Decoding Impact: New Methodologies for Measuring Sustainability
New Methodologies by IFVI Quantify the Impact of Well-Being, Water Consumption, and Health & Safety
TL;DR: The International Foundation for Valuing Impacts (IFVI) has unveiled a suite of new methodologies to quantify impact. This has the potential to substantially develop sustainability reporting. These frameworks use rigorous data-driven approaches to measure outcomes and assign monetary value to the impact of well-being, water consumption, and health and safety. For asset managers, they offer actionable insights to enhance decision-making, manage risks, and meet regulatory demands. By adopting these tools, firms can stay ahead in integrating sustainability into financial strategies.
Sustainability reporting still feels like the Wild West. There are too many different frameworks, regulatory requirements, and tools that promise to get things done.
This is changing, as exemplified by the adoption of Corporate Sustainability Reporting Directive (CSRD) in Europe. More consolidation and more explicit efforts to harmonize various reporting and impact quantification standards are to be expected.
Early efforts in sustainability reporting have broken some ground. However, given the enormity of the assignment — quantifying exactly how and why a company impacts the world around it and itself — these efforts barely scratched the surface. Doing this is necessary in order to understand what impact companies are having on people and the planet, and to derive ways to make that impact more positive.
Because of this, it is imperative for corporates and asset managers to keep watching out for new advances in reporting and impact quantification methodologies. One recent advance is the publication of quantification methodologies on well-being, water consumption, and health and safety by the International Foundation for Valuing Impacts (IFVI).
What makes their approach stand out is that they translate impact into monetary terms. This makes it easier for corporates, asset managers, and us at Wangari to understand where that money (and impact) might be going, and to redirect it in more efficient and equitable ways.
We Need Better Impact Quantification
Sustainability reporting has come a long way, but the tools to measure and understand corporate impact remain far from adequate. Much of what passes as ESG reporting is either too high-level to be actionable or too narrowly focused on compliance rather than outcomes. For example, reporting greenhouse gas emissions is now a common practice, but quantifying how those emissions directly affect people, ecosystems, or even a company’s financial performance remains elusive.
One of the problems is the fragmentation of existing frameworks and methodologies. A company might measure its social and environmental impacts using one standard while reporting them using another, resulting in inconsistencies that make it difficult to compare data, assess risks, or identify opportunities. Even more troubling, most frameworks stop short of linking these impacts to financial metrics, leaving asset managers, investors, and corporate leaders without the context they need to make informed decisions.
This is not just an inconvenience—it is a missed opportunity. Better quantification is a strategic tool because it helps understand not only how a company’s practices affect the planet and society, but also its own bottom line. By understanding the true costs and benefits of their activities, companies can uncover inefficiencies, prioritize high-impact interventions, and align their operations with long-term sustainability goals.
That is why the methodologies published by the International Foundation for Valuing Impacts (IFVI) are so significant. This is not just another framework to follow; they address the core challenges of impact quantification.
By translating impacts into monetary terms, these tools offer a way to bridge the gap between ESG metrics and financial decision-making. For asset managers and corporates alike, this is the missing link in making sustainability a driver of performance rather than a checkbox exercise.
IFVI’s General Methodology: An Important Step for Impact Accounting
At the heart of IFVI’s approach is its General Methodology, a foundational framework for measuring and valuing corporate impacts in ways that are systematic, replicable, and transparent. Rather than merely tracking inputs like emissions or outputs like products, the framework dives into the consequences of corporate activities—how they influence well-being, ecosystems, and economic systems.
A critical element of the framework is its use of the OECD Well-Being Framework as a basis for defining and measuring social impacts. This allows the methodology to go beyond traditional ESG indicators to consider dimensions such as health, education, and quality of life. For instance, it doesn’t just measure how much water a company uses; it evaluates how that consumption impacts local communities, ecosystems, and long-term resource availability.
From Intangible to Tangible
Using methods such as subjective well-being valuation and cost-based proxies, this methodology quantifies the economic value of changes in quality of life. For example:
Improvements in worker satisfaction or mental health might be valued using productivity gains or reduced healthcare costs.
Community-level benefits, such as improved access to services, are translated into economic terms using willingness-to-pay models or avoided costs.
By turning intangible outcomes into concrete metrics, the methodology provides decision-makers with tools to better understand the social return on their investments.
General Impacts: A Holistic Lens
The methodology also addresses broader impacts that do not fall neatly into environmental or social categories, but that are critical for a comprehensive view of corporate influence. These might include:
Cultural Impacts: How corporate activities affect local traditions, heritage, or collective identity.
