New GRI Standards are coming, are you prepared?

On April 19, 2016, the first set of drafts of the new Global Reporting Initiative (GRI) Sustainability Reporting Standards (SRS) were presented to the public. In order to become future proof, some quite drastic changes have been made to the structure compared to the previous G4 guidelines. The new standards are aimed at improving quality and flexibility and have a larger focus on material issues. It is expected that a final version will be presented to public at the end of 2016.

Time is short!

If GRI sticks to its current planning, companies will have until December 31, 2017 to publish a (sustainability) report according to the 'old' GRI guidelines. As of January 1, 2018, all companies that wish to be GRI compliant must report according to the GRI SRS. This means that your organisation's AR2017 is the final report that will be acceptable within the 'old' GRI G4 guidelines.

What is coming your way?

·         From principle to rule-based

One of the main transition points is a larger focus on DMA’s and the reporting principles. The new sustainability reporting standards are stricter and ask for the purpose of a management approach as well as a description of policy components and actions.

·         A modular structure

There are big changes in the numbering system (e.g. G4-10 becomes 201-8) and changes to the format. Companies that wish to report in accordance with are required to use all three universal standards of SRS 101(foundation), 201(general disclosures) and 301(management approach) and select the relevant topics of SRS 400(economic), 500(environmental), and 600(social) based on their materiality.

·   Criteria: Shall, should or can?                                                                                                            The new standards differentiate criteria into requirements, recommendations and guidance. Requirements are mandatory and are denoted by the word shall. Recommendations are not mandatory but are encouraged and this is denoted in the criteria by the use of should. Lastly, the Guidance aspects are also not mandatory and can be used. The new standards also provide background context and examples to better understand the disclosure, and describes possible, achievable, or allowed scenarios for reporting information.

If you want to know more about these and other changes, more information on the upcoming GRI Standards can be found here.  

How can I prepare myself?

To prepare your organisation, you can (should or shall) start by comparing the old and the new standards by taking a helicopter view. After reflecting these changes in your organisation’s reporting, a gap-analysis can provide knowledge on what is missing. As some organisations might have only just gotten their heads around G4, it might seem like a big effort to make the transition to GRI SRS. Fortunately several fundamental concepts in the GRI G4 guidelines have been carried over into the new standards. However, as the time to make the transition is short (only two reports away), we advise starting as soon as possible.

Nick de Ruiter is a partner at Sustainalize. He is a specialist in CSR strategy setting and performance monitoring.

Alissa Daurer-Stolker & Mart van Kuijk are consultants at Sustainalize. They specialize in CSR reporting and international benchmarks.

Science-Based Targets (SBTs) – helping to prevent the world from warming up by more than 2 degrees

There is no denying that climate change is now widely recognized as the major problem facing the earth. Climate change is going to directly impact human health, livelihoods and the economy. Extreme weather, drought, heatwaves, sea level rises, storms and floods will all cause irreversible damage to infrastructure and agriculture. If humans want to reverse this, emissions of CO₂ need to be cut immediately!

Luckily, we have had COP21 where agreements were made to limit global warming to 2°C. And please also take a look at our January blog. There we argued that stricter guidelines and regulations on emission reduction and energy consumption targets were to be expected.

However, as things go, the market is already ahead of policy makers. For instance with new target setting initiatives and benchmarks. A first concrete example of this is the Science-Based Targets initiative (SBTI), a partnership between CDP, UN Global Compact, WRI and WWF. SBTI aims to support organisations in taking emission target setting to the next level. But what are science-based targets?  Why are they needed? What are the benefits and how can business integrate them in their strategy?

What are Science-Based Targets?

Science-based targets (SBTs) are organizational targets that are in line with scientifically confirmed requirements for the transition to a low carbon economy through which we can stay within the 2 degree threshold. The efforts around the 2 degree approach are then cascaded to countries’ sectors and organisations. One method used to determine such targets is the Sectoral Decarbonization Approach (SDA). [1]

The underlying idea of science-based targets is pretty simple. Currently, most organisations have integrated emission reduction, climate change, or environmental goals into their short- and long-term strategies. They have set relevant targets for their own operations or even expanded these efforts to their value chain.

