There is a mature accounting system for financial value, but an equivalent accounting system for societal value is lacking. We can only manage what we measure.
Impact assessment and valuation, a recent development, aims to fill this gap by allowing us to capture what matters the most in our society, such as well-being, health, and social connections. It enables the translation of a wide variety of impact metrics across natural (tCO2eq, kg phosphorus, kg particular matter, etc), social (social benefits, taxes, etc.), and human capital (wages, the feeling of integration, health, and safety, etc.) into monetary units. By consistently and comprehensively assessing the value to society of each of those impact drivers, we make them comparable, allowing us to identify the most important ones and inform decision-making processes effectively.
By defining a unique, objective, and comparable impact metric (expressed in monetary terms) we increase the relevance of the information to decision-makers and make it accessible to a wide audience that might not otherwise have access to these insights. This unique value proposition helps answer key questions such as:
Does an activity have a net positive or negative overall impact?
How efficient are we at creating societal value compared to the financial resources required for the activity?
Which impact drivers, activities, or investments generate the most societal value and are the most significant (at the project, activity, or investment portfolio level)?
What trade-offs need to be addressed?
How can impact be communicated strategically to decision-makers familiar with financial metrics but not with impact metrics?
How can financial and societal value be compared effectively?
This methodology paper addresses only the valuation step in impact valuation. It does not provide guidance on impact measurement, data collection and surveys, materiality assessment, or other topics.
The method is firmly rooted in real-world applications and is highly operational, having been employed across hundreds of activities, projects, businesses, investment funds, and millions of pathways. We found this approach effective in driving change within organizations and among individuals, leading to a greater positive impact on society
The methodology overview is presented in the figure below, building on 7 generic outcomes, each with its specific valuation methodology (valuation pathways). The eQALY methodology defines a unique impact indicator, which is the change in well-being. This unique impact indicator defined ensures the consistency, comparability and relevance of the method and results.
We decided to publish the methodology in the public domain to lower the barrier of entry to using impact valuation and to support advances in impact measurement and management in general.
The methodology paper comes with an Excel template, providing the illustrative calculation for each one of the 7 generic outcomes, a list of datasets and valuation factors to facilitate the use of the method. This Excel template comes together with the download of the methodology paper clicking on the following button: