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Total Impact Valuation
OVERVIEW OF
CURRENT PRACTICES
Total Impact Valuation
Overview of Current Practices
RESEARCH REPORT R-1661-18
By Thomas Singer
CONTENTS
3 Executive Summary
4 Introduction
9 Who: Impact Valuation Landscape
14 What: Impacts Being Measured
17 How: Valuation Approaches
24 Appendix A: Companies in our sample
29 Appendix B: Economic, social, and environmental indicators
used in total impact valuation methodologies
35 Appendix C: Examples of valuation approaches by indicatorExecutive Summary
Total impact valuation—the practice of quantifying and monetizing a company’s
economic, social, and environmental impacts—can help organizations better understand
the full extent of their impacts on society, which can in turn guide management decisions
by identifying where to focus efforts on improving social value creation. While today this
process is complicated and its results can be misleading, once refined, it has the potential
to play an important role in the future of company reporting.
In this, the first phase of a research initiative on the topic, we examine examples of
existing total impact valuation approaches to identify their main differences and
similarities. Subsequent phases will examine the practical application of total impact
valuation and how companies are using their approaches to create value.
Total impact valuation is at an embryonic stage While many companies are engaged
in prominent multisector initiatives to understand and drive this practice forward, we
found only 14 trailblazing companies—multinationals BASF, Samsung, and AkzoNobel
among them—that have published results of quantitative impact analyses that include
both environmental and social impacts. Some of these companies have more than
five years of experience refining their approaches, while others are just beginning to
pilot their methodologies. Such is the growth of this practice that even the Big Four
accounting firms have established methodologies and service offerings related to
total impact valuation.
However, impact valuation is not without its critics—there are valid ethical and moral
concerns associated with the practice of placing monetary values on nonfinancial
impacts, including its ability to be used as a tool for greenwashing.
Water use and GHG emissions are the most commonly monetized indicators
Companies typically select the indicators to include in their analysis based on a
combination of materiality (an assessment of the importance of the indicator to the
business and stakeholders), data availability, and measurability. On average, companies
in our sample include 18 indicator categories in their impact valuation analysis, with
some companies including fewer than 10 and others more than 30. The most commonly
monetized indicators are GHG emissions and water use. Others are taxes paid, employee
training, workplace accidents, and payroll.
www.conferenceboard.org total impact valuation: overview of current practices 3Extending the scope of impact valuation to the value chain can yield useful insights,
but only a handful of companies do Almost all companies in our sample report the
results of their impact valuation at the company level rather than at the product or
business-unit level (though some companies drill deeper on an as-needed basis). But
only about half of the companies currently include value chain impacts as part of their
valuation. A broader scope of analysis that includes the value chain is admittedly more
challenging, but an analysis limited to a company’s own operations risks obscuring
significant downstream or upstream impacts.
Significant differences in valuation approaches and methodologies exist These
differences are driven by: the breadth and types of indicators companies are measuring;
the actual impacts companies are measuring; the monetary valuation techniques used;
and the specific coefficients or multipliers applied. These differences can have a material
impact on the outcome of valuation analyses.
Even in cases where valuation techniques are similar, the coefficients used can vary
tremendously. For example, almost all companies in our research sample use the
social cost of carbon (SCC) to monetize greenhouse gas emissions, but the actual SCC
values used range from less than $30 per metric ton of CO2 emissions to more than
$160 per metric ton.
The absence of a standard methodology limits the ability to draw useful conclusions
from impact valuation results Currently, comparing the results of impact valuation
exercises between companies is like comparing apples to oranges. Without a standard
methodology, even conclusions about an individual company’s results should be taken
with a grain of salt.
A review of the existing examples of total impact valuation raises a couple of important
issues that will influence the future trajectory of this practice:
• The need to define the intended audience The approach a company takes
to value its impacts will depend largely on who the intended audience is. Is
the exercise intended to guide company strategy? Is it primarily meant as a
reporting tool for investors and external stakeholders? In either case, greater
standardization of methodologies is needed to make results more broadly useful.
• The need to balance simplicity with rigor Existing examples of total impact
valuation span the gamut between back-of-the-envelope approaches and
dissertation-worthy methodologies. The future of total impact valuation rests
in part on finding a way to keep the approaches simple enough to encourage
wider adoption (despite heightened levels of ESG reporting and survey fatigue)
yet rigorous enough to not oversimplify inherently complex issues (and avoid the
risk of greenwash).
The current state of total impact valuation is exciting, fast changing, and cutting edge,
but it is also complex, murky, and scattered. Without a common language, total impact
valuation risks remaining at best an immensely challenging and diffuse practice, and at
worst a self-serving and misleading instrument. As this practice develops, total impact
valuation has the potential to become a powerful strategy tool for companies.
4 total impact valuation: overview of current practices www.conferenceboard.orgIntroduction
Companies are increasingly expected—and in some cases required—to report non-
financial or prefinancial data, including on environmental impacts (e.g., greenhouse
gas emissions, energy usage, water consumption) and social measures (e.g., workplace
accidents, diversity ratios, training spend). Investors and other stakeholders use these
data to gauge how prepared companies are to tackle pressing societal challenges.
In fact, in a recent survey of institutional investors, more than two-thirds responded
that nonfinancial information played a pivotal role frequently or occasionally in their
investment decisions.1
A small number of companies are taking this practice a step further: they are experimenting
with placing a monetary value on the impact of nonfinancial factors (such as CO2 emissions
or lost time injury rates) and adjusting financial impacts in an effort to paint an overall picture
of the company’s total impact. These emerging approaches, referred to in this report as
total impact valuation, describe the methodologies organizations use to make strategic
business decisions that consider the impacts on a broad range of stakeholders and society.