But how can we ensure that all the ambitions and efforts contribute to staying within the 2°C limit, and at the pace climate scientists believe is needed? This is where science-based targets become relevant. The more organisations that align their greenhouse gas emission reduction efforts to the science-based targets, the higher the probability of limiting climate change consequences. All thanks to concept of critical mass effects.

But why?

We all want to protect the planet we live on. The more we work on this together, the bigger the impact and the more streamlined efforts will be. That is the most obvious benefit of SBT.

But there are more benefits to be had for organizations, especially for the big players who have a huge impact because of their size and global footprint. They now have a validated way of setting their targets while simultaneously linking their efforts to the world’s biggest threat. Additional benefits are a closer alignment with the requirements of the Carbon Disclosure Project (CDP) which in turn will satisfy investors. Another big advantage is that, with comparable targets, benchmarking between companies becomes much easier and a level playing field is created.

How do we work with Science-Based Targets?

The remaining question and challenge concerns how science-based targets can be applied. The Science-Based Targets initiative (SBTI) provides a manual covering this and an overview of the different methodologies that can be used to align GHG emission reduction efforts to science-based targets. According to the SBTI, a 3 stage process should be followed to integrate SBTs into practice.

1.       Getting started

a.       Make the business case

b.      Understand the methods

2.       Setting the Science-Based Target

a.       Choose a SBT method

b.      Determine the target

3.       Announcing and implementing

a.       Gain internal buy-in

b.      Report and communicate

c.       Implement

Organizations should create a business case to enable them to understand the relevance and impact for their own business. This also helps create an understanding about their needs and so identify a SBT method that best suits their organization. Having identified a method, such as (a) the Context-based Carbon Metric (CSO), which allows for multiple scenarios covering different regions, target years or industries, or (b) the 3% Solution, focusing on reducing energy-related corporate emissions by 3.2% by 2020, the target can be set accordingly.

Of course the process does not end after having determined the SBT. Crucial steps for a successful integration include getting commitment from internal stakeholders and decision makers, reporting and communicating the target, and implementing initiatives in order to make the target achievement possible.

So let’s see if can make this thing big! Let’s make our ambitions bigger and bolder and send a signal to policy-makers that companies really are willing to accept their responsibilities as regards saving the world. Right now is always a good time to get started and find out how SBTs can be integrated within your organization!

Nick de Ruiter is a partner at Sustainalize. He is a specialist in CSR strategy setting and performance monitoring.

Lena Hülsmann is a consultant at Sustainalize for the German speaking markets. She is a specialist in CSR target setting, benchmarking and reporting.

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[1] Science-Based Targets Initiative (2015). SECTORAL DECARBONIZATION APPROACH (SDA): A method for setting corporate emission reduction targets in line with climate science. Retrieved from http://sciencebasedtargets.org/wp-content/uploads/2015/05/Sectoral-Decarbonization-Approach-Report.pdf

http://www.wri.org/our-work/project/science-based-targets-initiative

Fine tuning your strategy with the United Nations’ Sustainable Development Goals

On September 25^th 2015, the Global 2030 Agenda for Sustainable Development was officially adopted by the United Nations General Assembly. Since then, the Sustainable Development Goals (SDGs) have become especially ‘hot’ in sustainability world and with policy makers. As these goals define global priorities and aspirations for 2030, they will definitely influence future regulations. But, what is actually behind these goals? What is expected from the private sector? How, as a private organisation, can you implement and work with these globally accepted goals? And more importantly, how will results be measured and achieved?

With a set of 17 SDGs and 169 associated targets, the SDGs define global priorities and aspirations for the year 2030. Unlike the UN’s Millennium Development Goals, which mainly focused on developing countries, the SDGs are relevant for any organisation, in any sector. The first 15 goals relate to the well-known triple P: people (social), planet (ecological) and profit (economic). However the last two goals go a step further and relate to the aspects of peace and partnerships.

The  United Nation’s 193 member states which have ratified this Sustainable Development agenda are now under pressure to set new regulations and clear actions. However, it is not yet clear what regulations our governments (specifically in the Benelux) will implement to achieve these goals. This raises the question of how your organisation can stay ahead (of any regulations) and work towards these globally accepted goals. Below we have listed 3 steps which will help you implement the SDGs in your organisation.

