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  • Ildiko Almasi Simsic

What is a social impact?

Lately I have been thinking a lot about social impact assessment (SIA) and how we can better use this tool in a wider social development context. In a previous post I wrote about the EU EIA Directive and how it is inferior to international best practice when it comes to social impact assessment and management. I have had a lot of discussions with various people over the past weeks about what I do and what I aspire to do in this field of impact assessment and management. I share how I work on different projects in different industries around the world manging social risk and impacts in line with international best practice, usually IFI standards. Most people understand this as a compliance type role. Companies do what our policies say and we give them the money. Sounds rather straightforward. Except, social impacts are not black or white, usually hard to quantify and add a monetary value, or even standardize across countries and sectors because they depend on a variety of factors some of which are subjective, in some cases more of a perception than a reality.

It made me think about all the wonderful tools we have in the social impact world. We have the social impact assessment (SIA), ESG, CSR, social bonds, social enterprise, grants etc. All wonderful things that come into play with different timing, frequency, scope, purpose, defined beneficiaries. Some are more compliance type tools while others have less ‘limitations’ to create opportunities. In terms of the SIA, I looked back at a few of my recent projects and (E)SIAs that I reviewed to see whether we use this tool to its full potential, i.e. to assess positive and negative impacts, risks and opportunities of projects. No denying that risks and adverse impacts are the key from a compliance perspective. But everyone wants the positive social impact.

When I discuss social impacts with a variety of different people they all seem to understand very different things. The first reaction usually is that measuring social impact of projects makes a lot of sense. We all want to ‘do good’ – however we define it. Where there is construction and operation phase impacts on people, the company should design mitigation or compensation for those impacts.

The more business-minded individuals do go a step further and ask about the cost implications of all this. Cost implications to pay the experts to undertake the assessment and also the cost implications of the findings of the assessment. The more I explain the more they see the complexity of the issues and question their responsibility to provide certain compensation or benefit sharing measures. Most companies want to ‘do good’ and support local communities but the lines of compliance and proactive community development are often blurred. This is because we have not yet reached the stage in social development and social impact measurement where we can be honest about what a product/instrument can and can not do. SIA undertaken for compliance purposes to obtain funding is probably not the best instrument for community development. Better definitions of products and tools will help us pick and choose what we need to achieve the desired outcome. Is it an ESG framework or a social bond? Is it a combination of a grant and a social enterprise? The more we know the better we select our tools for the results we want.

Now returning to my original point about the purpose of the SIA. I almost forgot that it was also intended to identify opportunities to invest in communities and develop additional sources of income or livelihoods. In my work I mainly use it to identify risks and adverse impacts and provide a mechanism to remedy or compensate for those. There are positive impacts identified, mostly related to access to jobs on the project or improved infrastructure. For most IFI funded projects, the (E)SIA is a public document and the company signs up to implementing whatever measures are prescribed in the document. This usually means a management system with underlying management plans. I have seen examples of community investment plans or community development programmes identified in the (E)SIA included in the management system where the company was contractually required to implement this plan. Since these proactive community development type initiatives are not prescribed by international standards, thus go beyond the compliance aspect, to what extent can we require companies to ‘do good’ by implementing these measures? Now I know this is provocative, but this is the perspective I get from people outside our industry of project level environmental and social impact measurement. How can we require a renewable energy company who builds a powerplant in 12 months then exits, to invest in the community nearby? Based on the ESG approach to social impact management, the locals will already be better off because the plant will provide electricity to the grid, right? Is it their job to provide access to veterinary care for local herders when they don’t even really impact their grazing field or herding activities? Is it one company’s job to provide better access to education for locals? Or build a hospital for them? Are we expecting companies to design CSR activities and pay for services that are typically government responsibilities? Are they a good employer because they comply with local labour laws even if they don’t provide any extra perks?

In this post I have more questions than answers, as most of these are very much dependent on the project and its context. Also depending on the tool that we have (ESG, SIA, CSR) we end up with a different scope and purpose and also different types of limitations. I am yet to find a comprehensive resource that explains everything in detail in an objective manner, so I decided to write one. Stay tuned for some announcements very soon.


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