The concept of total impact valuation is not new, yet few companies have publicly
attempted to place monetary values on their nonfinancial impacts. One of the first
company efforts to quantify and monetize environmental impacts can be traced back to
Dutch information technology company BSO/Origin’s 1990 environmental accounting.
Another example came a decade later from German multinational athletic wear company
Puma’s trailblazing environmental profit and loss statement. These early efforts, however,
focused on environmental impacts. More recent approaches to total impact valuation
bring social factors into the equation as well.
Numerous initiatives and organizations are working to develop, promote, and refine
methodologies for total impact valuation. For instance, in 2014, the Natural Capital Coalition
began work on developing the Natural Capital Protocol, which aims to help businesses
measure and value their direct and indirect impacts and dependencies on natural capital.
Similarly, in 2015, the World Business Council for Sustainable Development initiated a call for
collaboration to begin developing a Social Capital Protocol, which was eventually launched in
2017 to help companies measure and value their social capital. Another important initiative is
the Impact Valuation Roundtable, an informal group of over a dozen international companies
that aim to develop and operationalize the practice of impact valuation. In 2017, the group
published a guide for companies thinking about launching impact valuation initiatives.2 Other
notable initiatives in this space include The Prince’s Accounting for Sustainability Project,
which developed a guide to natural and social capital accounting; the SROI Network’s
Social Return on Investment framework; the Embankment Project for Inclusive Capitalism;
and the Roundtable for Product Social Metrics, which released the Handbook for Product
Social Impact Assessment. Organizations and consultancies such as BCG and True Price
have also published guides on this topic, and PwC, KPMG, and EY have each developed
methodologies for total impact valuation that several companies are currently referencing.
In 2016, impact valuation was piloted and later abandoned as a criterion in RobecoSAM’s
questionnaire used to develop the Dow Jones Sustainability Index; the organization plans
to collect and analyze data in 2018 to refine the scoring methodology for 2019.
www.conferenceboard.org total impact valuation: overview of current practices 5In 2017, The Conference Board launched a research initiative into the emerging practice
of total impact valuation. Building on the existing literature on total impact valuation, the
primary aim of this first phase of the research initiative is to provide an overview of the
approaches leading companies are currently using, highlighting the primary similarities
and differences in these approaches. This report addresses the following questions:
• What are some approaches companies are using to evaluate their total impact?
• What are some of the primary characteristics of these approaches (e.g., types
of indicators measured, valuation coefficients used, alignment with existing
methodologies, use of external assurance)?
• What are the key similarities and differences between these approaches?
Phase 2 will examine the practical application of total impact valuation and how
companies are using these approaches to create value.
Methodology
We first identified a sample of companies based on the following criteria:
• Their total impact valuation analysis includes both environmental and social
impacts (this means our sample excludes companies that only measure
environmental impacts in their analyses, for example, companies that publish
environmental P&Ls, such as Kering and Natura);
• Their approach is primarily quantitative rather than qualitative/conceptual; and
• Quantitative results of their analysis are publicly available.
The goal was not to arrive at a definitive list of companies involved in total impact valuation,
but rather to identify a sample of companies that would allow for a useful comparison of
approaches and methodologies. Our research yielded 14 companies that met the criteria
and provide a good representation of existing approaches. Given our narrow selection
criteria, many companies that are actively working on or engaged behind the scenes in total
impact valuation approaches do not feature in this report. This should not be interpreted as
an assessment of the validity of their approaches; it is simply a result of the selection criteria
used to define the scope of this research.
We then reviewed publicly available materials (methodology documents, company annual
reports, sustainability reports, and company websites) describing the total impact valuation
approaches companies in our sample use. The aim of this literature review was to capture
some of the defining characteristics of companies’ various approaches. Some of the main
data points captured for each company include:
• Existing impact valuation methodologies referenced
• Year of first impact valuation analysis
• Frequency of impact valuation analysis
• Use of third-party assurance
• Scope of methodology (e.g., company-wide or product-level)
6 total impact valuation: overview of current practices www.conferenceboard.org• Value chain scope
• Economic, environmental, and social impacts measured
• Valuation coefficients used and primary sources for coefficients
• Explicit links to strategy
The field of total impact valuation is complex and fast developing. While every effort has
been made to ensure the accuracy of content in this report, some examples may become
outdated as companies revise their methodologies. Also, the limited sample means caution
should be taken when interpreting the report’s findings. These findings are meant to advance
the knowledge of this field but should not be considered conclusions or recommendations.
