What is the VBA methodology for impact measurement and valuation?

Impact measurement and valuation (IMV) refers to methodologies (not only the VBA methodology) that quantify corporate impacts on environment, society and economy (in economics referred to as “externalities”) and assigns them values in monetary terms. The VBA calls the result of its IMV methodology the Impact Statement (where the results are presented). The Impact Statement reflects the “value to society perspective” (inside-out perspective / impact materiality).

Accompanying this, the “value to business perspective” (outside-in perspective / financial materiality) is reflected in an Integrated Account (Statement).  According to the VBA disclosure framework, the term Integrated Account references a historical datasheet. The two perspectives are complementary, and outside the VBA, people usually have a different interpretation of integrated accounting. Both perspectives, value to society and value to business, are commonly referred to as “double materiality”.

The VBA and the International Foundation for Valuing Impacts (IFVI) have joined forces to develop one common impact accounting methodology for the public good. This partnership brings together the corporate and investor perspective on impact, and the joint work will be made available publicly. The strategic ambition, together with the Global Value Commission, is uptake by an international standard setter. The work strives to be business-relevant, pragmatic, scalable and transferable – building on the global sustainability reporting baseline currently being developed by standard setters.

Why should companies consider impacts beyond currently reported ESG data? 

Currently, reported ESG information is limited to outputs (e.g., the amount of emissions or water consumption) and lack a contextualized view of impacts on society. As an example, mere data on the total amount of water consumed does not illustrate how local communities are affected. Extracting water from areas faced with water scarcity has very different societal consequences compared to extracting it from areas with high fresh water availability. Incorporating impact information with a contextualized value makes these societal effects visible and thus enables improved business steering. In addition, impacts valued in monetary terms harmonize different measurement units (e.g., m³ of water consumed, tonnes of CO2, or m² of land used) and thereby not only contextualize the effects but also make it easier to integrate the information into existing business steering processes. By applying our impact measurement and valuation (IMV) methodology, companies create a more holistic assessment of their sustainability performance along the entire value chain. Impact measurement and valuation aims to complement the financial statements with information on the positive and negative impacts a company has on stakeholders, including the environment, employees, customers and society.

How is the IMV methodology developed? 

Our IMV methodology is developed in partnership between VBA and IFVI. Joint teams from VBA and IFVI, supported by the four largest professional services networks – Deloitte, EY, KPMG and PwC – work together on methodology papers. This is supported as well by other leading organizations in the field of impact measurement and valuation (e.g., Harvard Business School, the OECD, WifOR).

Development is planned in two stages: The methodology paper drafts undergo an expert review by a group of experts from academia, business, policymakers, think tanks, standard setters, etc., before being opened to the public for wider consultation. This expert group is called the Valuation Technical and Practitioner Committee (VTPC) and is a result of the partnership between IFVI and VBA. In parallel, corporate practitioners pilot the methodology in live settings. Feedback from the consultation and piloting is then processed into an updated draft, which undergoes a similar process.

How is the VBA methodology related to other existing frameworks? 

The VBA methodology adds to and seeks compatibility with existing and emerging frameworks and, where possible, we refer to existing frameworks/initiatives rather than create our own definitions. For example, for principles relating to natural capital assessment, see Natural Capital Protocol, and for measurements of impact drivers, the work is linked to OEF/PEF. Crucially, the methodology seeks to bridge sustainability and financial performance perspectives.

Why it matters: There is currently a proliferation of initiatives & frameworks – an “alphabet soup” – which makes it difficult for users to understand where their focus should lie. Even though the focus of the work of the VBA is on a standardized methodology with an emphasis on quantification (data and calculation), rather than disclosure (which many initiatives focus on), it will only add to the confusion if links to established frameworks are not clear.

Why is the perspective of the VBA methodology backward-looking? How can future strategies and target settings be included? 

From insights on historical information of past years, companies can forecast future impacts (similar to setting of financial targets). For example, through country-specific estimates on potential child labor cases in the supply chain, companies can easily identify high-risk countries. This information can be reflected in future decision making (e.g., where to source from, where to build a factory), steering or target setting. Scenario analyses using the VBA methodology may translate backward-looking information into forward-looking guidance to assess impacts on society based on potential risks and opportunities. This can enable more sustainable outcomes.

What is the VBA approach to the Social Discount Rate (SDR)? Are future impacts valued less than current impacts? 

The Social Discount Rate (SDR) is used in the VBA methodology to incorporate impacts that will occur in the future. SDR is an interest rate applied to expected costs and benefits in order to convert them to a present value. In other words, it represents the value we place on the welfare of future generations and consequently the cost that society today should bear for future generations.

