For the fifth year, we’ve used our Total Impact Measurement & Management (TIMM) framework to monetise our economic, tax, social and environmental impacts. It’s one of the ways we’re providing greater transparency for our stakeholders.
We estimate that our net contribution to the economy in 2017 totals £4.62bn. This is 28% more than our revenue, and an increase of 2% on last year. It’s also £800m more than when we first measured our total impact five years ago. Once again, our positive economic (£2,701m) and tax (£1,814m) impacts account for the majority of the total, with an additional social impact of £256m. By comparison, our negative environmental impacts (-£146m) are relatively small.
We categorise our impacts into ‘direct’, ‘indirect’ and ‘induced’, shown by the shading on each bar in the image. This year, our indirect and induced impact combined, are 66% greater than our our direct impact.
Although the framework doesn’t yet account for all of our impacts1, it’s given us a concept and language for considering social, environmental and tax implications alongside the financial business case, as we manage our day to day operations. And, it’s helped us to understand where to focus our efforts to decouple business growth from our environmental footprint.
1All figures refer to impacts before any estimates of the ‘counterfactual’ (i.e. what the impact might have been if PwC didn’t exist)
Our total contribution to the UK economy is driven by our economic impact, which remained flat at £2.7bn this year. 63% of it comes from the jobs we create and 29% from the profits we make.
Our direct operations account for more than half of this total. The rest is driven by what we spend with our suppliers (indirect impacts), and the salaries that our people, and the employees of our suppliers, spend in the economy (induced impacts).
This year our direct payroll increased 3% as we continued to employ more people to meet growing market demand for our services. We’ve also invested heavily in new technology and software to aid the delivery of our work, driving up the direct intangibles figure by 150%.
These investments have translated into corresponding increases in indirect and induced impacts, as we spent more with suppliers. But they have also increased our cost base, and therefore contributed to a drop in our direct profits, which fell 9% this year.
We make a substantial contribution to the UK economy through the taxes arising from our business. For several years, we’ve reported the aggregated taxes we pay and collect on behalf of government, using our Total Tax Contribution (TTC) approach.
To arrive at our total tax ‘impact’, however, we add two more items: the taxes our suppliers pay relating to the goods and services we purchase from them (indirect taxes); and the taxes that our people and the employees of our suppliers pay through spending their personal income in the general economy (induced taxes), which are largely through Value Added Tax.
In 2017, our total tax impacts increased by 3% to £1,814m, which is £300m more than five years ago. The increase relates to higher direct people taxes from an increased payroll and higher production taxes from increased VAT. The increases in payroll and supplier spend also raise our indirect and induced impacts.
Our direct environmental taxes, meanwhile, decreased by 44% as we drove down our energy consumption.
We’ve quantified our social impacts in two areas: our contribution to education in the UK via the investment we make in training our people; and the contribution we make to community livelihoods through our support for the social enterprise restaurant, Brigade.
Our main social impact is the incremental Gross Value Added (GVA) generated from people who train with us and then go on to work in other jobs in the economy at large. Although we’ve only measured this impact for our accountants, the value is £256m this year, up 11% on 2016 and 38% more than five years ago.
We’ve also valued our contribution from the social impacts generated by our social enterprise, Brigade, in the Community Livelihoods category of the TIMM framework. This totalled £0.5m in 2017.
We don’t yet have the data required to value our other social impacts reliably, although we continue to measure the outcomes of our community programmes with a view to including them in the future.
As a professional services firm, our direct environmental impact is small when compared to many other industries, but we're committed to minimising it as part of being a responsible business.
We’ve made fantastic progress in reducing the direct environmental impacts from our operations over the last ten years. And this year, our direct environmental impact decreased by another 12%, as we benefited from a full year of our 100% renewable electricity tariff and reduced our business travel emissions. It is now 36% lower than five years ago.
The value of our total environmental impacts remain the same as last year at -£146m, but still relatively small compared to our total economic, tax, and social impacts (3%). Greenhouse gas and other air emissions (64%), and land use impacts (26%) account for most of this total.
The analysis does, however, highlight the relative importance of our indirect and induced environmental impacts, which are 160x and 660x those of our direct impacts, respectively, because of the additional consumption they enable in the economy. Their scale reinforces the importance of our ongoing supplier and employee engagement programmes.
You can find more detail about the indicators in each TIMM quadrant on our Corporate Sustainability website.
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Corporate Affairs, PwC United Kingdom