Critiques of total impact valuation
Though various initiatives are working on establishing some common ground, for now
there is no standard methodology for assessing total impact valuation, which presents
a challenge to wider adoption of this practice. Ideological issues may also hinder total
impact valuation from becoming a ubiquitous practice. For instance, some notable
critiques raised include:
• Monetization of nonfinancial impacts can facilitate greenwashing. As noted
by EY, “monetization can cover up actual bad performance by apportioning
a low conversion factor to certain negative outcomes and therefore facilitate
greenwashing. Solely managing on monetized data can actually give perverse
incentives and lead to ‘devilish tradeoffs.’”3
• Monetization can result in prioritizing cents over sense. In a review of KPMG’s
“true value” methodology, Nick Barter warns that “key to note with monetiza-
tion is that it can result in individuals prioritizing cents over sense and thus
perpetuating a situation where the only morality is a bigger or smaller number
depending on revenues to be raised or costs reduced. In turn, the concurrent
inputs and outputs of those numbers and the ecological and societal baggage
associated with them are lost to the morality of whether the number should be
increased or reduced.”4 Barter warns that by reducing morally weighty issues
to numbers, monetization can lead to a narrow focus on the achievement of a
certain monetary figure with little concern for what actually makes sense from an
environmental and social standpoint. He emphasizes that “what makes economic
sense is not always right, and what is right is not always economic.”5
• Financial valuation of social impacts is inappropriate. Andrea B. Coulson
notes the ethical issues surrounding the financial valuation of social impacts such
as human rights and the value of a life. She acknowledges that “research and
practice has shown that others, with alternative worldviews, may fundamentally
reject that financial valuation can in whole or part be used to represent social
impacts. For example, concern has been expressed that the intrinsic value of
social and environmental relationships centered on human rights or the value of
a life should not be subject to commodification, and any attempt at placing an
arbitrary financial valuation is inappropriate.”6
www.conferenceboard.org total impact valuation: overview of current practices 7• Environmental and social limits are not accounted for. Mark W. McElroy points
out that monetization schemes do not “take social, economic, or environmental
limits or thresholds explicitly into account… It’s as if all resources are infinitely
available, and they merely become increasingly expensive the more that we
use. The fact that certain rates of use might exhaust available supplies and
should be priced, therefore, as exponentially or infinitely higher in cost is
nowhere to be found.”7
Benefits and challenges of monetization
BENEFITS CHALLENGES
• Impacts and dependences are translated • There can be skepticism from decision
into a language which is more readily makers regarding the methodology used
understood by business leaders and to translate impacts and dependencies into
political decision makers, which helps financial values. It is therefore important
to facilitate comparison with other to be as transparent as possible about the
financial implications. assumptions made in the assessment and
any areas of judgement, and to work with
• Difficult decisions on trade-offs between
respected economists or other experts.
different impacts (e.g., carbon emissions,
water use, or job creation) can be • It can be costly, particularly where external
facilitated through conversion into a consultants are used. It can also be time
common financial unit (instead of tons, consuming to collect the required data
liters, or number of jobs). particularly where you wish to consider
indirect impacts from your supply chain.
• There are reputational benefits
associated with demonstrating that you • Not all impacts and dependencies are
are a responsible organization and that appropriate to monetize (e.g., where there
you understand the full value of your is a threshold over which the business
natural and social capital impacts and does not wish to cross, which can be the
dependences, and how you can build this case with the risk of fatalities or impact on
capital through your business activities. culturally important sites.
• There is currently no agreed common
methodology for valuation, with many
organizations using different techniques.
Source: Adapted from Natural and Social Capital Accounting: An Introduction for Finance Teams, The Prince’s Accounting for
Sustainability Project, 2016, p. 14.
8 total impact valuation: overview of current practices www.conferenceboard.orgWho: Impact Valuation Landscape
European companies lead the way
Historically, most initiatives aimed at measuring nonfinancial impacts have emerged from
Europe. For instance, one of the first examples of corporate environmental accounting
came from BSO/Origin, and many of the contemporary initiatives related to impact
valuation originated in Europe (e.g., the Impact Valuation Roundtable). The absence of
North American companies is not particularly surprising given this region’s historically
slower adoption of nonfinancial reporting in general, possibly driven by legal concerns
arising from increased levels of disclosure.
Total impact valuation is still relatively new
All of the companies in our sample released their total impact valuation results within the
last five years, and more than half (8) publish annual results. The remaining companies
have either published their results more than once but not annually or conducted impact
valuation analyses as one-time pilots.
Table 1
Sample companies
Company Sector Headquarters
ABN AMRO Financials Netherlands
AkzoNobel Materials Netherlands
Argos Materials Colombia
BASF Materials Germany
Holcim/Ambuja Cement Materials India
LafargeHolcim Materials Switzerland
NS Dutch Railways Industrials Netherlands
Safaricom Communication Services Kenya
Samsung Information Technology South Korea
The Crown Estate Real Estate United Kingdom
TUI Consumer Discretionary Germany
UPM Materials Finland
Volvo Industrials Sweden
Yarra Valley Water Utilities Australia
Chart 1
Years when companies first released their total impact valuation results
Number of companies
5
4
2 2
1
2013 2014 2015 2016 2017
www.conferenceboard.org total impact valuation: overview of current practices 9Seeing an opportunity, accounting firms are carving a space
The emerging practice of impact valuation represents a new business opportunity
for accounting firms. A few firms have launched methodologies specifically designed
to help companies measure and quantify their total impact. In our sample, seven
companies base their impact valuation approaches on a methodology developed by
KPMG (“True Value”), and two on a methodology developed by PwC (Total Impact
Measurement & Management, or TIMM). Of course, companies are not limited to
using methodologies developed by accounting firms, and in fact, several companies
choose to follow independent approaches that often reference existing related frame-
works, such as the Natural and Social Capital Protocols and the International Integrated
Reporting Framework.
The practice of impact valuation also represents an emerging opportunity for assurance
providers. Among our sample of 14 companies, five (BASF, Holcim/Ambuja, NS Dutch
Railways, AkzoNobel, Argos) use external assurance by one of the Big Four accounting
firms (KPMG, EY, PwC, Deloitte).
Other companies engaged in nonfinancial valuation
The sample of companies reviewed in this research was determined by a narrow set of
criteria. However, several companies outside our sample provide good examples of the
variety of approaches used to value nonfinancial impacts:
• SAP places a monetary value on how the company’s operating profit is affected
by four nonfinancial indicators (Business Health Culture Index, employee
engagement, retention, and carbon emissions). For example, the company
finds that a reduction by 1 percent in carbon emissions would have a positive
impact of €5 million in operating profit.
• Mars, through the company’s internal think tank Catalyst, has spearheaded
several business pilots based on its “Economics of Mutuality” approach. This
approach establishes indicators and metrics for measuring mutuality, a concept
that focuses on creating lasting positive benefits across stakeholders and
recognizes that the benefits of a company extend beyond shareholders.
