Impact Measurement: The Business Response Case Studies

Like many other methodologies, it's no surprise that when it comes to impact reporting, there are differences in approaches. Below we discuss several case studies demonstrating how businesses approached the calculation of the social and environmental effects.

J.P Morgan & Social Mobility Foundation – Qualitative impact measurement approach

Framework / methodology used: No specified basic framework

Approach to measurement / assessment: Qualitative measurement

JP Morgan and the Social Mobility Foundation funded students from low-income families involved in invest banking in 2012 and 2013. They offered job placement opportunities as well as career mentoring and skills development through the Aspiring Professional Program (APP).

JP Morgan demonstrates the program 's impact in their 2014 Impact Report, using selected quotations and case studies that express the opinions and emotions of the APP participants.

"J.P. While only does Morgan invest in its activities, it also invests in people and I know that J.P. Morgan and SMF have invested a lot in me and for that I am really grateful. I hope to prove this was a worthwhile investment indeed.'

'Training with J.P. Morgan and the SMF have been excellent and my motivation to pursue a career in banking has definitely increased. '

This qualitative approach is especially useful when used to convey impacts to an external audience, but when used for internal reporting or to help business decisions, it may not be considered as useful.

Nestlé & Valuing Nature – Quantitative/Monetary valuation approaches

Framework/methodology used: Social Capital Protocol

Measurement/valuation approach: Quantitative and monetisation of social impacts, and the use of the DALY methodology

Nestlé embarked on an initiative in a pilot project with Valuing Nature to quantify and monetise its social effects in the light of the health and work conditions of its employees.

By applying the DALY (disability-adjusted year of life) model, described by the WHO as one DALY=one-year loss of 'good' life, Nestlé attempted to investigate how human health indicators can be used to quantify social impacts. In particular, they explored how their company affects their employees' quality of life and expectancy through jobs, health and safety conditions and living wages.

The project followed the stages of the Social Capital Protocol, and a combination of different quantitative metrics was used in the measurement and valuation phase, eventually converting all data into a monetary value.

This example illustrates how to incorporate many different approaches to quantify and appreciate the social effects of an organisation. The case study also confirms a key finding from our research – that some fields, including health, have stronger methodologies to quantify and analyze impacts than others.

BASF’s Value-to-Society – Monetary valuation approach

Framework/methodology used: Proprietary framework developed by BASF

Measurement/valuation approach: Monetisation of environmental and social impacts

BASF has created its own 'Value to Society' approach to determine its monetary, economic , and social impact. They applied this particular approach to improve their perception of both the positive and the negative effects on society and the environment that exist in their supply chain, with their own activities and also to look at their direct clients.

The Value-to-Society approach monetises the following impact categories:

·         Profits (net profit, depreciation, depreciation and amortization)

·         Taxes, wages & benefits, human capital, health and safety

·         Air pollution, GHGs, water pollution, toxic waste, land use and water use

In their Total Effect Assessment and Management (TIMM) model, they apply the valuation coefficients given by PWC to the non-financial impact categories.

BT Digital Inclusion

Framework/methodology used: Social Return on Investment (SROI)

Measurement/valuation approach: Qualitative, quantitative and monetisation

BT commissioned Just Economics to assess their Get IT Together programme, which aimed at giving individuals a social value by growing their digital skills and being online. Through applying quantitative analysis, qualitative (surveys and interviews) and monetary assessment methods, they managed to conclude that the current value of the program's social gain would surpass £ 1.5 million with an investment of over £420,000. This suggests that they will produce over £ 3 of social benefit to society for every £ 1 invested in the programme.

SROI evaluation gave BT a deeper insight into the obstacles consumers encountered when using their services. Data obtained during the interviews and surveys was then used to establish new services for low-income clients and housing associations.

BT also understands the importance of financially translating the impact principles, as it has strengthened internal relations with colleagues at BT Finance. Throughout our research , we found this to be a recurring theme, that using monetary valuation is the best way to translate impacts into a common business language that everyone can understand.

Kering and PUMA

Framework/methodology used: Environmental Profit and Loss (E P&L)

Measurement/valuation approach: Monetisation of environmental impacts

PUMA conducted the first E P&L study using recognized ecological and economic accounting techniques to assess the environmental impacts of its overall business, including its entire value chain. Simply put, the E P&L reflects the amount to be charged for providing clean air and water, decomposing waste and restoring soil and environment, following their quality degradation as a result of the activities of a company.

As a result of the 2019 assessment, PUMA reported that their cumulative impact was EUR 457 million (representing the cost to the environment), and the highest impact areas were GHG emissions (37 per cent) and land use (24 per cent) in terms of percentage contribution to that cost. Because of a complex supplier network, a significant proportion of their environmental impact has occurred within their supply chain , particularly their suppliers of fabrics and components.

PUMA 's executives characterized the tool as a driver of sustainability growth, as it enables areas for improvement to be found, business risks to be handled, new ways to become more competitive and help protect the natural environments on which they depend. They have taken steps since conducting E P&L assessments to train their suppliers to be resource effective, and are extending the evaluation to include more materials.

After E P&L 's success with PUMA, Kering carried it out through their brands and released the technique information on their website to promote the use of it by other organisations.

Key findings

1.       There are myths as to what impact measurement and analysis are

2.       Lack of data quality and lack of reliable measuring systems have been described as the most pressing issues currently facing businesses when considering or implementing impact measurement and valuation

3.       Companies want to measure both social and environmental impacts for decision-making and external reporting purposes

4.       Businesses use a range of methods to calculate and analyze impacts. Those include SROI, TIMM, HACT, Natural and Social Capital Protocols, TCFD, the GIIN methods, the Flexible Framework and the methodologies built internally

5.       Although the impact sector is considered immature due to a considerable number of data collection and quality challenges, there are some more developed fields and tools than others. It has been noted that the field of social impacts is more advanced and tools like SROI are widely used across different industries and for activities of various scales and scales

6.       Appropriate instruments for impact assessment and valuation should be selected based on the resources of the businesses as well as the target market that will benefit from the impact data communication

Concluding Remarks

As the demand for new tools enabling impact reporting rises and the number of companies involved in impact assessment and valuation expands, these demands will require the following:

Methods / techniques consolidation - Experts strongly believe the sector will grow significantly over the next five years and early adopters who invest human and financial capital in it will benefit once techniques and methods are harmonized.

Measurement / valuation consistency – As investors increasingly look to leverage reporting impacts as part of their decision-making process, greater comparability across approaches is needed. Early adopters are patching the way to explore how different models fit different sector needs that will form the basis for practical discussions about where consistency is possible and where relevance would be hampered, especially at sector level.

Enhanced collaboration – Sector-level coordination is required to identify indicators that are applicable to different sectors so that investor audiences can comment on them. This will ensure a comparability and accountability structure is established to increase the recognition of social and environmental impact reports.