Economic Multiplier Effects: The broader economic ripple effects of a company’s operations, such as job creation or regional economic development.
While these impacts can be challenging to quantify, IFVI’s methodology provides a structured framework to ensure they are at least not overlooked. This enables organizations to better align their strategies with both societal and economic goals.
Data quality and success markers
Another standout feature is its emphasis on data quality and methodological rigor. The General Methodology acknowledges that not all data are created equal, advocating for a mix of primary data (directly collected) and secondary data (derived from other sources) to ensure accuracy and relevance. It also integrates techniques for addressing data gaps and uncertainties, which is a huge challenge in sustainability reporting these days.
Whether this methodology proves effective will depend on its uptake and use in the next few years. On the face of it, however, it does seem to have the capacity to deliver clearer insights into how a company’s operations align with stakeholder expectations, regulatory requirements, and long-term value creation.
Occupational Health & Safety
The Occupational Health & Safety (OHS) methodology developed by IFVI tackles an area often sidelined in traditional ESG reporting: The human costs of workplace incidents. From injuries and illnesses to fatalities, workplace health and safety issues have far-reaching implications for employees, their families, and the organizations they work for.
As we have found in our research, these impacts correlate to corporate financial performance. Yet, many reporting frameworks fail to adequately quantify these impacts, often treating them as qualitative issues or compliance risks rather than measurable outcomes.
The Impact Pathway Approach
At the core of the methodology is an "impact pathway" framework, which traces the causal chain from a company’s activities to measurable outcomes and impacts. For OHS, this means linking workplace incidents—such as injuries, illnesses, or fatalities—with three key outcomes:
Human Health: The direct and indirect effects on workers’ physical and mental well-being.
Healthcare Costs: The financial burden of medical care stemming from workplace incidents.
Lost Wages: The economic losses incurred due to temporary or permanent absence from work.
Monetary Valuation Techniques
The methodology employs specific equations to quantify these outcomes:
Human Health: Valued using metrics like Disability-Adjusted Life Years (DALYs) and the Value of a Statistical Life (VSL). For example, a workplace fatality is not just a tragic loss but also an economic event with calculable impacts on workforce productivity and societal well-being.
Healthcare Costs: Derived from granular data such as country-specific healthcare expenses, adjusted for severity and type of injury or illness. The methodology also accounts for whether workers are covered by compensation insurance.
Lost Wages: Calculated based on median daily wages, ensuring a fair representation of financial impacts across different income levels. This approach also considers long-term losses, such as future earning potential for workers with permanent disabilities.
Practical Applications
For corporates, this methodology provides a way to not only quantify OHS impacts but also identify areas for improvement. For example, if lost wages and healthcare costs are disproportionately high in certain regions or job categories, companies can target those areas with interventions like better safety protocols or training programs.
For asset managers, the ability to evaluate a company’s OHS performance in monetary terms offers a new dimension of risk assessment. Due to shifting legislation, poor safety records are no longer just reputational hazards but quantifiable liabilities. Conversely, companies that excel in OHS can demonstrate measurable value creation, aligning with both investor expectations and workforce well-being.
Water Consumption
Water is arguably one of the most critical—and increasingly scarce—resources companies rely on. Yet, traditional ESG reporting often overlooks the full impact of water consumption, reducing it to simplistic metrics like total usage or discharge volumes.
The IFVI’s Water Consumption methodology changes this narrative by offering a nuanced, data-driven framework that captures not only how much water is used but also how that usage affects ecosystems, communities, and future resource availability.
From Consumption to Impact
At the heart of the methodology is the concept of local context. Water scarcity is not a global issue in the same way everywhere—it varies significantly by region, watershed, and even season. IFVI’s framework incorporates these nuances by linking water usage to local water stress and biodiversity impacts. It shifts the focus from raw numbers to actionable insights on how water consumption interacts with natural and human systems.
The methodology traces impacts through an impact pathway, which connects an entity’s water consumption to key outcomes:
Resource Depletion: The reduction of water available for other users, including agriculture, industry, and local communities.
Ecosystem Disruption: The loss of ecosystem services, such as water purification and biodiversity, due to overuse or altered water cycles.
Human Health: Indirect impacts on health, such as water-borne diseases or malnutrition caused by reduced agricultural productivity.
