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"Hu" is the common language for ESG impact

The biggest problem facing the most complex Environmental, Social, and Governance (ESG) challenges of our time has been communicating varying impacts consistently and equitably. The Human impact unit (Hu) is a unifyingly simple solution proposed in a 2023 white paper by Nicky Gillibrand and Dr. Chris Draper that solves the inconsistency of ESG reporting by putting human impact at the center of ESG valuation and analysis.   At its most basic level, the Hu is equal to the impact of an ESG effort relative to the magnitude of the problem being addressed per person who could be helped by the effort.

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How does the Hu translate to carbon?

Very simply. The video to the left shows how one would represent the issue of carbon emissions in Hu - and demonstrates how thoughtfully considering the "Size of Problem" relative to your local community - can be equitably calcuated. In the video the calculation of CO2 emissions reductions into Hu accounts for the fact that worlwide emissions per person is significantly less than emissions in the United States of America. This realization is incorporated into the Hu calculation. 

Video Transcript: "A Human Impact Unit is the magnitude of your impact, relative to the size of the problem being solved per person. So if a company installs carbon capture systems that reduce CO2 emission by 8 metric tons per year, this 8 metric ton impact is converted into an Hu by comparing it against the expected emissions caused by humans. Which is where it can get tricky. When thinking globally, many estimate that the average human causes 4.8 metric tons of emissions per year. This value converts an 8 metric ton reduction into a 1.67 Hu solution. Yet in many parts of the United States, average emissions can easily reach 20 metric tons per person per year. So in the United States, this same 8 metric ton reduction would only be worth 0.40 Hu’s. This adaptability allows the Hu to remain equitable, no matter the location or application."

What about ESG #beyondcarbon?

The issue of equitably accounting for ESG impacts #beyondcarbon is at the heart of the Hu Impact Unit concept, so the video to the right demonstrates how the Hu could be applied to food recovery. This example walks through how practitioners should take each performance metric, thoughtfully consider the Size of Problem relative to the number of people the proposed solution is actually able to serve, and creating a Hu performance target based on these parameters.

Video Transcript: "Food rescuers collect unused food from events or conferences and deliver it to organizations serving the food insecure. Measuring its ESG value in carbon makes no sense: food rescue is about feeding people - which can be equitably measured using Hu. A Human Impact Unit is the magnitude of your impact, relative to the size of the problem being solved per person. Rescued food is tracked in pounds. To compute an Hu based on the number of pounds collected, the size of the problem must be defined using the same units - by finding the number of pounds per person needed to end food insecurity in the served community.

In the United States, the decisions taken and policies accepted by our 333 million citizens have caused food insecurity that the USDA estimates affected 44.2 million people in 2022 (Household Food Security in the United States in 2022 (  Feeding America concurrently reported that the average food insecure PERSON needed an extra $44 per month to prevent food insecurity (What's new in Map the Meal Gap 2022 | Feeding America) at a cost per meal of $3.59 (Local Food Insecurity Estimates & Costs | Feeding America) - a food gap of 147 meals per year per food insecure person. Given the Feeding America assumption that the average meal is made up of 1.2 pounds of food ( ), food insecurity in the United States could be estimated as an annual 7.8B pound food gap between access and need - represented as a 23.4 pound gap per person per year in the United States.

This means that a Nationally serving food rescue organization achieves 1 Hu of impact for every 23.4 pounds of food that is rescued and made available to someone who is food insecure. Most food rescue organizations do not have a national footprint, so an appropriate Hu value must be tailored to the community being served, allowing any Hu estimate to remain equitable, no matter the location or application."

Is there a market value for an Hu?

Yes. Because the Hu provides direct equivalence to currently tradable commodities like carbon credits, these markets can be immediately used as proxies to find the value of an Hu. These equivalency efforts for providing pricing guidance are complimented by the growing number of RAC auctions that directly price the intangible value of ESG intangible values that previously had no offical market. 

"Market value is defined by what someone is willing to pay. The Hu helps define what that payment is worth. A Human Impact Unit is the magnitude of your impact, relative to the size of the problem being solved per person. When looking at carbon - for which there is an operating market - European markets show buyers willing to pay roughly 91 dollars per ton. In the United States, where it takes 16.4 tons of CO2 to equal one Hu, the market value per Hu is then $1,492.40. Alternatively, recent RAC offset auctions for food recovered by Eat Greater Des Moines saw investors buying at $3.53 per pound of food recovered. At 23.4 pounds of food per Hu, the market bore $82.60 per Hu - indicating that food recovery may be undervalued by ESG investors. Greater ESG offset activity will narrow this value gap, making all ESG investments more equitable, no matter the location or application."

How does the Hu clarify ESG ROI options?

The business world lives on ROI - and ESG is one of the most important investment decisions facing businesses today. Whether driven by altruism or regulation, investor sentiment or Board direction, decision and policy makers needs to compare disparate ESG initiatives based on ROI. Hu is the first tool that is easily accessible for making directly comparable ROI decisions in the ESG space - allowing you to truely see where your financial investment produces its greatest ESG return.

"Decision or policy makers must choose where to direct limited resources, generally towards the greatest return on investment. Yet comparing differing ESG ROI, say trees planted versus food recovered, was difficult. A Human Impact Unit is the magnitude of your impact, relative to the size of the problem being solved per person. Say a Board is faced with two projects: a nationwide food rescue program that can redirect 4,000,000 pounds of food per year for a $180,000 annual budget, or an USA-based tree planting effort that sequesters up to 24 tons of carbon per year by planting 1,000 trees for a one-time $500,000 investment. USA-based Hu calculations estimate that 1 Hu is achieved for every 23.4 pounds of food rescued, or 16.4 tons of CO2 reduction. In this case, that means the food rescue proposal is worth 170,940 Hu, and the tree planting project is worth 1.46 Hu. When simplistically comparing project costs over 10 years, a decade of food recovery support will cost $1.8 million, where 1,000 trees require a one-time cost of $500,000. Simplistically dividing each return by the investment, the food recovery project yields 0.095 Hu per dollar, where the tree planting effort yields 0.00000292 Hu per dollar - showing that the food recovery project returns more than 32,000 times the ESG value of the tree planting project. Direct comparisons of the Human impact returned allow ESG investments to remain equitable, no matter the location or application."

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Is there a best practice for Hu analysis?

Yes. ESG RACs has created a template that helps analysts, academics, or consultants simplify their approach to beginning, completing, and communicating a meaningful Hu analysis which can be downloaded here or by clicking the icon to the left. This template can be used for any analysis from a high level gap evaluation to an in-depth evaluation of a multifacted organization, or anything in between. If you would like an experienced partner to help consult or perform an Hu analysis, please contact us today for this template, or to be connected with an expert who can help!

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