• Solvay’s Sustainable Portfolio Management approach helps the company
understand its products’ sustainability risks and opportunities. The approach
monetizes the environmental impacts of products and categorizes those products
based on a questionnaire that identifies key benefits and challenges associated
with those products.
• DSM has conducted several pilots to quantify the environmental costs and
benefits at the product level. A pilot study for the company’s OatWell® product,
for example, expanded the analysis to include social impacts as well.
• Kering, Natura, and NovoNordisk have all developed environmental P&L
statements. Natura is also working on developing a social P&L statement.
10 total impact valuation: overview of current practices www.conferenceboard.orgWHAT DOES TOTAL IMPACT VALUATION LOOK LIKE?
Most of the companies in our sample present the results of their total impact valuation
in the form of either a “true earnings bridge” chart or an “integrated P&L” chart. For
companies using KPMG’s True Value methodology, the true earnings bridge chart is a
standard way of presenting this type of information. In the case of companies referencing
PwC’s methodology, some organizations (such as TUI) opt to use the TIMM visual, while
others choose to present their results using a different format. Most companies in our
sample publish the specific monetary results of their analyses, though this is not always
the case. BASF, for example, calculates specific figures but chooses to publish only
directional values rather than specific figures. Below are visual examples of how three
different companies present their impact valuation results.
LafargeHolcim
LafargeHolcim’s 2016 Integrated Profit & Loss (IP&L) statement shows the results of
the company’s total impact valuation calculation as over 4 billion Swiss Francs. The
IP&L is divided into financial, socio-economic, and environmental categories. The IP&L
shows the biggest positive impact is stakeholder value (which consists of salaries, taxes,
interests, and dividends) and the biggest negative impact is CO2 emissions (upstream
and own operations).
Financial Socio-economic Environmental
8,304 93 3 – – 6
-87
– 4,044
1,121 –
-5,899
-556
2,252
-1,042 -151 -2
Retained value
Stakeholder value
investments
Strategic social
businesses
Inclusive
accidents
Industrial
health
Occupational
rights
Human
education
Employee
own operations
CO 2 upstream and
CO 2 downstream
Air
Water
Biodiversity
Waste
resources
Secondary
incidents
Environmental
calculation
Triple-bottom-line
Triple bottom line can be used to assess opportunities beyond compliance
Source: LafargeHolcim Integrated Profit and Loss Statement 2016, p. 2.
Compliance with governance, social and environmental requirements and standards
(Continues on next page)
www.conferenceboard.org total impact valuation: overview of current practices 11WHAT DOES TOTAL IMPACT VALUATION LOOK LIKE? (continued)
The Crown Estate
The Crown Estate’s Total Contribution approach illustrates the net value created in
each of six capitals (financial resources, physical resources, natural resources, people,
know-how, and networks). The graphic shows the significant value created from the
organization’s know-how (an area that includes benefits related to employee training,
research & development, and asset management, among others).
£15m
Our networks
£370m
Our know-how
£1m
Our people
£27m
Natural resources
£118m
Physical resources
£320m
Financial resources
(GVA)
Source: The Crown Estate Total Contribution Report 2017, p. 19.
(Continues on next page)
12 total impact valuation: overview of current practices www.conferenceboard.orgWHAT DOES TOTAL IMPACT VALUATION LOOK LIKE? (continued)
TUI
The total impact of TUI Group’s activities in Cyprus in 2013 are shown using PwC’s TIMM
approach. The graphic shows the positive impacts in shades of green and negative
impacts in shades of red (the shading indicates whether impacts are direct, indirect, or
induced). The impacts are categorized as economic, tax, environmental, or social. Payroll
represents the biggest positive impact.
Tourists staying in
Aga Naaba spent
Tourists staying in
Aga Naaba spent
Source: Measuring Tourism’s Impact: A Pilot Study in Cyprus, The Travel Foundation and PwC, p. 13.
www.conferenceboard.org total impact valuation: overview of current practices 13What: Impacts Being Measured
Materiality, data availability, and measurability
Companies in our sample typically select the indicators to include in their analysis based
on a combination of materiality, data availability, and measurability.
Figure 1
An example approach for selecting the indicators
to include in a total impact valuation analysis.
MATERIALITY ASSESSMENT
Conduct a stakeholder-based materiality analysis
to identify the company's most important impacts.
DATA AVAILABILITY
For the most material impacts, identify the impacts
for which data are readily available or can be
obtained relatively easily.
MEASURABILITY
Determine the practical and ethical feasibility of
caclulating a monetary value for those impacts.
This general approach results in a list of indicators that, though material, may still not
be included in the impact valuation analysis. There are interesting differences in how
companies choose to handle this outcome. The Crown Estate, for example, notes that
over 60 indicators could potentially be included in its analysis, but only 35 are currently
measurable.8 Interestingly, for each measurable indicator, The Crown Estate includes a
level of confidence in its valuation. NS Dutch Railways also acknowledges the material
indicators it can’t yet quantify by including qualitative information about these indicators
in its impact valuation methodology document. For example, the company includes
diversity as one of its material indicators but notes that “it does not seem to be possible
to calculate the social impact of women in senior positions. Although the percentage of
women at NS is known, there are only sources available calculating the positive impact of
women in senior positions for the company itself.”9
Companies that plan to evaluate their total impact may have to consider whether their
choice of indicators will be based on quality (choosing a few indicators that can be
monetized with a high degree of confidence) or quantity (choosing a comprehensive
list of indicators to cover a broad set of impacts). Samsung and TUI take contrasting
approaches; Samsung limits its analysis to only a few indicators the company can
confidently quantify, whereas TUI conducts a “high level valuation of all the impacts,
rather than a more detailed valuation of a few.”10
14 total impact valuation: overview of current practices www.conferenceboard.orgAn indicator may pass the materiality and data availability screens, and it may be technically
feasible to monetize, yet a company may still choose not to include the indicator in an
impact valuation analysis for ethical reasons. For instance, AkzoNobel specifically excludes
certain indicators: “We feel that a lot of these topics such as human rights management
violations or child labor should not be monetized because it is never acceptable in our
value chains (not at any price).”11
GHG emissions is an indicator category in all approaches
On average, the companies in our sample include 18 indicator categories in their total
impact valuation approaches; the range of indicator categories they use spans a minimum
of 8 and a maximum of 36. Overall, environmental indicators are the most commonly
used. On average, companies include 8 environmental indicators, 6 social indicators, and
4 economic indicators.
