learn more, get in contact with us or check out one of our case studies.