Measuring Local Economic Impact

This blog post is by Heeseung Kim. Heeseung is an MBA/MS candidate at University of Michigan, Erb Institute for Global Sustainable Enterprise. She was Plant Chicago’s Economic Impact Research Intern during Summer 2020. 

Read Heeseung’s full 2020 Circular Economy Leaders Network report here

How to measure impact? That was the challenge I faced while developing Plant Chicago’s inaugural impact report for its Circular Economy Leaders Network. Of course, impact can take many forms. Initially, my goal was to understand the economic impact the Circular Economy Leaders Network had on their local community by engaging in the circular economy. However, it quickly became apparent that I first needed to understand how exactly the businesses in the network were participating in the circular economy. It was only once I understood the environmental and social implications of the businesses’ practices, that I could present a full picture of the Circular Economy Leaders Network’s impacts in their community and beyond.

As defined by Plant Chicago, the local circular economy seeks to retain resources (including materials, energy, nutrients, and knowledge) within local systems and to build resiliency at the community level with the understanding that benefits should be equitable and shared. To help inform how to measure these aspects, I conducted a scientific literature review of assessments of circularity and sustainability, consulted Circular Economy Advisory Committee members Dr. Weslynne Ashton and Dr. Nancy Landrum, and interviewed members of the Circular Economy Leaders Network.

With all that in mind, I divided the network’s impact into three measurable categories: people, networks, and “stuff,” in line with Plant Chicago’s Circular Economy for Small Business Toolkit, a resource to support small businesses working toward circularity. I then turned to the business owners, who graciously took time during an unprecedented pandemic to underscore their commitment to circularity by participating in data collection surveys and interviews.

PEOPLE

The goal with this section was to understand what jobs were being created by the Circular Economy Leaders Network, who was working these jobs (in regards to geography, race and ethnicity, and gender), and how much they were getting paid, factors important from an equity perspective. Additionally, employee satisfaction was measured when possible to help measure retention, which is critical to train and advance employees.

NETWORKS

This section homed in on the collaborative aspect of circular economies. It also considered locality: A strong local system supports the local economy while resulting in fewer emissions and energy use. But first, the boundaries of what constituted “local,” another term with no universally agreed-upon definition, had to be determined. For the report, I examined several levels of local: southwest Chicago, where the Circular Economy Leaders Network businesses were located; Chicago; and Illinois and the bordering states (a frequent shorthand for local is within 400-500 miles).

In considering networks, I first looked at local spend. Participating businesses shared their total spending at the various tiers of local, which was compared against their revenue to determine the businesses’ impact directly on the local economy. It must be noted that tracking expenses to such a level is a time-consuming task, particularly for small businesses; instead, tracking spend throughout the year may be less labor.

The Circular Economy Leaders Network’s charitable giving was also examined, whether in the form of money, in-kind donations, or time, again at the local level and beyond. However, the full extent of these contributions could not be analyzed as many businesses did not comprehensively track their donations. Similarly to spend, maintaining a system for tracking donations can provide a fuller picture of the benefits businesses provide to their community.

Finally, I considered resource-sharing, both within the Circular Economy Leaders Network and outside of the network, which would allow for more efficiencies and promote shared business success. While there were instances of resource-sharing, many of these were informal, with greater opportunities for collaboration in the future.

STUFF

This section was intended to measure resource efficiency, with implications for the local community. First, I looked at packaging, a large source of waste exiting the businesses, and looked at which packaging was made of recaptured materials and which could be recaptured. I then considered the businesses’ overall waste production. Plant Chicago has a robust database of waste audits to measure the amount of waste generated and diverted on site, so I was able to devise a waste-to-revenue ratio, which can be compared year over year to understand the level of waste generated by the business. I hope that the comparisons over time gradually reveal greater efficiencies and waste reductions.

The amount of waste sent to landfill (compared with the amount of waste recycled or composted) impacts the local community in two key ways: (1) Disposing of waste in the landfill — especially food waste —  generates greenhouse gases; Chicago has committed to a 26-28 percent reduction in emissions levels by 2025. (2) And landfill space is finite, with high costs associated with opening a new landfill.

In addition to waste, I intended to measure utility use, with the hope of tracking greater renewable energy use (and reduced utility use) over time. Unfortunately, many of the businesses were unable to access their bills, due to barriers such as paying landlords for a share of utilities, rather than paying the utility company directly. However, given barriers to entry for small businesses in the renewable energy market, reduction of energy and other utility use remains a critical circular economy principle.

Small businesses make up 44 percent of U.S. economic activity, making them a critical part of the ecosystem. Participating in the circular economy is an opportunity for small businesses to operate with greater efficiency for benefits that extends far past their individual firms. Plant Chicago’s impact report provides an initial snapshot of the impact of the Circular Economy Leaders Network in southwest Chicago and beyond. But this is just the starting point: As businesses continue to measure and report on their practices, we get a better picture of just how much an impact a circular system can have on a community.

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