What is Impact Economics?

Impact economics measure company performance by placing a monetary value on the company’s most significant positive and negative impacts on society.

This involves quantifying externalities and leads to a comprehensive, widely accepted framework in which comparisons between companies and sectors are made accurately and consistently.

The final metric is expressed as a dollar value, making material comparisons across companies and sectors not only possible but scientifically rigorous and transparent.

Economic impact explained
  • Quantifying the social cost of carbon
  • Summing the increase in wage-earning power through staff training
  • Calculating the value derived from local ecosystems

How impact economics is different from traditional economics

Stakeholder capitalism

Responsible companies treat shareholders and stakeholders alike, ensuring employees, customers and investors are given an equal say.

Integrated accounting

Impacts must be accounted for in company decision-making, as what economists term externalities today are tomorrow’s risks and the day after’s costs.

Identification of hidden risks and opportunities

Quantifying the effects of a company’s operations on societal wellbeing, helps to uncover hidden costs and benefits, and to understand how they arise.

Impacts are defined as changes in wellbeing – both positive and negative – as a result of a company’s activities.

Companies always measure impact on financial capital, but they don’t measure impacts across the remaining three capitals:


Why Impact Economics

Impact economics provides a holistic lens to help identify, measure and quantify hidden risks and opportunities when it comes to a company’s interactions with society and the environment (or its “externalities”).

By assigning a $ value to these externalities, impact economics puts impact information on par with financial metrics, so leaders can make fully informed decisions.

Regulatory risk

Stricter environmental regulations
Carbon taxes, stringent discharge limits for effluents and air pollutants, etc.

Increased litigation costs
Higher damages for managing accidental spills and discharges

Operational risk

Increased compliance costs
E.g. installation of emission monitoring systems

Increased costs of raw materials
E.g. higher cost of water

Stranding of assets
As a result of protests and regulations

Market risk

Shift in customer preference
Consumers opting for environmentally friendly products

Changing incentives
E.g. subsidies for lower energy and resource intensive products
Banks and insurers charging a premium for unsustainable business practices

Reputational risk

Fall in share price
As a result of reduced investor confidence following controversies

Loss of sales
E.g. customer boycott as a result of campaigning efforts

How Impact Economics improves your business

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GIST Impact’s approach and methodology is highly trusted

The last few years have seen considerable harmonisation in the lexicon of measuring and quantifying impacts.

GIST Impact’s four capitals approach, definitions and methodology align with emerging industry standards, including the Capitals Coalition, the Value Balancing Alliance, and many others.

The quantified impacts measured across the four capitals can also be translated and redistributed to the Sustainable Development Goals (SDGs) via the GIST Impact SDG mapping methodology.

Aligned with global institutions

International Chamber of Commerce

Consistent with key industry alliances

Mappable to reporting frameworks & guidelines

Frequently asked questions

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