Across the full spectrum of indicators, GHG emissions (specifically CO2 emissions) and
water use are the indicator categories most commonly included in companies’ impact
valuation approaches. All 14 companies include GHG emissions as one of the indicators
in their impact valuations, and 10 companies include data on water usage.
Chart 2
Indicator categories most frequently included in Environmental
companies’ total impact valuation methodologies Economic
Number of companies that include the indicator in their
Social
total impact valuation methodologies
CO2 14
Water use 10
Taxes paid 9
Employee education/training 9
Accidents / lost time injuries 9
Payroll (wages and benefits) 8
Profits 6
SO2 6
NOX 6
Waste landfilled 5
VOCs 4
Land disturbed 4
Water pollutants 4
Number of fatalities 4 Note: This chart only shows indicator
categories that were included in the
Education projects 4 methodologies of 4 or more companies.
www.conferenceboard.org total impact valuation: overview of current practices 15Other indicators
A few of the less frequently used indicators shed light on some of the differences
in materiality across sectors and geographies (see Appendix B for a full list of the
indicator categories included in companies’ total impact valuation approaches).
For example, Safaricom is the only company in our sample that includes a value for
the impact of corruption, applying a Transparency International corruption factor
to adjust the economic value generated by the company. This unique approach
highlights the significant impact that national levels of corruption can have in eroding
socioeconomic value.
While many of the environmental and social indicators tracked by companies fall under
the category of negative impacts, a few indicators worth highlighting are categorized as
positive impacts. For example, UPM measures the value created by using waste streams
(in this case, ashes) as a replacement for virgin materials; Yarra Valley Water calculates
the positive impact resulting from the carbon sequestration of its owned land; and
The Crown Estate measures the economic benefit of the recreational opportunities to
communities delivered by its Windsor Estate.
16 total impact valuation: overview of current practices www.conferenceboard.orgHow: Valuation Approaches
Almost all apply valuation approaches company-wide
Impact valuation is most commonly conducted at the company level, but in a couple of
examples the approach is at the product or country level rather than the company level:
Volvo performs impact analysis only for its electric buses, and TUI limits it to tourism
activities in Cyprus.
Companies that conduct impact valuation at the company level in some cases
also selectively apply their valuation approaches at the product, business unit, or
country level, though these analyses do not tend to be published and are conducted
on an as-needed basis.
Half of companies extend the scope to value chain impacts
There is an even split between companies that limit the scope of their valuation to
their own operations and companies that extend the scope to include some impacts
generated in their supply chains.
Examples of impact valuation results that include the value chain
AkzoNobel
AkzoNobel’s 3D P&L shows the company’s economic, environmental, and social impacts.
The impacts are shown for the company’s downstream (customers and their customers),
own operations, and upstream (direct suppliers and their suppliers). The results show
much of AkzoNobel’s environmental impact lies outside of its own operations.
15 Economic Capital Environmental Capital Social Capital
10
10 8
5
5
2 2
Capital in b€
Upstream Own operation Downstream 1
0
Upstream Own operation Downstream Upstream Own operation Downstream
-1
-5
-10 -8
-10
-15
Source: 3D Profit and Loss Accounting: Creating shared value across three dimensions (Background documentation and justification of
AkzoNobel 2016 annual report), AkzoNobel, May 5, 2017, p. 4.
(Continues on next page)
www.conferenceboard.org total impact valuation: overview of current practices 17Examples of impact valuation results that include the value chain
(continued)
BASF
BASF’s Value-to-Society results show the company’s economic, environmental, and
social impacts. The impacts are shown for the external supply chain (direct and indirect
suppliers), own operations, and customer industries.
Full external supply chain Own operations Customer industries
Indirect suppliers > Direct suppliers Customers in industries supplied by BASF
Profits
Depreciation
Taxes
Wages & benefits
Human capital
Health & safety
Air pollution
GHGs
Land use
Waste
Water consumption
Water pollution
-10 0 30bn€ -10 0 30bn€ -10 0 30bn€
Value contribution by BASF purchase Value contribution by BASF operations Value contribution made by BASF sales
Impact of BASF’s full supply chain Impact of BASF’s customer industries
Source: Value-to-Society: Quantification and monetary valuation of BASF’s impacts on society, BASF, July 2017, p. 5.
AkzoNobel, for example, includes upstream (direct suppliers and their suppliers) and
downstream (customers and their customers) impacts in its valuation. For impacts
associated with upstream use of raw materials and downstream emissions related to its
products, AkzoNobel uses data from life cycle assessments. For lost time injuries, the
company assumes that upstream and downstream incident rates would be the same per
euro of staff compensation as within AkzoNobel.
BASF also includes impacts from direct and indirect suppliers as well as customer
industries (valuation at the use and end-of-life phase is tested on a case-by-case basis at
the product level but is not currently done for the complete product portfolio). To assess
the impacts from direct and indirect suppliers, BASF’s share in direct supplier industries
is allocated based on the procurement value. The impacts to society by indirect suppliers
are calculated via input-output modeling. Similarly, for customer industries, BASF’s supply
share into a specific customer industry and country is used to quantify the impacts of
customer industries’ activities that are enabled by BASF’s product applications. Once
quantified, the valuation is performed using coefficients provided by PwC and the World
Bank’s purchasing power parity indicators.
