Social Impact Assessment – measuring the economic benefit

Oct 31

As charitable organisations often rely on government funding or support from the public, it is important that they are able to demonstrate the benefit they are creating and the good they are doing in fiscal terms. ‘Social impact assessment’ is a methodology which allows organisations to calculate the social, economic or environmental benefit they have (and you can learn more about what is social impact here if this is your first time hearing this particular term). Using this information, organisations can effectively measure the impact they have in economic terms regardless of the type of work they undertake or benefit they provide.

To effectively gauge the social impact of an endeavor, various models come into play. One prominent model involves assessing the economic gains generated by the activity. For instance, if the activity boosts an individual’s earning potential, this increase is quantified in terms of the financial advantage it brings. Similarly, the reliance on welfare or benefits can be measured in economic terms, along with overall productivity and tax contributions. Often, an upswing in economic benefit in one area is accompanied by an improvement in another. For example, an increase in earning capacity can lead to reduced dependency on government assistance and higher tax contributions. This model underscores how a single activity can yield multiple economic benefits, which can be evaluated both individually and collectively.

Another approach to measuring social impact is to scrutinize the costs that are circumvented or saved. While initial intervention may entail expenses, it frequently averts the heightened costs associated with subsequent intervention or rectifying a situation that could have been prevented. A prime example is providing rehabilitation for drug users through centers specialized in drug and alcohol rehab in massachusetts and various other states. While this initial investment may be required, it diminishes the expenses tied to ongoing medical treatment, as well as the costs borne by law enforcement and the criminal justice system. By extending care to individuals, organizations simultaneously reduce the financial burden that the state would have incurred without the initial intervention.

Furthermore, organizations can explore the availability of alternative options. Often, simply changing suppliers or utilizing different resources can lead to immediate cost reductions. Opting for support from charities or public bodies instead of private sector firms can frequently yield financial savings for companies aiming to provide benefits on economic, social, or environmental fronts.

By successfully carrying out the above techniques, organisations can effectively measure their social impact assessment and justify their requests for additional funding by highlighting the impact they have both socially and economically. Whilst this allows charities prove they meet the compulsory Public Benefit test, it also allows non-charitable organisations to measure the social return on investment for any charitable activities they carry out. As funding for charitable organisations and activities is particularly difficult in times of economic downtown, providing measurable and quantifiable examples of their social return on investment is particularly important for organisations. By doing so they can highlight the impact they have, secure additional funding, ensure their survival and continue to provide economic, social and environmental benefits to those in need.

Baker Tilly is an independent firm of chartered accountants and business advisers, positioned as one of the leading mid-tier accountancy firms.

Baker Tilly specialises in Social Impact Assessment solutions to corporate organisations.

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