Step 1. Value creation and impact analysis

The first step is to understand the organisation’s impact on society and the environment. This is not a new approach as such, as a lot of organisations are already embracing this and take the whole value chain into consideration while mapping their value creation. Nevertheless, this approach is key in order to identify the right and relevant sustainable goals on which to focus. In essence, if an organisation has insight into its inputs and can clearly describe its business activities and the unique properties of its operations, then the outputs, outcomes and the implicit positive and negative impacts will follow naturally. More information on value creation can be found in one of our previous blogs - October 6^th.

Step 2. Identify the right goals

Once the impacts have been identified, the relevant SDGs can be chosen. When your organisation selects the SDG, the number of goals should not be leading. Specifically, goals should be selected based on their relevance for your operations and its activities. The SDG Industry Matrices[1] from the United Nation Global Compact can serve as a guide. They provide industry specific information and best practice examples such as AbInbev, Heineken, Unilever and Rabobank.

Not surprisingly, companies that have set a Big Hairy Audacious Goal (BHAG) can align their strategy more naturally to the SDGs. This is, for example, the case with Philips[2]. Its BHAG is to improve the lives of 3 billion people a year by 2025 and this links directly to SDG number 3 – Ensure healthy lives and promote well-being for all at all ages. Setting a BHAG can help organisations structuring their ambitions and push them to translate a set of results into concrete impacts on society.

Step 3. Set the right indicators and measure the results

The most important and challenging part is to measure the results of the chosen SDGs. Measurement should be done with a selection of KPIs.

Although Inter-Agency and Expert Group on Sustainable Development Goal Indicators provide a first drafted set of indicators for each of the 169 targets[3], it may not be very helpful as these KPIs are related to the global goals. We therefore see the importance of linking the chosen SDGs to the current organisation’s strategy and objectives. A useful tool for this has been developed by SDG Compass[4], which links all 169 targets with indicators from internationally recognised standards such as GRI G4 and the CDP Benchmark.

A big challenge still remains to realistically translate and account for an organisation’s results against the SDGs targets and goals. This challenge relates directly to the current trend of monetarisation and lifecycle assessments as it requires the quantitative translation of achievements into more understandable and comparable metrics. The Danish chemical company Novozyme has already made some steps in this area by starting to assess the impacts of its products and solutions against the first 15 SDGs[5].

Go for it

The SDGs came right on time. Organisations are looking for cohesion and are becoming more willing to incorporate the impacts of their initiatives and activities on society and the environment. Implementation of the SDGs may require your organisation to address its value creation model or to start the journey toward monetarisation. Either way, this transformation will definitely help your organisation to stay ahead of upcoming regulations. So let’s use these newly framed goals to fine tune and improve your strategy!

Nick de Ruiter is a partner at Sustainalize. He is a specialist in CSR strategy setting and performance monitoring.

Lola Debersaques is a consultant at Sustainalize for the Belgian market. She is a specialist in CSR strategy setting, performance monitoring and reporting.

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[1] https://www.unglobalcompact.org/library/3111

[2] http://www.theguardian.com/sustainable-business/picture/2015/aug/19/philips-sets-their-sights-on-these-three-sdgs-for-a-healthier-sustainable-world-infograph

[3] http://unstats.un.org/unsd/statcom/47th-session/documents/2016-2-SDGs-Rev1-E.pdf

[4] http://sdgcompass.org/business-indicators/

[5] http://www.novozymes.com/en/sustainability/novozymes-sustainability-approach/Pages/from-life-cycle-assessments-to-SDG-assessments.aspx

Benchmark season is coming!

While most of us are still busy finishing up our annual reports, invitations are already starting to roll in for benchmarks like the Carbon Disclosure Project (CDP) and the Dow Jones Sustainability Index (DJSI). With a well-deserved break within reach after the long days and short weekends that accompany the reporting months, suddenly the benchmarking season starts and you need to start running again.

But it doesn’t have to be like this. To help you, here are our 5 tips for a more relaxed benchmark season.