18 total impact valuation: overview of current practices www.conferenceboard.orgBASF'S General Approach for Assessing Supplier Impacts
Economic, social,
BASF Input-output environmental Monetization
purchase profile model multipliers coefficients
Procurement value Procurement relation- Procurement relationship Value to society
of products/services ship between direct between direct suppliers per unit in each
purchased on suppliers and previous and previous steps in the impact category
country level steps in the supply chain supply chain
EXAMPLE
Procurement value Effects by indirect Impact quantification Impact valuation
at direct suppliers supplier sectors per supplier sector
€1m naptha Economic output GHGs Russia: GHG costs
from oil and gas Russia: • Electricity - to society:
sector Russia • Oil - €850k 539tCO2e Russia - €151k
• Trade - €113k • Oil - 502tCO2e
•… •…
Total: €2,803k Total: 2,352tCO2e
Source: Value-to-Society: Quantification and monetary valuation of BASF's impacts on society, BASF, July 2017, p. 7.
The use of input-output models is a common approach for quantifying supply chain
impacts. Yarra Valley Water, for example, calculates supply chain impacts related to air
pollutant emissions using Trucost’s input-output model. This model estimates impacts
using suppliers’ sectors of operation and their revenue generated in each sector. These
emissions are then apportioned to Yarra Valley Water based on the level of activity it is
responsible for in its supply chain.
The Crown Estate categorizes its value chain impacts as direct (direct operations),
indirect (supply chain operations), and enabled (customer operations). Indirect and
enabled impacts are calculated for several, though not all, of the company’s indicators.
Indirect impacts are calculated using an input-output model. Enabled impacts, on the
other hand, are calculated by classifying customer activities (e.g., crop production),
determining the scale of activities (e.g., crop production over 500 hectares), and applying
activity-specific multipliers (e.g., GHGs releases per hectare farmed).
Valuation approaches vary significantly
Sometimes methodologies converge, particularly when it comes to valuing impacts such
as CO2 emissions, air emissions, land use, health & safety incidents, and community
development projects. However, there are notable differences in the methodologies for
valuing other impacts, such as water consumption, waste, and employee training.
With the exception of UPM, all companies in our sample use the social cost of carbon
(SCC) to measure the financial impact of their CO2 emissions. Even UPM, which bases its
calculation on the European emissions allowance, includes a note indicating what its CO2
impact would be based on a SCC approach.
www.conferenceboard.org total impact valuation: overview of current practices 19Approaches for valuing other impacts are far less uniform. For example, there are at least
four different ways companies value water consumption. These approaches vary from using
location-specific water scarcity prices to using desalination costs as a proxy for the price
of water. Similarly, there are wide variations in how companies value the cost of workplace
accidents. While most of these approaches are based on willingness-to-pay estimates,
there are important differences in how they are applied. Some companies apply country-
specific prices and others apply global multipliers; some use different prices depending on
the severity of the accident, while others use an average price across different severity levels.
Overall, here are some of the primary ways in which valuation approaches tend to differ:
• The actual impacts being addressed: Not all valuation approaches measure
the same impacts, even if they examine the same indicators. For example, Yarra
Valley Water includes both human health impacts and ecosystem impacts when
valuing water consumption. Other approaches may look at only one of these
two impacts. When valuing workplace accidents and fatalities, some companies
(such as The Crown Estate) include the costs to the employee, community,
and employer, whereas others (such as Argos) exclude from their calculations
the costs to the employer. Similarly, The Crown Estate’s approach for valuing
employee training measures the impacts to the employer, whereas AkzoNobel’s
approach measures the impact of training on employees’ future wages.
• The monetary valuation techniques used: The valuation techniques companies
choose to use depend largely on the specific impacts they intend to measure.
The wide variation in impacts being measured results in a similarly diverse set of
valuation techniques used by companies. These techniques include contingent
valuation (e.g., willingness-to-pay approaches), avoided cost, hedonic pricing
(i.e., values based on the impact of an environmental or social factor on market
prices), benefit transfer, and changes in productivity.12 For example, the valuation
techniques companies use for water consumption include desalination costs as
a proxy for the price of water, willingness-to-pay estimates, and prices based on
water stress indexes, among others.
• The geographic scope of multipliers: Some companies apply a single global
multiplier when measuring an impact, and others use different multipliers
depending on the location of the impact. This choice is particularly relevant for
impacts that are highly dependent on local conditions, such as air pollution, water
consumption, and land use. For air pollution, for example, LafargeHolcim uses
global averages for emission factors, whereas BASF uses different multipliers
within countries to account for variations in the impact of air pollution depending
on whether the origin of emissions is urban, peri-urban, rural, or from transport.
• The degree of granularity of multipliers: One of the differences between the
various approaches examined is in the level of specificity of multipliers. For
example, AkzoNobel uses different multipliers depending on the severity of
workplace accidents, whereas UPM uses a single multiplier for all accidents (an
average across levels of severity). Similarly, to calculate the value of employee
training, Argos uses ROI multipliers for specific categories of training (such as
leadership skills, diversity training, health & safety training, etc.), whereas NS
Dutch Railways calculates the value using a single social return rate on education.
20 total impact valuation: overview of current practices www.conferenceboard.orgTable 2 provides a brief overview of the different valuation approaches used for some of
the most common environmental and social indicator categories. More details on these
approaches, along with company examples, can be found in Appendix C.
