This is the second part of a 3-part series on an extensive piece of research on social and environmental impact reporting. To view the first part of this series on ‘The state of social and environmental impact measurement and reporting’ please click here. In this part, we give an overview of the key organizations in the sector and the different frameworks, methodologies, and approaches designed to measure and communicate social and environmental impacts.
We aim to define some of the key terminology we use in this part of the blog below:
Active Organizations in Impact Reporting
The Natural Capital Protocol Toolkit contains information on 59 different frameworks, guidelines, and methodologies. It also contains online tools developed for natural capital measurement and valuation. Well-recognized international organizations and consultancy firms such as PwC, Deloitte, EY, and Accenture have developed their own frameworks and guidelines on how to approach social and environmental impact measurement.
Some of the key organizations in impact measurement and reporting are:
Existing Frameworks
The frameworks detailed below assist companies in defining the scope of their impact assessments. They also assist them in setting their objectives and delivering meaningful and consistent results. These frameworks don’t necessarily indicate which specific methodologies companies should use to analyze impact data. However, they do aim to provide companies with clear standardized processes related to impact reporting.
Please note that there are various other frameworks available for companies that we do not list here, but this section details the most commonly referenced frameworks.
Natural/Social Capital Protocols by WBCSD
WBCSD describe their Social Capital Protocol as ‘a consistent process to guide companies in measuring and valuing social capital’ and ‘a framework for collaborative action towards harmonized and standardized approaches’.
Total Value by EY
By combining existing knowledge and lessons learned from diverse experiences around the impact sector, EY have developed a seven-step approach that helps organizations to frame, scope, and execute their impact measurement and valuation.
TIMM by PwC
Total Impact Measurement and Management (TIMM) has been developed by PwC to provide a comprehensive framework for businesses to understand and assess the various impacts that they have on their stakeholders and on natural ecosystems.
Four Pillars by NPC
NPC defines their four pillar approach as a process that allows charities to build an effective framework for impact measurement. By applying this approach, NPC believes that organizations can provide results that are understandable, material, and conveyable.
Theory of Change
Theory of Change explains how inputs and activities are linked with your outcomes and end goals through creation of a conceptual map. In some literature, theory of Change is also defined as impact pathway.
Social Value Principles
Social Value International have developed a set of principles as a foundation. Organizations that want to improve their decision-making and expand their understanding of the value that they create decide which ones to apply. According to the Social Value network, these principles are developed around acceptable social accounting principles.
Methodologies
Within the frameworks mentioned above, companies use certain methodologies to evaluate data, with the aim of measuring and placing a value (monetary or otherwise) on its impact. This enables organizations to communicate their impacts both internally and externally and to provide comparisons of the impacts of different projects or investments.
Organizations develop their own or use widely accepted methodologies, which are a combination of various valuation approaches and datasets. In this section, we provide examples of the two most commonly used methodologies in the impact sector.
Social Return on Investment (SROI)
Valuation approach – a mixed approach which aims to monetize social impacts and provide an indication of the added social value (or social return on investment) from projects, programs and investments. Traditionally, SROI applies both qualitative and quantitative approaches to gather necessary information for calculations.
Skills required – experience in engaging stakeholders and basic accounting skills.
The SROI methodology was first developed in 1996 by the Roberts Enterprise Development Fund for economic evaluations and financial return on investments assessments. Social Value UK has since standardized this methodology. They have further developed it in order to integrate the wider social, economic, and environmental dimensions of impacts. As described by the UK Cabinet Office, SROI is used ‘for measuring and accounting for a much broader concept or value; it seeks to reduce inequality and environmental degradation and improve well-being by incorporating social, environmental and economic costs and benefits’.
Environmental Profit & Loss Method
Valuation approach – mixed approach with the aim to monetize the environmental impacts of an organization throughout its value chain. A financial value is placed on the changes to the environment as a result of the organization’s activities. It is also measured across impact areas like GHG emissions, water consumption pollution, and land use.
Essential skills include experience in engaging stakeholders and knowledge of ecosystem services valuation techniques. They also include a basic understanding of ecological footprint and LCA.
Environmental P&L is a methodology developed by Kering, PwC, and Trucost. It was initially used with Kering’s PUMA brand. However, it has since been rolled out to its whole portfolio of brands. EP&L measures and monetizes the impacts of the businesses’ activities on the environment. It also accounts for positive and negative externalities taking into consideration the ecosystem services a company depends on. It also considers the environmental costs of direct and indirect impacts. PUMA defines the EP&L as “the amount to be paid if the environment billed us for providing clean water and air, restoring soils and the atmosphere, and decomposing waste”. The methodology has also been developed around ecosystem services valuation and other environmental and natural accounting techniques.
Qualitative, Quantitative, and Monetization approaches
Each of the methodologies mentioned uses different approaches, or a combination of approaches, to value impacts. These vary depending on the type of data being assessed and the intended audience.
Conclusion
Based on the above research, Cority has come to the following conclusions regarding the various frameworks, methodologies, and approaches available for impact measurement and valuation.
- There is a distinct difference between impact measurement and valuation tools. Frameworks and methodologies help you to understand where and how to begin your impact measurement and valuation. However, approaches provide more specific details on how to calculate certain impact values.
- Methodologies can be a combination of different approaches.
- Frameworks, such as impact pathways or ‘theories of change’, are critical to helping define the most significant impacts, boundaries (organizational, geographic, and temporal), receptors of impacts, and the interdependencies between them.
- Stakeholders are key players in helping to define the materiality of your impacts.
- Impact data should be reliable, material and when possible, consistent and comparable. They should also account for both positive and negative impacts.
- Whichever tool organizations choose to employ, they should be transparent about the data sources and methodologies applied.
- Organizations should not limit themselves to specific frameworks, methodologies, and valuation approaches. Additionally, organizations should consider impact measurement and reporting on a case-by-case basis for different projects, programs, investments, and activities.
In part 3 of this blog series, we will cover ‘The business response to impact measurement & key conclusions’.
References
https://www.naturalcapitaltoolkit.org/
https://www.cority.com/blog/social-environmental-impact-reporting-research-insights/
Valuation, Modeling & Economics services | EY UK
The Principles of Social Value — Social Value International
Understanding Impact – NPC (thinknpc.org)
Kering: Sustainability strategy and initiatives | Kering
Theory of change for funders: Planning to make a difference – NPC (thinknpc.org)
The Cabinet Office, 2009. A guide to Social Return on Investment