Tip 1: Start now

We regularly see companies starting too late with their benchmarks. This puts a lot of pressure on the organisation. At the very last moment the hunt for crucial information begins and you are depending on colleagues that don’t have benchmarking at the top on their priority list. Favours are asked and given, frustration builds, and the information obtained is often of a low quality. Just before the deadline, the sustainability officer is processing all the input, editing the questionnaires, and trying to add as much information as possible. Once again facing long days and short weekends.

So why not do it differently? Think of announcing the opening of benchmarking season early in the year. Organize a working session with key people in the organization during which you celebrate last year’s success and look ahead. Emphasise the value of involved colleagues’ contributions and provide insight into their role. Set up a detailed planning schedule and communicate continuously on deadlines and input. Doing so makes sure everyone can prepare themselves for their involvement in the project.

Tip 2: Involve higher management and the board

To obtain a high score, you need to depend on the specialists in risk management, carbon management and health & safety matters, to name just a few. Although the entire company benefits from a higher rating or score, most colleagues probably won’t be too eager to participate. They will need a little nudge in the right direction and it surely helps if a senior decision maker creates a sense of urgency. Additionally, in many cases the board is keen on a high positioning in the ratings and benchmarks, but doesn’t get involved enough. Make sure to focus on senior management involvement and creating that sense of urgency. It gives an almost direct improvement on the scores and makes the lives of sustainability officers a little easier.

Tip 3: Integrate and combine

We know that larger corporations have to deal with many different ratings and benchmarks. Just think of CDP, DJSI, FTSE4GOOD, Oekom, Vigeo, Sustainalytics. You may feel as if you keep asking your colleagues for the same information over and over, for different purposes. And that’s exactly the case!

Luckily, the overlap between the different rating schemes is increasing.  For instance, your CDP questionnaire can be uploaded to DJSI and different benchmarks are tying their questions to the GRI G4 indicators.

It may be  a useful exercise to make a complete overview of all the information you’re going to need and how it relates to G4. You can then arrange that the requested data and content for the annual report can also be used for benchmark purposes. You’ll only need to ask for information once instead of multiple times, you’ll be more efficient, and you’ll also keep your colleagues happy!

Tip 4: Establish a data trail

Most of the time the information you need to provide to the rating schemes is about 80% to 90% the same as the year before. Policies, procedures, key risks and important programs probably don’t change on a yearly basis. It’s therefore worthwhile establishing a data trail of the information you have provided to the different rating schemes. Simply secure basic details such as which department provided what information and how data was gathered and consolidated. This allows you to quickly gather base information for the benchmark or rating you are complying with and to build from there.

Tip 5: Don’t be the judge!

Too many times we see companies not sending in useful information to rating agencies because they doubt if it is good enough. Yet for most of the rating schemes it is not very clear how the criteria are to be interpreted,  so making such a call is dangerous. It’s better to work within a broader interpretation of certain requirements, send in information you think is relevant and let the rating agency judge. This allows for more specific feedback from the rating agency on the information provided and you’ll know where to improve and how.

Conclusion

While the administrative burden of complying with benchmarks and ratings is still considerable, we believe that with some changes the life of your sustainability officer can be made easier. Getting the right people involved, working according to predefined procedures, and the ability to provide valuable information are important prerequisites. After all, it would be a missed opportunity if your company’s sustainability performance was not reflected and recognized fully in the important benchmarks and ratings.

Nick de Ruiter is a partner at Sustainalize. He is a specialist in CSR strategy setting, benchmarking and performance monitoring.

Wouter van ‘t Hoff is a consultant at Sustainalize. He specializes in a variety of areas including sustainability benchmarks and ratings such as CDP, DJSI, and the Dutch Transparency Benchmark. 

Buckle up, 2016 has something sustainable in store for you!

2016 has officially kicked off. We expect that this year is going to be a great year for organisations that invest in sustainability and corporate responsibility. From ambitious new targets to trending tools: read on for our predictions for 2016.

-          COP21

The international climate change conference held in December 2015, COP21, has led to an international agreement that aims to limit global warming to 2 °C. In response, governments will likely start formulating policy measures on a national or even regional scale. We expect that more stringent energy targets will be set in 2016, demanding more from businesses in the near future. See our December blog for what your business can expect from the COP21 outcome.

