Measuring “impact” rather than just “inputs”

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– So far, most companies have focused primarily on measuring inputs and activities rather than impacts.
– The “Impact-Weighted Accounts Project” at Harvard Business School was one of many efforts to change that.

In this note, Alexis Pantziaros notes “while many companies are pursuing important initiatives and are quantifying and reporting outputs in annual sustainability impacts are far fewer.

First, a disproportionate number of companies are headquartered in Europe. Second, most of the companies that have claimed to have measured employment and social capital impact so far have focused primarily on monetizing inputs/activities rather than impacts. Third, product impact is much less often measured.”

The “Impact-Weighted Accounts Project” at Harvard Business School, led by Professor George Serafeim, piloted the “Impact-Weighted Accounts” methodology – which concluded at the end of 2022 – in an effort to gauge what will create real financial value. In 2022, the International Foundation for Valuing Impacts (IFVI) grew out of IWA. The research conducted at IWA, and the former IWA team, are now part of IFVI. The Valuation Technical and Practitioner Committee, which guides, reviews, and approves IFVI’s research agenda is currently chaired by Serafeim.

This article explains how “impact-weighted accounts” have four elements of:

  • Changing our intuition about what creates impact
  • Bringing impact to the ESG investing market
  • Allowing managers to make better informed decisions
  • Strengthening incentives