SDR has been widely applied in cost-benefit analysis of public policies. It is used in comparing cost-benefit of social projects like building railway lines or schools (where the costs and benefits are expected to be long term and can differ in their distribution over time).

The SDR used by VBA is the one chosen by governments like HM Treasury (2018): The Green Book – Central Government Guidance on Appraisal and Evaluation.

Applying the SDR is based on assumptions that societies will be wealthier in the future due to economic growth, and that a dollar in the future will therefore be worth less than a dollar today. This does not necessarily mean that the current generation is deemed more important than future generations, but people prefer income today rather than tomorrow, even if they expect to be richer tomorrow.

How does the current version of the VBA methodology address Human Rights / Human Dignity? 

All indicators of the VBA methodology are based on impact pathways to monetize the impact. The VBA methodology already covers basic human rights – occupational health & safety, living wage, forced labor and child labor. Not all human rights topics can be fully represented in an impact measurement and valuation framework due to limitations in underlying studies.

To date, there are few mature studies that monetize the impact of human rights topics based on impact pathways (e.g., no current study on impact valuation for freedom of association). Our methodology is thus still in development, and more aspects of human rights will be added in the future as methodologies become available.

Can negative impacts be compensated by positive impacts? 

(e.g., climate impacts compensated by high wages for managers; deforestation acceptable when large profits can be made)

The VBA methodology cannot be used to compensate for negative impacts in one area through positive impacts in another area (opposition to offsetting is made clear in all of our methodology papers and in other VBA statements).

Indeed, the use of a monetary value (USD or EUR) helps to identify the exact trade-offs and interdependencies by enhancing transparency as well as comparability.

Moreover, it helps companies to better understand the positive impacts on society and the environment that the company should aim to build on – as well as the negative impacts that should be reduced as much as possible.

What are the benefits of impact monetization? 

Monetization – the valuing of impacts in monetary terms – is beneficial because it is a simple way to contextualize impact information: Monetary value is the language of business for decision making. It helps demonstrate materiality across indicators, simplifies the integration of sustainability into financial accounting and helps reveal financial risks. The importance of monetary impact valuation is confirmed by the current work of the different standard setters like ISSB, GRI and EFRAG, as it embodies the true value contribution of business models to society and enterprises.

Does the VBA methodology regard planetary boundaries? 

Fundamental differences exist between the planetary boundaries framework and the VBA methodology. For instance, planetary boundaries are developed for public accounting, whereas the VBA methodology is applied by corporates. Moreover, planetary boundaries are about setting goals/targets, while the VBA methodology is a measurement & valuation approach. Some planetary boundaries are still in development to be quantified.

Nonetheless, the VBA methodology implicitly accounts for planetary boundaries by assigning a higher (negative) value to the capital if it is closer to the boundary. As a result, monetized values indicate the relative importance of different environmental factors and vary by the context considered (e.g., water stressed area vs. water abundant area). Valuation coefficients reflecting the valuation of impacts on society are developed over time and are expected to be provided by independent organizations. The VBA will pick them up when they are available.

VBA Organization

How is the VBA organized? What are the decision-making bodies and workstreams? 

The VBA is an independent and not-for-profit member association organized under German law.

The members are international companies that share the goal of creating a way of measuring and comparing the value of contributions made by businesses to society, the economy and the environment. The VBA methodology translates information on environmental and social impacts into comparable financial data. Our members test the methodology to ensure feasibility, robustness and relevance.

Currently, VBA has 25 members and targets further growth. The alliance is supported by major accounting firms, researchers and academia, and works in close collaboration with standard setters.

The VBA offers two membership models (Core and Expert), which can be freely selected by each company. A Core member also has a seat on the Steering Committee and sends one employee to work as a secondee at VBA.

Strategic decisions are taken by the Steering Committee based on a simple majority of representatives of the members. Every year, the alliance holds a general meeting with all our members. The agenda is set by the Steering Committee and covers strategic development and reporting topics, supplemented by member requests. Each member company has one vote.

Only daily operating decisions are made by the Executive Committee (CEO, COO and CFO) and the Leadership Team (Workstream Leaders). The CEO, Christian Heller, may only decide jointly with other Executive Officers under the agenda given by the Steering Committee and within the limits of the VBA overall charter how to operate the VBA.

VBA’s workforce, members of which come from the academic world, has been recruited very diversely. The VBA share of total staff is growing continuously compared to the number of secondees from member companies.

Based on the partnership agreement signed 27th of December 2022, the methodology development in 2023 will be carried out jointly with Harvard spin-off International Foundation for Valuing Impacts (IFVI) and approved by the Valuation Technical and Practitioner Committee (VTPC), where VBA members have only a minority of votes. These bodies determine their own procedures and constitute themselves according to best practice with regard to due process.