Table 2
Summary of valuation approaches for the most frequently used indicators
Water Employee Occupational Community
CO2 emissions consumption Air pollution Solid waste Land use training safety development
Social cost of Location- Location Social cost of Benefit transfer: Social return Willingness to Project-specific
carbon (SCC) specific price specific waste Single price per to education pay estimates: social ROI
based on water multipliers hectare based multipliers Global prices multipliers
Emissions scarcity level based on External costs on estimated (impact on for different
allowance willingness to due to GHG distribution of future wages) severity of Project and
Desalination pay estimates emissions habitats incidents location-
costs from landfill, ROI multipliers specific social
Global average disamenity Damage costs: for specific Willingness to ROI multipliers
Human health air pollutant effects from Price based on categories of pay estimates:
impacts (based costs landfill sites, specific land training Global price
on willingness- and leachate use impacts based on
to-pay and from landfills average across
disability Loss of severity of
adjusted life Actualized cost ecosystem incidents
years) and of state of the services:
ecosystem art landfill waste Country- Economic costs
impacts (based handling as a specific and/or
on net primary proxy for the region-specific
productivity) value of the multipliers
impact avoided
Subsidy cost of
water plus costs Willingness to
from GHG and pay approach
air pollution and the value of
emissions statistical life
Even when approaches are similar, coefficients are not
Even when one company is measuring impacts the same way another company is,
there are significant differences in the valuation coefficients each chooses to use. For
this reason, a comparison of impact valuation results is currently neither useful nor
encouraged. For example, while most companies in our sample calculate their CO2 impact
using SCC, the actual figures they use vary widely from less than $30 per metric ton of
CO2 emissions to more than $160 per metric ton. This is in part a result of companies
referencing at least six different sources for their SCC values. The most common source,
however, is the US Interagency Working Group on the Social Cost of Greenhouse Gases
(formerly the Interagency Working Group on the Social Cost of Carbon). The most recent
estimates from the IWG refer to a current middle SCC value of about $47 per metric
ton of CO2 (in 2017 US dollars), based on a 3 percent discount rate.13 Some companies,
however, choose to use the highest value (95th percentile), which is currently about
$137. By comparison, PwC’s guidance is to use a value of $78 per metric ton of CO2
(in 2012 US dollars).14
www.conferenceboard.org total impact valuation: overview of current practices 21Chart 3
Range of CO2 prices used by companies
Number of companies
4 4
Note: Prices in original
currencies converted to USD.
2 2 Prices shown are not inflated
1
to current year.
$100
CO2 price (USD / metric ton)
The variations in coefficients used becomes particularly problematic from a compara-
bility standpoint in cases where valuation approaches (or the impacts measured) are
also quite different. For example, for two companies in our sample, the prices used to
value workplace accidents vary from less than $7,000 per accident to almost $40,000 per
accident. Similarly, in one example, investments in employee training are valued using
a multiplier of 15 percent, whereas a different approach uses multipliers of at least 250
percent. These differences are largely a result of companies addressing different impacts,
even if they are examining the same indicators
Diversity of approaches highlights comparability challenges
Variations in the methodologies and coefficients used to value nonfinancial impacts
make meaningful comparability across companies difficult, if not futile. These differences
lead to impact valuation results that can be misleading if comparing results between
companies. For example, one company’s approach to monetizing GHG emissions results
in a figure that is over six times lower than the figure calculated by another company.
Similarly, the price one company uses to value water consumption is almost eight times
higher than the price another uses.
A review of the emerging practice of total impact valuation reveals some methodologies
are gaining common traction across companies. However, the practice remains at a very
early stage, and for now comparisons between companies should be limited to discus-
sions about the methodologies used rather than the specific results of the total impacts
calculated. Nonetheless, the practice of total impact valuation has the potential to be an
important source of value for companies. The next phase of this research will examine the
specific ways in which companies are using this practice to create value.
22 total impact valuation: overview of current practices www.conferenceboard.orgEndnotes
1 Is Your Nonfinancial Performance Revealing the True Value of Your Business to Investors?,
EY, 2017, p. 6.
2 Operationalizing Impact Valuation: Experiences and Recommendations by Participants of the
Impact Valuation Roundtable, Impact Valuation Roundtable, March 2017.
3 Total Value: Impact Valuation to Support Decision-Making, EY, 2016, p. 20.
4 Nick Barter, “A Review of ‘A New Vision of Value’—Old Wine, New Bottle,” Sustainability
Accounting, Management and Policy Journal 7, no. 4, 2016, p. 534.
5 Nick Barter, “Natural Capital: Dollars and Cents/Dollars and Sense,” Sustainability Accounting,
Management and Policy Journal 6, no. 3, 2015, p. 372.
6 “KPMG’s True Value Methodology: A Critique of Economic Reasoning on the Value Companies
Create and Reduce for Society,” Sustainability Accounting, Management and Policy Journal 7,
no. 4, 2016, p. 520.
7 Mark W. McElroy, “Does Monetization Equal Integrated Reporting?” Sustainable Brands,
October 27, 2014.
8 Total Contribution Methodology, The Crown Estate, January 2017, p. 8.
9 NS Impact Analysis: Methodology, NS, February 18, 2016, p. 43.
10 Measuring Tourism’s Impact: A Pilot Study in Cyprus, The Travel Foundation and PwC, p. 12.
11 “3D Profit and Loss Accounting: Creating shared value across three dimensions (Background
documentation and justification of AkzoNobel 2016 annual report),” AkzoNobel, May 5, 2017,
p. 6.
12 Note: As a reference, detailed explanations of monetary valuation approaches can be found on
pages 84-87 of the Natural Capital Protocol and pages 54-58 of the Social Capital Protocol.
