“The impact measurement and management framework developed by PwC is a huge step forward in assisting companies in thinking on an integrated basis and enabling them to do business in the 21st century. It also helps to change mindsets to take a holistic perspective and move towards Integrated Reporting. I urge all companies to start incorporating this type of thinking into their strategic business decisions.”
Prof Mervyn King SC, Chairman International Integrated Reporting Council
We live in a world of significant change and upheaval. We have a growing population, seeking a better lifestyle, to be delivered from a planet with finite resources, many of which are now rapidly running out.
At the same time, the expectations placed on businesses about the role they should play in society has shifted amongst stakeholders including customers, suppliers, employees, governments and society in general. Many business models and practices are not equipped to deal with the new requirements, and many sectors recognise that they need to transform if they are to thrive in the future.
These changes are already affecting corporate decision making and reporting, but until now, it’s been hard to quantify and monetise social and environmental impacts, leaving them stranded outside traditional accounting and return on investment decisions. Yet, more than 93% of CEOs we surveyed said that measuring both their financial and non-financial performance would enable them to better identify and manage their risks. We developed our TIMM framework in response to this need.
TIMM helps private and public sector leaders to understand how different activities contribute to the economy, the environment and society. It provides a more complete assessment of how value is generated (or potentially destroyed) in both the short and long term, helping decision makers to consider the net impact of their actions, beyond financial results. Some of our clients have already recognised the potential of evaluating their total impact, including companies in travel and tourism, fashion, chemicals, utilities, consumer goods, and mining.
The TIMM ‘wheel’, below, shows a business’s activities at its centre, surrounded by the stakeholders who are affected by its operations (the grey circle). Each of the impacts is then represented around the outside of the ‘wheel’. TIMM values the impacts of a business arising in three ways:
The impacts are grouped into four areas, each comprising five indicators. Once calculated, impacts are represented on the wheel using bars sized proportionately to the value of each indicator, green for positive impacts, or red for negative impacts.
Economic impact refers to an organisation’s contribution to the economy through Gross Value Added (GVA). It incorporates the consequences of the direct, indirect, and induced impacts of five indicators - profits, payroll, investments, intangibles, and exports. For example, in the PwC UK total impact analysis, we’ve estimated the value created through our core business operations (i.e. the provision of services to our clients), our payments to suppliers and the spend arising from suppliers and employees in the wider economy.
Tax impact is the overall contribution of an organisation to the public finances – direct, indirect and induced. It includes taxes on profits, people, production, and property, as well as environmental taxes. The tax impacts are separate from, and additional to, the economic impacts.
Social impact incorporates the effects of an organisation’s business activities on society through outcomes such as livelihoods, health, education, empowerment and community cohesion. In our case we’re currently only able to measure the education component, which relates to the accountants we train but who leave us, adding value to the marketplace.
Environmental impact refers to the impact of an organisation on society as a result of greenhouse gas (GHG) emissions, air emissions, land use, water pollution and use, and waste generation. For most companies environmental impacts are negative. We’ve estimated the impact from our direct operations, our payments to suppliers and the spend arising from suppliers and employees in the wider economy.