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True, Integrated value as standard corporate management tool

More and more expert articles and corporate practices point towards taking account of externalities that companies create in parallel to creating economic value. Some call attention to a looming crisis within less than a decade to go (see e.g. this SustainAbility blog post) unless companies get ready to internalise and positively impact their externalities.

 

In their 2014 report “A New Vision of Value: Connecting corporate and societal value creation” KPMG demonstrates an approach to integrated thinking and internalisation of CSR norms. The report introduces the True Value methodology that was developed by the CSR Europe member company in order to assess societal value creation of corporations.

 

Core assumption of the contribution is that externalities have always been largely excluded from measuring corporate value. With the growing integration of companies in society and closer relations with stakeholders the disconnect between corporate and societal value is disappearing and therefore yields new potential for leaders and investors to unlock opportunities of value creation.

 

KPMG attributes three key drivers to fostering internalisation of externalities such as climate change, water scarcity or food security:

  1. Regulations and standards
  2. Stakeholder action
  3. Market dynamics

 

The True Value methodology was developed to capture a company`s value creation by taking into consideration quantitative, as well as qualitative drivers and representing these in a format that top executives could also use in defining strategy.

 

Several CSR Europe members already make use of the method, or have otherwise made efforts to mainstream triple-bottom-line performance in operations or product development and have partnered with experts in the field. Whereas other organisations, for example True Price or the World Business Council for Sustainable Development are working on methodologies to account for both environmental and social externalities in a standardised manner.

 

CSR Europe is providing support to companies looking for practical ways to manage externalities.  On 30 September 2015 CSR Europe and KPMG organised a workshop on externality management, based on the True Value methodology. Participants and speakers represented a number of companies leading in this field: BBVA, Bridgestone Europe, Engie, Intesa Sanpaolo, KPMG, Microsoft, Pirelli, SAP, Solvay, State Street Global Advisors, Telefónica, The Coca-Cola Company, TITAN Group, and Unipol Group.

 

Throughout the workshop, several dilemmas were tackled, which can be summed up in the following questions:

 

 

Read the insights coming from the workshop here.

 

CSR Europe will explore these, and more questions, related to externality valuation as a tool to advance management and transparency for competitiveness in forthcoming activities and events.

 

 

 

Resources

 

Natural Capital Accounting

 

Social Capital Accounting

 

 

 

Good practices

 

Randstad - Youth@Work to boost youth employment with measurable impact

 

Solvay - Employee Performance Linked to Sustainability & Sustainable Portfolio Management

 

AXA - Corporate Responsibility Barometer

 

NS - Assured Environmental and Social Profit & Loss calculations

 

Further practices of monetising externalities can be found in True Price report:

http://trueprice.org/report/ and in KPMG`s report: “A New Vision of Value: Connecting corporate and societal value creation

 

Novo Nordisk & Dow Chemicals on the SustainAbility Blog

 

SAPIntegrated Performance Analysis

 

Microsoft - Carbon Fee project