Impact valuation is a tool companies can use to identify, measure and value their impact on society. Impacts are measured, quantified and reported in hard figures that can be positive or negative, depending on whether value is being created or destroyed. It is only by measuring these externalities that a true picture of a company’s value can be painted.
Today, an increasing number of companies moving toward an integrated approach to impact valuation, however according to a study by S&P Global merely 31% of those companies seems to correctly conduct this assessment. These numbers show that there is clearly confusion among companies about its purpose, execution, and use. Back in 2017, the Impact Valuation Roundtable already explored the practical ways to operationalize Impact Valuation for business application.
The real value of impact valuation can only be captured through proper execution and use of the impact valuation approach. Since impact valuation is a new topic, many companies seek for the suitable approach to embed impact valuation in the organisation. Based on the learnings from an impact valuation study performed for a service logistics provider, we have identified three conditions for successful implementation of impact valuation, which will help you to set direction for your company’s impact valuation approach:
Impact valuation is not just a reporting exercise; it is a way to look for future innovation. It is important to realize that impact valuation should not only be used to identify and demonstrate the benefits and costs of business to society, but also to understand and improve those benefits and costs.
One of the most valuable outcome of impact valuation is the identification of so-called hotspots and getting an understanding of the levers that can be pulled to change impacts of business activities and capture value. Integrating an ideation process in your impact valuation approach will help your organization to find those hotspots and identify innovative solutions to change the impact and capture value. By obtaining this holistic approach to impact valuation you create a better business case, but also more internal engagement.
Pivotal in the collection and application of useful data is creating and maintaining a framework to have metrics available for daily decision making. This framework provides insights in not only the environmental, but also the financial and social impact to have the complete picture. The framework should include specific, established methods, tools and indicators that allow your company to fulfil the desired application.
Specific methods that can be applied to measure three pillars are for instance lifecycle thinking approaches (environmental and social Life Cycle Assessment) and ideation methodologies (as mentioned above). These methodologies each have their own models, tools and indicators.
Additionally, the framework can become an excellent tool to increase efficiency in what can be a strenuous project – as the single source of truth for all teams within your company, providing them with the insights they need.
Impact valuation is time-, knowledge-, and resource-intensive. Therefore, it is recommended to start small in order to scale fast. To give an example; Finch & Beak and PRé Sustainability conducted a pilot project for a logistics service provider for two of their focus areas: reverse logistics and reduced packaging. By conducting the impact study for two pilot activities, it was possible to develop a prototype framework for impact valuation within a short period of ten weeks.
The prototype framework includes specific methods, tools and indicators that allows the company to integrate environmental, social and economic impacts in reporting, monitoring, innovation and target setting. The outcomes of the pilot projects have provided valuable insights to mature the framework for impact valuation and successfully scale and implement a company-wide approach for impact valuation.
The impact valuation approach can support companies to ensure long-term and sustainable value creation if correctly executed and used. The three conditions for successful implementation will help you set direction for your company’s impact valuation approach. Do you want to discover how to successfully embed impact valuation in your organisation, please feel free to contact Jan van der Kaaij, managing director, at firstname.lastname@example.org or call +34 6 82 04 83 01.