Social value and corporate value are increasingly connected
By Barend van Bergen, Global Head of Sustainability Advisory, KPMG
Companies have always created societal value in the course of doing business. They provide people with the goods and services they need. They contribute taxes to the economy. They create jobs and wealth, and by doing so, they have played a significant part in helping to lift hundreds of millions out of poverty. Yet that positive contribution to society comes at a price. In the course of doing business, companies also draw on the natural resources of the planet and can have negative effects on people and the environment.
A new report by KPMG International, A New Vision of Value, argues that societal value and corporate value are increasingly connected. Economic, social and environmental megaforces are transforming the operating landscape for business. New regulations, growing stakeholder influence and changing market dynamics are driving the internalization of business externalities at an increasing rate. Companies need to measure, understand and proactively manage the value they create, or reduce, for society and the environment as well as for shareholders.
We have developed the KPMG True Value methodology to enable clients to understand their societal value creation. Companies can create positive social value, for instance through providing infrastructure, healthcare and education that improves the lives of workers and communities. Yet companies can also reduce social value by, for instance, failing to pay workers a decent wage, neglecting health and safety or not preventing pollution. The KPMG True Value methodology draws on existing tools and techniques for valuing social and environmental externalities, including Social Return on Investment (SROI) techniques. By combining SROI data with social data from our clients, in areas such as health and safety, community investment and employee wages, we are able to estimate the value of a company’s social externalities in financial terms.
This helps companies to increase their corporate value while enhancing their contribution to society.
We piloted the methodology with a subsidiary of global cement conglomerate Holcim. The project showed that the company creates positive social value by supporting income-generating activities for members of the local community, as well as through foundation projects to improve community healthcare and education and the livelihoods of farmers.
A New Vision of Value: connecting corporate and societal value creation can be found at www.kpmg.com/truevalue
Barend van Bergen is a partner at KPMG in the Netherlands. For further information about the KPMG True Value methodology please contact him at email@example.com.
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