What is Monetisation and Impact Measurement?
Impact measurement, also called monetisation, is the conversion of qualitative factors into financial terms in order to accurately compare the environmental and economic performance of a product or service. Monetisation translates impacts into a single metric — costs — to help businesses better develop their risk management strategies.
Monetisation is used for completing a cost-benefit analysis or, in the case of a specific product, an eco-efficiency analysis. These types of measurements can cover a range of topics if needed or desired, however, in most situations, the following four resource types are included to provide a balanced overview: Natural Capital (ecosystem resources and services), Social Capital (networks and relationships), Human Capital (knowledge and experience), and Financial Capital (economic resources). Additionally, impact measurement approaches can be used to calculate the marginal costs of abating a ton of CO2 for different emission savings measures using the Marginal Abatement Cost Curve. Contrary to the broadness of cost-benefit analysis, this focuses solely on pricing the emission reduction effort.
Methodologies developed by Ecomatters
Valuation calculations are not always straightforward. Therefore, we have developed three manuals explaining the specific aspects of the valuation calculations related to three specific aspects of impact assessment. We are happy to share these manuals so that they 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 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 the 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 the 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 decade to identify, measure, and evaluate societal impacts. Since social impacts are highly diverse, the general approach is to assess externalities per social aspect. One of the most important identified social aspects is the development of employees upon involvement in production. This is measured as the expected growth in salary and the value created is termed the ‘expected value of incremental future earnings’. This paper discusses the methodology for the assessment of the ‘expected value of incremental future earnings’ by Ecomatters and illustrates the procedure using an employee-specific example.
Using monetisation methodologies
Monetisation methodologies help to put a true value on business operations and are commonly used within Corporate Social Responsibility (CSR) strategies as a way to support the bottom line.
When using monetisation methodologies, 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.
At Ecomatters, we are experienced in helping CSR, sustainability, and accounting departments monetise qualitative factors. We can either take on the entire process or provide support with calculating and monetising 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 in a clear and concise manner. To learn more, get in touch or check out one of our case studies.
Ecomatters supported AkzoNobel in their 4-Dimensional Profit and Loss Accounting…
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