Why do some environmental and social impacts never appear in the price we pay?
Internalising social and environmental externalities: Lessons from the built environment and bioeconomy.
Many of the environmental and social consequences of economic activity never appear in the price of a product, service or project.
For example, the cost of greenhouse gas emissions, habitat loss or impacts on local communities are often not reflected in the decisions made by businesses, investors or policymakers. These hidden impacts are known as externalities.
This report, commissioned by Zero Waste Scotland explores how Scotland can better account for these wider impacts when decisions are made about investment, development and economic growth.
Focusing on the built environment and bioeconomy sectors, the report examines practical ways to ensure environmental and social costs - and benefits, are considered alongside financial ones.
Why it's important
When environmental and social impacts are overlooked, it can lead to unintended consequences such as pollution, carbon emissions, resource depletion and missed opportunities for communities to benefit from economic activity.
The research shows that creating a more circular economy requires decision-making systems that recognise the true value of natural resources, community wellbeing and long-term environmental outcomes.
Seven ways to account for environmental and social impacts
The report identified seven broad types of mechanisms that can help ensure environmental and social impacts are considered in decision-making:
Choice editing
Restricting or phasing out activities, products or practices that cause harm.Negative financial incentives
Using taxes, charges or other measures to discourage harmful behaviours.Positive financial incentives
Providing grants, subsidies or rewards for actions that create environmental or social benefits.Targets and caps
Setting limits or goals for issues such as emissions, waste or resource use.Measurement and reporting
Collecting data and reporting impacts so they can be seen, tracked and acted upon.Guidance, information and education
Helping organisations and individuals understand and address impacts.Inclusive decision-making
Involving communities and stakeholders in shaping decisions that affect them.
What could this look like in practice?
Making circular construction the norm
Strengthening planning rules and public procurement requirements could encourage buildings and infrastructure projects to use materials more efficiently, reduce waste and design for reuse from the outset.
Improving how aquaculture impacts are managed
Environmental and social considerations could play a greater role in how aquaculture licences are awarded and managed, while revenue generated from the sector could continue to support local communities and regeneration projects.
Measuring the carbon impact of buildings
Working with industry to improve the measurement and reporting of embodied carbon could help the construction sector better understand and reduce emissions linked to the materials used in buildings and infrastructure.
Unlocking funding for nature-based projects
Natural capital approaches could help attract investment into projects that deliver environmental benefits while supporting Scotland's circular bioeconomy.
Connecting community energy and circular economy goals
Community-led energy projects and participatory decision-making processes could help communities play a greater role in decisions that affect them while supporting wider social and environmental outcomes and a transition to a circular economy.
Key findings
The report found there is no single solution for addressing environmental and social impacts. Instead, the most effective approaches combine multiple mechanisms, are tailored to local circumstances, are supported by good data and reporting, and involve collaboration between government, businesses and communities.
Access the full report to explore the evidence, case studies and recommendations in more detail.
Downloads
Access the Internalising Social and Environmental Externalities Report to explore the evidence, case studies and recommendations in more detail.