-          The Netherlands as EU president

The Netherlands holds the presidency of the European Union from January 1 to June 30, 2016. Innovation and a forward-looking climate and energy policy are just a few of the topics that the Netherlands wants to focus on during its presidency[1]. The aim is to create a more future-proof model for sustainable growth. This will provide opportunities for business to benefit from this momentum by jumping on the bandwagon of sustainable innovation and energy management.

-          Sustainable Development Goals

In 2015 the United Nations updated their Sustainable Development Goals (SDG). These human development targets have been renewed for the 2015-2030 timeframe. In particular in Belgium, the SDGs are increasingly being used to frame sustainability efforts. We expect that the popularity of the SDGs will increase even further in 2016 and that they will also make their entry into the Dutch CSR arena.

-          IIRC - Integrated reporting and strategies

Integrated Reporting is gaining ground in corporate reporting. In a relatively short period it has changed the reporting landscape and connected the report more closely to the company that is behind the report. It has also become a starting point for integrating sustainability within the core business strategy of organisations. We believe that in 2016 integrated reporting will become the standard for how most businesses communicate their (non-financial) performance. We expect more value chain reporting, more integrated and interconnected information, and more forward looking and strategic reporting.

-          Impact Measurement

An important element of integrated reporting is the focus on creating value and having a positive impact. More organisations will be judged by their stakeholders on the value they create, in particular social and environmental value. As already described in our November Blog, insights into the impact of your organisation can create substantial benefits for business. In 2016, organisations will continue to develop and use various methods in order to map the value they create for society. 2016 will be the year in which we expect several more ‘Puma-cases’ of impact monetization and environmental/social profit and losses.

-          Big Hairy Audacious Goal

Companies taking sustainability serious tend to set mega-targets or ‘Big Hairy Audacious Goals’. We expect that more companies will formulate BHAGs and follow frontrunners such as Unilever and Philips in developing a bold vision statement. In our client base, we see many companies considering such a target. Most organisations see a BHAG as the most inspirational means to clarify their goal. It is not important whether you accomplish the goal or not, it is more of a unifying focal point for a company’s effort. It is a true differentiator and lifts your external communication, marketing and reporting to a next level.

Conclusion

2016 has something sustainable in store for you! With all these trends for 2016, it appears that sustainability will continue its trajectory of becoming a more mainstream element of doing buisness. This is a good development for society at large, but it will become more challenging to stand out from the crowd. Luckily, there are numerous methods and tools that you can use to tailor your sustainability strategy. Be it inspiring BHAGs or outstanding sustainability performance. Use this to your advantage and try to keep in mind the following message: distinguish your business from the others - be a leader in something!

Nick de Ruiter is a partner at Sustainalize. He is a specialist in CSR strategy setting and performance monitoring.

Mart van Kuijk & Marcella van Steenbergen are consultants at Sustainalize. They specilize in CSR reporting and impact measurement and -monetization. 

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[1] http://english.eu2016.nl/eu-presidency/input-and-priorities

Act now: Take the initiative for COP21

Should businesses wait for explicit targets from policy makers in order to start mitigating climate change? No. From November 30^th to December 12^th, 2015, the 21st Conference of Parties (COP) took place in Paris. For 12 days representatives of nations and various organisations gathered in Paris to formulate a universal agreement on climate mitigation and adaptation. This agreement aims to restrict the maximum warming of the global temperature to 2 degrees Celsius. However, past conferences have not brought what the world was hoping for: a concrete, global carbon emission policy. Companies are therefore increasingly taking matters into their own hands and setting up ambitious projects. And so can you!

What does my company have to do with COP 21?

Diplomats and heads of state recently gathered in Paris and, for the first time, each of the represented nations listed concrete proposals for future climate policy. For example, the European Union and its Member States are committed to a binding target of at least a 40% domestic reduction in greenhouse gas emissions by 2030 compared to 1990[1]. The United States intends to achieve an economy-wide target of reducing its greenhouse gas emissions by 26-28% below its 2005 level in 2025[2]. Although democratic institutions are not usually known for their decisiveness, The COP21 agreement aims to achieve a significant decrease in carbon emissions.

The intended decrease in carbon emission can have a wide range of implications at a company level. Countries can make laws on energy efficiency, they can come up with taxes on carbon intensive products (including fossil fuel use), or they can impose increased import tariffs on unsustainably managed forestry etc. The impact of these measures differs per type of business and per sector, but it most certainly has an impact, either direct or indirect.

Be a frontrunner, not a laggard

In the light of these important developments, companies are realising that the outcome of COP21 may affect their business proposition. But instead of waiting for politics to unfold, the business world is using the momentum created by the Conference to show initiative. Corporations like Danone and Unilever are voluntarily pledging to stringent emission targets[3]^,[4]. Furthermore, the CEOs of 78 major companies, including Siemens and HSBC, have called on world leaders to include carbon pricing in a global climate deal at COP21[5]. Even major oil and gas companies (BG Group plc, BP plc, Royal Dutch Shell, Statoil and Total SA) have, Taking the summit in Paris into consideration, set out their position in a joint letter to introduce carbon pricing systems[6].

These companies have already started recognizing and identifying the implications of a changing climate on their business proposition. By anticipating the outcome of COP21, they are taking a pre-emptive approach to prevent any potential damage in the future, or to improve their position in the market by grabbing the first-mover advantage. Those who move quickly may generate not only a head start on their future targets, but also a competitive advantage from a boost in reputation or increased efficiency.

So what can you do?

For companies that want to anticipate on a changing climate, there are several options for a climate change strategy. For an organisation that wants to get involved with climate change action, it is sensible to formulate a clear strategy plan. Should the focus be on mitigation or adaptation? What targets do you want to set? Here it can be useful to first map the impact on your business so that you know where the easy wins and biggest challenges are. With this knowledge, you can build a strong plan to act on.

A second step in corporate climate management is measuring your impact. CO₂ footprint, Life Cycle Assessment, and impact monetisation are all methods that can be used to gain an insight into the impact of your business practices. Not only do they measure the impact on the climate, but some also provide data on other environmental factors, which could prove to be valuable information in reducing your impact, or, costs.

To harness the beneficial effect on your business’ reputation, it is vital to report on your efforts. Reporting is a great tool to track and communicate progress. On the topic of climate change, numerous big corporations take part in the Carbon Disclosure Project (CDP). The CDP requires an organisation to report on its climate performance, risks and opportunities, and strategy. The outcome is a dual score: one for the actual performance of the organisation, and one for the quality of the disclosure. The performance score is relative to other organisation in the specific industry, making it easy for a organisation to compare itself with its competitors.

Jump on

While bureaucracy is typically a slow-paced environment, companies are much better equipped for fast change. In fact, as an early mover, you can prepare yourself for future regulations while you reap the benefits of being progressive. So don’t wait for the COP21 outcome. Use this momentum to get your company in the leading group in the battle against climate change now.

Nick de Ruiter is a partner at Sustainalize. He is a specialist in CSR strategy setting and performance monitoring. 

Misha Elkerbout is a specialist in life cycle analyses, impact monetization and CSR performance improvement.

Marcella van Steenbergen is intern at Sustainalize with a profound interest in CSR, CSR strategy setting, impact measurement and CSR reporting.

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[1] Latvia/1/LV-03-06-EU INDC.pdf

[2] U.S. Cover Note INDC and Accompanying Information.pdf

[3]http://www.danone.com/uploads/tx_bidanonepublications/DP_DANONE_Climate-Policy_EN_091115.pdf

[4] http://www.theguardian.com/environment/2015/nov/27/unilever-to-stop-using-coal-for-energy-within-five-years

[5] https://agenda.weforum.org/2015/11/open-letter-from-ceos-to-world-leaders-urging-climate-action/

[6] http://www.shell.com/global/aboutshell/media/news-and-media-releases/2015/oil-and-gas-majors-call-for-carbon-pricing.html

It’s all about the money: Turning non-financial indicators into financial impact

‘Accountants will save the world’ was what Peter Bakker, president of the World Business Counsel for Sustainability (WBCSD) in 2013[1] stated about how companies should measure and compare their sustainability performance. Although he didn’t say how, he was right. This is reflected in an upcoming trend; the emergence of different methods to measure and compare non-financials such as the environmental and social impact of organisations. These methods are often based on quantifying the outcomes of an organisation in financial terms, better explained or popular named as the monetisation of impacts. Considering the early development phase in which these methods are currently positioned, a variation in design is apparent, and no ‘dominant design’ has evolved yet. Therefore, to get a clear view on these developments, this blog outlines the current state of monetisation methods and will explore why monetisation of impacts is important to organisations.

