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Accounting Social Impact

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Accounting Social Impact Carleton Centre for Community Innovation Centre d’innovation communautaire de Carleton accounting for social impact The Expanded Value Social accounting examines ways in which economic, social and environmental Added Statement value can be captured and communicated. Building on traditional accounting principles, the Expanded Value Added Statement (EVAS) is an innovative tool to account for economic, social, and environmental factors. It provides a way to account for traditionally non-monetized factors (such as volunteer hours) to provide a better picture of social value creation. Social Accounting Social Accounting The Expanded Value Added An accounting framework influences how a Statement Measuring The Value corporation defines success. Traditional The EVAS is a method of social accounting of Volunteering accounting focuses on maximizing shareholder which attempts to answer the question, what value and on the financial bottom line. However, difference do our actions make in economic, an increasing number of corporations are social and environmental terms? , in sharp interested in “double” or “triple” bottom line contrast to the question asked by traditional accounting. They are interested not only in accounting, how can we maximize profit for measuring the impact of their business practices our owners? ”2 Developed by Dr. Laurie Mook 1 Catherine Clark, William on the financial bottom line, but also the impact at the University of Toronto, the EVAS builds Rosenzweig, David Long, and Sara on their employees, the communities in which on traditional corporate accounting concepts Olsen.(2004) “Double Bottom Line they operate, and the natural environment. to capture the social value that is created by Project Report: Assessing Social (investments in) social ventures. 3 As well, the Impact in Double Bottom Line Ventures. Methods Catalog.”, Given the lack of common practices around EVAS can be used to show how this value is www.riseproject.org/DBL_ social impact assessment, many social ventures distributed to a variety of stakeholders, including Methods_Catalog.pdf, p.3 are judged solely by their financial metrics even the wider community. if social goals are a primary driver. 1 Social 2 Laurie Mook (2007) Social and Environmental Accounting: The accounting broadens this focus to include The EVAS attempts to quantify and place a Expanded Value Added Statement. social and/or environmental objectives which value on goods and services that are usually Unpublished doctoral dissertation. are traditionally not reflected in accounting viewed as “free.” It integrates financial and University of Toronto, Ontario Institute for Studies in Education. statements. It encompasses a broader definition social information: financial information from p.142 of the ways in which organizations create value audited financial statements, and social values for different groups, by seeking to account from calculations of typically non-monetized 3 Laurie Mook, Jack Quarter, and for their social and environmental impacts in factors, such as volunteer hours. For instance, the Betty Jane Richmond (2007). What Counts: Social accounting for addition to financial performance. The Expanded contributions of unpaid volunteers to non-profits, nonprofits and cooperatives. Second Value Added Statement represents one innovative a valuable resource for many organizations, Edition. London: Sigel Press. tool to account for social value creation. don’t get “counted” in traditional accounting - 1 - statements. The EVAS provides a methodology direction on which areas to invest in, and a that can account for some of these important means to illustrate the social impact of these contributions to illustrate the social value investments to different initiatives. created. Environmental sustainability: The overall Valuing Volunteers: Items typically not concept used to guide the EVAS is sustainability, monetized in financial statements and it can be used to account for various • Value of volunteer time contributed to dimensions of environmental impact. The non-profits (as a resource for non-profits) EVAS methodology has been used to illustrate • Unpaid or subsidized specialized or the environmental impact of an organizational technical contributions (such as free consulting) policy to encourage employees to use more • Informal skill development received environmentally friendly transportation to Social by volunteers (e.g. leadership and management) and from work. 5 Another example applied to accounting seeks • Personal development of volunteers sustainable building practices has demonstrated “ • Community networking and collaboration impressive additional social and environmental to encompass benefits (nearly $1 million) gained from a a broader Applying the EVAS mere two percent increase in costs ($100,000). 6 definition of Employee volunteering: The EVAS has been Again, the EVAS can be used as a tool to what is counted applied in a number of cases to assess the justify investment into these social ventures contribution of volunteer hours to non-profits. 4 by demonstrating the social and environmental and what Many corporations encourage employees to value created. is excluded. volunteer with community organizations, but often do not track the impact of these Applying the EVAS: ” contributions of time and expertise. Excluding Tracking Volunteering Hours volunteer labour in non-profit accounting Since nonprofits operate for purposes statements undervalues a key and valuable other than earning a profit, their efficiency resource upon which many non-profits rely, and effectiveness cannot be determined by and a key contribution that corporations make means of income measures alone. Volunteer to their communities. The EVAS represents contributions, an important resource for non- a way to articulate the social value of these profits, are often not assigned a monetary contributions to society. value. The EVAS provides one way to account for these contributions. The main issues are: Investments in non-profits: Through CSR (a) attributing an appropriate market value 4 Mook et al. (2007), Chapter 7; strategies, many corporations provide financial, to volunteer labour; (b) attributing a value to Karim Harji and Kelly Babcock in-kind or employee volunteer contributions to benefits received by the volunteers from their (2007) “Social Value Accounting: non-profits. Often, however, success is measured volunteering, and (c) attributing value to the Two Case Studies Using the 7 Expanded Value Added Statement.” by the financial amount contributed rather than social impacts of non-profits. Presented to the Annual Conference the social value created. The EVAS can reflect, of the Canadian Evaluation Society, in an integrated way, the financial and social The EVAS allows for a systematic analysis of Winnipeg value that non-profits create in communities, each of these issues. A detailed explanation of 5 Mook (2007), p.3 and for which stakeholders (community, the EVAS methodology, and various case studies employees, and other groups). These include on how it has been implemented, is provided in 6 Ibid, p.92 the cost savings to society through services Laurie Mook’s book, “What Counts”. 8 The provided by non-profits, such as counselling book discusses methods to capture the value that 7 Ibid., p.52 and subsidized childcare. An EVAS can make volunteers create by estimating a comparative 8 Mook et al. (2007) the case for investing in non-profits, provide market value of hours contributed by volunteers. - 2 - While it is often difficult to quantify these kinds A clearer understanding of these areas can be of values, as there may not be a direct market useful for corporate strategy, and allow for a (price) comparison, proxy market values can closer alignment between different parts of the be estimated as appropriate to the types of organization when implementing CSR strategies. skills involved. The method uses conservative By valuing traditionally non-monetized factors, assessments to calculate the comparative market these factors become important for decision value of social contributions, and is transparent making processes. The change of focus from in articulating the assumptions behind the a profit-oriented bottom line, to an integrated calculations. There are also credible guidelines economic, social and environmental bottom and open source software to facilitate these line provides an opportunity for organizations assessments. 9 and society to think about impacts in a much By redefining broader sense. 12 The EVAS can also illustrate “success in The EVAS demonstrates the benefits of and communicate a corporate commitment to terms of social volunteering for volunteers, non-profits, and sustainability and investing in communities. impact or society. EVAS case studies have shown that the secondary benefits that volunteers derive, In articulating and presenting the true costs and environmental such as informal skill development, can be benefits of employee volunteering, corporations sustainability, quantified. Volunteers make contributions that can design corporate volunteering programs in a social are as important, and sometimes even more more strategic manner – finding more appealing significant than, financial grants or paid staff. 10 volunteering options; improving employee accounting can The EVAS can also describe how volunteers training and support programs; and assessing strengthen the extend the human resources available to non- the value of these programs to employees, the business case for profits,
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