Measuring and comparing impacts

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Measuring and comparing impacts 

Strategic Impact Assessment

A holistic perspective on sustainability is great to follow in principle, but tricky to measure and weigh up in practice

Our  previous blog outlined why it’s important for businesses to assess their impact on the world in a holistic and independent way. Here, we consider how such effects can be measured, to support strategy and decision making. 

The bigger picture

Holistic thinking does not mean woolly thinking and, while it might be driven by broad principles, it ultimately needs to be unpacked into measurable variables. Although existing ESG approaches might help in selecting and quantifying several environmental, social and governance indicators, we challenged ourselves to identify and measure data that provides deeper insights into the impact organisations create for their broader stakeholders. In turn, that knowledge can be used to help a business identify the hidden risks and opportunities arising from its actions, and how they affect those stakeholders. 

Strategic Impact Assessment

Taming complexity

Greater clarity involves scale and complexity, bringing the challenge of how to manage a much richer variety of variables. Our starting point is to consider the impacts of an organisation’s whole value chain, in terms of six broad realms, or capitals: human, financial, intellectual, social, manufactured and natural. Within each, we identify specific impacts, which can be measured, monetised and aggregated, to quantify each capital. 

The value of language

Every business seeks to create value, and the language of financial value is widely recognised and understood. Historically, though, most social and environmental impacts have been expressed in a wide range of units, making them hard to compare. To address this challenge, and put all impacts on a comparable footing, each impact is measured and then converted into the same monetised units as conventional business results. Underlying our thinking is a more widely aligned concept of value and its beneficiaries: traditionally, these might be immediate shareholders and employees, but our approach also considers how such value is created or lost for the wider world. 

Language is collaborative and evolving

We are not alone in this arena, and our questions around impact measurement are now being asked by multiple organisations. Deloitte is part of the Value Balancing Alliance, along with other consultancies, universities and major global businesses, Harvard has launched the Impact Weighted Accounts initiative, and many more other platforms seek to have a standardised methodology in place for all organisations to adhere to. Although these initiatives are relatively new, they’re an early indicator of moves toward more holistic, multi-capital accounting, which consider economic, societal and environmental impacts on the same basis, and deliver a more complete account of profit and loss. 

Framing the big picture

This approach to quantifying impacts lies at the heart of our Strategic Impact Assessment (SIA) framework, which we will describe in out next blog, to be published soon.

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