Step6:Economic Valuation of Impact

Quantitative Impact Economic Valuation

After conducting impact evaluation and quantification, it is possible to convert impacts that have an economic value, which can be expressed in currencies like JPY or USD. This allows for cross-comparison of impact areas and between different organizations. However, it is essential to note that economic valuation is often avoided due to its complexity and challenges in ensuring validity.

Nevertheless, economic value conversion of social, environmental, and economic impacts is crucial for impact accounting and informed decision-making. Below, we present the main methodologies to ensure validity while conducting economic valuation. Keep in mind that no single method is universally superior, and ideally, multiple approaches should be combined to represent different economic values.

Direct Economic Value:

This method applies to impacts with well-established market prices, such as carbon emissions and carbon credits, or impacts that directly lead to cost savings (e.g., reducing pharmaceutical losses, which results in increased gross profit).

Link to Person-Hours or Person-Count:

This approach is used for non-economic units, such as reduced labor hours, where assumptions can be made about their economic value.

①Time Efficiency:

Assuming that the saved time is reutilized in the same activity, you calculate the economic value by considering the original activity’s time and its associated economic value. (e.g., if a specific task is improved by 10 hours per day in a care facility, you estimate the improved daily personnel costs for that facility).

②Maximizing Time Value:

Assuming that the saved time is utilized in another specific activity, the economic value of that alternative activity’s time is calculated. (e.g., if sales personnel save 10 hours per week by spending less time in internal meetings, you estimate the value of the 10 hours that can now be used for sales activities).

③Time Value Undetermined:

When the saved time is allocated to various unspecified activities, you apply the economic value of the typical activity (e.g., household chores saved 10 hours per week; this time could contribute to increasing the GDP per capita).

Other Conversion and Evaluation Perspectives

Indirectly Impacting Value:

For impacts that are indirectly related to economic value, it’s important to consider concepts such as cost reduction in waste management through food loss reduction, increased local tax revenue due to population retention or migration promotion, and economic activation from stable employment and improved working conditions. While these impacts might not directly translate into economic value, their relationship to economic effects can be used as a basis for economic valuation.

Long-Term Value Potential:

When evaluating concepts that may not have immediate economic value but show potential for future value creation or enhancement, you can estimate the expected economic value through projections. For instance, assessing the potential impact of increased startup creation, improved education levels, or similar factors can help predict the long-term economic value they may generate. Additionally, you may consider discounting these future values to their present value as needed.

Ripple Effects on Value:

Effects that create a ripple effect of value, such as improved self-fulfillment or changes in consumer behavior, can indirectly lead to qualitative economic value enhancements. These can be quantified by assessing how these improvements lead to increased productivity, efficiency, and other economic improvements, which are qualitatively related to the initial impact.

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