UPM.COM
Story | 03/17/2022 10:19:54 | 3 min Read time

Measuring and valuing impacts

Tommi Melajoki

Impact valuation is an emerging field that aims to determine monetised value for the negative and positive impacts companies’ activities have on the society and environment. We are currently investigating how the methodology could be applied and utilised in decision-making.

Impact valuation is about assessing environmental, social and economic impacts in monetary terms. When different impacts are converted into financial terms, they can be better taken into account in planning and decision-making. This will also help to better understand the scale and significance of the impacts and their interdependencies.

Valuation also aims to make impacts more tangible. For example, converting x millions of tonnes of CO2 emissions into the social cost of climate change helps to better understand the phenomenon.

As there are no standardised methodologies yet, most of the organisations piloting with impact valuation are using different methods to quantify and value the societal impacts of raw material and land use, emissions, employment and taxes, for example.

Managing our impacts

UPM is familiarising with the methodology

Misteli Tuominen investigated impact valuation at UPM and complied a profound study on her findings.

"From a practical perspective, I have looked at the different steps involved in the process, the choices that need to be made in terms of impact valuation objectives and the challenges in the calculation. We are also studying the potential benefits of the method and how it could be applied in UPM," says Tuominen.

According to Tuominen, valuing the impacts is quite complex in nature and different kind of assumptions and simplifications might need to be made along the process.

"A comprehensive and accurate assessment also requires a number of resources. Valuation can be done based on commonly available information, such as figures and valuation factors found in annual reports and online, but to make an accurate assessment you often need an expert who can apply the right figures in the right context. It is also important to remember that, of course, the quality of the information used in the valuation has a significant impact on the accuracy of the results."

Usefulness also requires transparency

Tuominen believes that it is important for companies to plan in advance how the results could be utilised and what is the possible contribution to decision-making and strategic planning. The complexity of the process must be also considered in the valuation.

"At the stage when the impacts are reported externally, the calculation must be supported by sufficient information on the basis of which the values have been calculated, what has been taken into account and what is excluded for the calculation method to be as transparent as possible," Tuominen adds.

The current theoretical framework best supports measuring and valuing environmental impacts

albeit methods are constantly developed for social impacts also. To get a comprehensive and realistic understanding of the impacts, it is necessary to focus on a number of different but interrelated aspects.

Committed to community involvement

"Focusing only on environmental impacts gives a narrower picture than taking into account social impacts such as the impact of employment and taxes. Social impacts are often more complex in nature which is why they are commonly harder to measure and value," she concludes.

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