13 Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory
Impact Analysis Under Executive Order 12866, Interagency Working Group on Social Cost of
Greenhouse Gases, US Government, August 2016, p. 25.
14 “Valuing Corporate Environmental Impacts—PwC Methodology Document: Greenhouse
Gases,” PwC, 2015, p. 27.
www.conferenceboard.org total impact valuation: overview of current practices 23Appendix A
Companies in our sample
The following provides a quick reference for information on the companies covered in our sample:
BASF
Sector: Materials Scope (company-wide or product level):
Company
Country of HQ: Germany
Value chain scope: Own operations, direct
Name given to total impact
and indirect suppliers, customer industries
valuation approach:
BASF’s Value-to-Society Explicit link to UN SDGs?: No
Existing methodologies referenced: Explicitly informs strategy
PwC TIMM and/or targets?: Yes
Year data first available: 2013 References:
Frequency of valuation analysis: Methodology paper
Annual (2013, 2014, 2015, 2016) Website
Uses third party assurance: Yes
Holcim/Ambuja Cement
Sector: Materials Uses third party assurance: Yes—KPMG
Country of HQ: India Scope (company-wide or product level):
Company
Name given to total impact
valuation approach: True Value References:
Existing methodologies referenced: Sustainable Development Report 2014
KPMG True Value True Value website
Year data first available: 2013 Verdantix report
Frequency of valuation analysis:
Limited annual (only 2013 and 2014 published)
LafargeHolcim
Sector: Materials Uses third party assurance: Unclear
Country of HQ: Switzerland Scope (company-wide or product level):
Company
Name given to total impact
valuation approach: Integrated Value chain scope: Own operations
Profit and Loss (IP&L) statement
Explicit link to UN SDGs?: No
Existing methodologies referenced:
Explicitly informs strategy
KPMG True Value
and/or targets?: Yes
Year data first available: 2014 (Holcim)
References:
and 2016 (LafargeHolcim)
2016 IP&L statement
Frequency of valuation analysis:
Annual (2015, 2016) Holcim 2014 IP&L
24 total impact valuation: overview of current practices www.conferenceboard.orgNS Dutch Railways
Sector: Industrials Scope (company-wide or product level):
Company
Country of HQ: Netherlands
Value chain scope: Own operations and
Name given to total impact
value chain within the Netherlands
valuation approach:
Social Impact Analysis Explicit link to UN SDGs?: No
Existing methodologies referenced: Explicitly informs strategy
KPMG True Value and/or targets?: Yes
Year data first available: 2013 References:
Frequency of valuation analysis: Impact analysis methodology
Annual (2015, 2016) KPMG white paper
Uses third party assurance: Yes—Ernst & Young
AkzoNobel
Sector: Materials Value chain scope: Upstream: Raw material
extraction, transportation of raw materials,
Country of HQ: Netherlands
production of intermediate materials, etc.; Own
Name given to total impact operations: Emissions, energy use and waste
valuation approach: 3D P&L assessment treatment at sites of AkzoNobel; Downstream:
Impact on environment and nature during use
Existing methodologies referenced:
and enf-of-life of the products
Natural and Social Capital Protocol
Explicit link to UN SDGs?: No
Year data first available: 2015
Explicitly informs strategy
Frequency of valuation analysis:
and/or targets?: Yes
Unclear
References:
Uses third party assurance: Yes—PwC
3D P&L website
Scope (company-wide or product level):
Company 3D P&L methodology
Safaricom
Sector: Communication services Scope (company-wide or product level):
Company
Country of HQ: Kenya
Value chain scope: Own operations in Kenya
Name given to total impact
valuation approach: True Value Explicit link to UN SDGs?: Yes (goals 1, 8, 9,
12, and 16)
Existing methodologies referenced:
KPMG True Value Explicitly informs strategy and/or targets?:
Yes
Year data first available: 2015
References:
Frequency of valuation analysis:
Annual (2015, 2016, 2017) Safaricom True Value brochure
Measuring Safaricom’s True Value for
Uses third party assurance: No
FY 2014-2015
www.conferenceboard.org total impact valuation: overview of current practices 25The Crown Estate
Sector: Real estate Scope (company-wide or product level):
Company
Country of HQ: United Kingdom
Value chain scope: Direct (direct operations);
Name given to total impact valuation
Indirect (supply chain operations); Enabled
approach: Total Contribution
(customer operations)
Existing methodologies referenced:
Explicit link to UN SDGs?: Yes
International Integrated Reporting Framework
Explicitly informs strategy
Year data first available: 2013
and/or targets?: Yes
Frequency of valuation analysis:
References:
Irregular (reports in 2013 and 2017)
Methodology
Uses third party assurance: No (uses PwC’s
Total Contribution report
“Inspiring Trust Through Insight” concept as
quasi-assurance) PwC Insight Report
Samsung
Sector: Information technology Uses third party assurance: No
Country of HQ: South Korea Scope (company-wide or product level):
Company
Name given to total impact valuation
approach: Sustainability Management Value chain scope: Unclear
Value Creation
Explicit link to UN SDGs?: No
Existing methodologies referenced:
Explicitly informs strategy
KPMG True Value
and/or targets?: No
Year data first available: 2016
References:
Frequency of valuation analysis:
Sustainability Report
Annual (2016, 2017)
Argos
Sector: Materials Scope (company-wide or product level):
Company
Country of HQ: Colombia
Value chain scope: Own operations
Name given to total impact valuation
approach: Value Added Statement Explicit link to UN SDGs?: No
Existing methodologies referenced: Explicitly informs strategy and/or targets?:
KPMG True Value Yes
Year data first available: 2015 References:
Frequency of valuation analysis: Social Capital Protocol case study
Annual (2015, 2016) Value Added Statement
Uses third party assurance: Yes — Deloitte
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