Social Impact Assessment – measuring the economic benefit

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.

In order to successfully calculate the social impact assessment, various models are used. A popular model involves assessing the economic benefit that is created from the activity. For example, if the activity increases a person’s earning capacity, this would be measured by the financial benefit it has created. Similarly, the use of benefits or reliance on welfare can be measured in terms of economic benefit as can overall productivity or tax contributions. An increase in economic benefit in area often causes or correlates with an increase in another area. For example, if a person’s earning capacity is increased this may lead to a reduction in their reliance on government assistance and an increase in their tax liability. By using this model to measure the economic benefit of an activity it becomes evident that one activity can produce numerous economic benefits which can be measured individually and as a whole.

Another technique of measuring the social impact assessment is to look at the costs saved or avoided. Although initial intervention may be costly, it can often avoid the increased costs of later intervention or remedying the costs of a situation that could have been avoided. A common example of this is providing rehabilitation to drug users. Whilst this may require an initial financial outlay, it reduces the cost of continued medical treatment as well as the cost of police and the continued costs associated with the criminal justice system. Whilst providing care to the individual, organisations are also reducing costs which the state would have incurred without the initial intervention.

In addition to measuring the economic benefit or the costs saved, organisations can simply examine whether alternative options are available to them. Often by switching a supplier or using different resources, organisations are able to reduce costs immediately. Reliance on charities or public bodies rather than private sector firms can often provide financial savings for companies aiming to provide a benefit either economically, socially or environmentally.

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.

For more information please visit http://www.bakertilly.co.uk/publications/social-impact.aspx