Monetary Valuation Techniques
To make these outcomes financially tangible, the methodology uses advanced valuation techniques:
Local Value Factors: Calculated for each site of water consumption based on local water stress and pressure on biodiversity. These value factors are derived from national benchmarks and adjusted to reflect local conditions, providing precise estimates of environmental and societal costs.
Opportunity Cost Framework: A unique aspect of the methodology is its use of opportunity cost to assess the "lost value" from water consumption. For instance, if a company’s water use reduces the availability of clean water for agriculture, the methodology quantifies the economic impact of lower crop yields or increased water treatment costs.
Long-Term Impacts: The framework also accounts for the financial cost of securing future water supplies, such as investments in desalination or infrastructure upgrades, providing a holistic view of water-related liabilities.
Applications in Practice
For corporates, this methodology offers a roadmap to not only measure water usage but also assess its impacts in meaningful terms. Companies operating in water-scarce regions, for example, can use these insights to prioritize water efficiency projects, adjust sourcing strategies, or engage with local stakeholders to mitigate risks.
For asset managers, the ability to assess water-related impacts in monetary terms is a game-changer. It enables a deeper understanding of exposure to water risks, such as regulatory constraints or supply chain disruptions, and highlights opportunities for investment in companies with strong water stewardship practices.
Impact Quantification Can Help Asset Managers in Investment Decisions
In a market in which sustainability concerns will not be going away, robust impact quantification offers a way to separate signal from noise. This enables better investment decisions that align with both financial performance and long-term value creation.
Sharper Risk Assessment
One of the most significant advantages of advanced impact quantification is its ability to highlight hidden risks. Poor water management in a region prone to drought, for example, isn’t just an environmental issue—it is a financial liability waiting to happen. Similarly, weak occupational health and safety standards could translate into operational disruptions, legal penalties, or reputational damage.
Spotting Opportunities for Value Creation
Impact quantification is also a tool for identifying upside potential. Companies that excel in water stewardship, for instance, might not only reduce costs but also position themselves as leaders in emerging sustainability-focused markets. Similarly, firms investing in worker well-being may enjoy increased productivity, lower turnover, and stronger long-term growth. Quantifying these benefits helps asset managers recognize companies that are turning sustainability into a competitive advantage.
Aligning with Regulatory and Market Expectations
As frameworks like the Corporate Sustainability Reporting Directive (CSRD) in Europe raise the bar for disclosure, asset managers need data that is not only accurate but also aligned with regulatory standards. IFVI’s methodologies help bridge this gap by producing metrics that integrate seamlessly into reporting requirements while providing deeper insights for internal analysis.
Improved Portfolio Strategy
By embedding impact quantification into the investment process, asset managers can refine their portfolio strategies. Instead of relying on generic ESG scores, they can use detailed, monetized impact data to construct portfolios that optimize for both financial returns and sustainability outcomes. For example:
A focus on water consumption data might guide investments toward companies less exposed to water scarcity risks.
Occupational health and safety metrics could influence weighting in labor-intensive industries.
Well-being metrics might steer capital toward companies that align with broader societal trends, such as improving worker conditions or fostering community resilience.
The Competitive Edge
Ultimately, advanced impact quantification provides asset managers with a sharper lens to evaluate companies. In a crowded marketplace, this ability to translate ESG data into actionable insights can be a decisive differentiator. For firms willing to embrace these tools, the payoff isn’t just about better sustainability outcomes—it’s about smarter, more future-proof investment decisions.
The Bottom Line: Thanks, IFVI, for Making Us Money and Helping The Planet!
By translating impacts into monetary terms, the IFVI’s methodologies not only made sustainability more measurable but also more actionable. For companies, these methodologies offer a roadmap to understand and improve their real-world impacts. For asset managers, they open the door to sharper risk assessments, smarter investment decisions, and portfolios that align with the future of finance.
The beauty of IFVI’s approach is that it’s practical and forward-looking. It doesn’t just check boxes for regulatory compliance; it pushes us to rethink the connections between business success and positive impact.
This is not just altruism. Better data leads to better strategies, which lead to better returns. When companies understand the financial implications of their impacts, they can allocate resources more efficiently, creating value for investors, stakeholders, and society at large.
At Wangari Global, we are excited about what this means for our work and the industry as a whole. Tools like IFVI’s methodologies help us—and others—understand where the money and the impact are going. With this clarity, we can redirect resources to create outcomes that are not only profitable but equitable and sustainable. That’s the kind of win-win the world needs right now.
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