Why monetise impact?

Valuing impact can create several opportunities to organisations, as they gain insight into the organisation’s impact on society and the environment:

• Better overview of risks, which can be foreseen in an earlier stage.  This can prematurely mitigate potential problems and greatly improve decision making.
• Comply with the growing demand from stakeholders that increasingly ask for a larger focus on non-financials.
• It can reduce costs because of a better understanding of the internal processes (e.g. allocating resources and the impacts of safety and energy reduction), and could foster new innovations.
• From an external perspective, there is an opportunity for improved communication as society requests more transparency. 
• Consumers and future employees are increasingly appealed to buy and work for ‘responsible’ and/or ‘sustainable’ organisations.

Integrating Impact

Our world is full of societal and environmental challenges, and it seems obvious that we are in need of a system that is able to provide us with insight into the actual impact of our choices. This is also echoed by the International Integrated Reporting Council[2], which states that the value that an organisation creates is based on four stages. Namely, the input-, business model-, output- and outcome stage (more information on this value creation model is provided in our last blog on Integrated Thinking[3]). These four stages eventually result in the impact an organisation has on the environment and society. But how can organisations translate different impacts into a monetary value? A lot of organisations are experimenting with methods to monetise their impacts. Although there is no leading method yet, monetisation seems to have great potential for organisations to improve their performance. Therefore, some assistance is needed. At this moment, only several experts are able to provide this service. Albeit the market for providing this service is still relatively small, it is growing and shows a promising future. Should your organisation be on the sideline waiting for this market to move forward or engage in an active manner by experimenting with this method?

Best practices

Several organisations are experimenting with new methods of monetising impacts. Currently, they differ largely on their scale of application, namely by product, project, region or organisational scale. PUMA was one of the first organisations that monetised the environmental impact of its product. They used a method that calculated the true costs producing a pair of shoes by incorporating environmental costs into its production costs. Based on this information PUMA has made drastic changes and now aims to find alternative substitute leather types. The PUMA case dates back to 2011, however other have followed since then, such as Natuurmonumenten. This is the largest nature conservation society in the Netherland. The organisation monetised its impact of societal services such as CO₂ storage, particulates storage and natural water purification. With this method they found out that nature conservation does not halt economic development but instead is an important carrier for economic recovery, which strengthened the organisation’s license to operate. On a more regional scale, Heineken aimed to quantify the effects of its activities by performing socio-economic impact studies in several East African countries. This greatly helped the organisation’s management to make better business decisions based on actual facts on the impact it has on society. This study also gave insight in how Heineken could help to increase the yields of small-scale farmers, which indirectly improved their sales and income. These organisations have benefited from monetising impacts, but we believe many more organisations can benefit from this approach.

Monetization will repay your efforts

The main goal of impact monetisation for organisations is to better allocate resources in order avoid or decrease negative impacts and/or to increase the positive impacts. This is endeavoured by taking into account the different values of these impacts in different contexts, and thereby gaining a more comprehensive view of the total impacts of an organisation on society. It should however, be noted that monetising and valuing an organisations impact is not an ‘one size fits all’ approach, is organisational specific and requires a high level of insight in an organisation’s impact. Nevertheless, despite the initial effort that the monetisation of impacts requires for organisations, these are in our opinion most definitely outweighed by the benefits.

Nick de Ruiter is a partner at Sustainalize and has produced several Integrated Reports. He is also a specialist in CSR strategy setting and performance monitoring.

Mart van Kuijk is intern at Sustainalize. He is writing his master thesis on impact measurement and impact monetization.

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[1] https://hbr.org/2013/03/accountants-will-save-the-worl/

[2] IIRC, 2014 (http://integratedreporting.org/wp-content/uploads/2015/03/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-2-1.pdf)

[3] Integrated thinking: how to smartly visualise your unique selling points (http://cr-reporting.blogspot.nl/2015/10/how-to-smartly-visualise-your.html, 2015, 2015