Enforcement of the methodology lies outside the scope of the VBA. The VBA members discuss the methodology informally on the Membership Day and decide voluntarily whether to pilot the methodology. Each member independently pilots the methodology and shares findings with the VBA. The Executive Committee gathers the findings and suggests a report and the methodology to the Steering Committee.

As the VBA collaborates with standard setters and other public bodies, the VBA is under constant monitoring and input from such bodies, commissioned by the EU to develop Green Accounting Principles, and working with the OECD on inclusive value chains. Any deviation leads to immediate termination of these collaborations.

Individual members and persons lack the power and opportunity to determine the content or nature of publications, methodologies and policies of the VBA.

How is the VBA funded? 

The VBA funds itself through its members via equal annual fees corresponding to the chosen membership model. Member companies also send experts as secondees to VBA, and we receive public grants via the EU LIFE fund for the Transparent project.

Secondees and pro-bono consultants are paid by their respective employers and therefore work free of charge for VBA. Members are accountable to the VBA mandate; so are their secondees and pro-bono consultants.

What are the ultimate goals of the VBA? 

The Value Balancing Alliance was founded with the ambition of changing the way company performance is measured and valued. The alliance’s objective is to develop, test and pilot a global impact measurement and valuation (IMV) methodology that will eventually be taken up as THE accepted sustainability management and accounting system – a standard for monetizing and disclosing positive and negative impacts of corporate activity – and to provide guidance on how these impacts can be integrated into business steering. A global IMV method is necessary not only to foster long-term thinking and comparability of performance, but also to consolidate the knowledge already available in this field. By applying the methodology to their business operations, VBA members validate its feasibility and build relevant know-how.

The Value Balancing Alliance’s vision is an ability to measure the total value created by a company as accurately as its financial success is measured today. The VBA furthermore underlines the importance within decision making of meaningful corporate reporting relating to impacts and dependencies.

What milestones have been achieved so far? 

VBA Founding in 2019: start of methodological development, launching and joining various initiatives and projects.

Since February 2020: VBA, along with the Capitals Coalition and the World Business Council for Sustainable Development (WBCSD), are mandated by the European Commission to develop natural capital accounting principles via the “Transparent” project, funded by the EU LIFE fund. Outcomes of this project may inform reporting requirements included in the EU Corporate Sustainability Reporting Directive (CSRD).

March 2020: VBA took the lead on the impact measurement and valuation workstream of the B4IG (Business for Inclusive Growth) initiative, a partnership between the OECD and major corporations.

Late 2020: The first round of piloting the methodology by the VBA member companies was successfully accomplished.

September 2020 until October 2022: VBA was a member of the Platform on Sustainable Finance (PSF), an advisory body of the EU Commission for the EU Taxonomy.

Early 2022: VBA member companies completed the second round of piloting (live application) of the Value Balancing Alliance methodology in their business operations.

December 2022: VBA and IFVI signed a partnership to join forces in methodology development and related activities.

Publications of the Value Balancing Alliance since February 2021:  

All publications are available on the Value Balancing Alliance website, on the Publications page. Further piloting rounds will build on and expand current results.


What does it mean to 'pilot'? 

To assess the feasibility of the VBA methodology under live conditions, member companies apply and test the Value Balancing Alliance methodologies in their operations. To measure their value to society, companies calculate the economic, environmental and social impacts arising from their corporate activities across the value chain. Challenges and lessons learned from this piloting exercise are discussed among VBA member companies and consolidated into subsequent versions of the Value Balancing Alliance IMV methodology.

What needs to be piloted? 

Member companies should pilot the full scope of the methodology (all impact dimensions, and value chain levels). The Value Balancing Alliance impact valuation methodology v0.1 and v0.2 (value to society) were piloted in 2020 and 2021, respectively.

In the first piloting round, nine indicators across three impact dimensions (economic, environmental, social) were piloted, whereby companies calculated the impacts arising primarily from their own operations and the full upstream supply chain. To learn more about the scope, please see our Pilot Study publication. 

In the second piloting round, VBA members piloted the Value Balancing Alliance impact valuation methodology v0.2 (value to society). This version of the methodology includes additional social indicators, and some companies began to assess their downstream impacts. Learnings from the second piloting were published in the Pilot Study v0.2

What support does the VBA provide? What resources are required for piloting? 

The Value Balancing Alliance provides a detailed description of the methodology, additional guidance for implementation and support for the piloting process through peer exchange. The effort required for piloting will depend on individual factors like the level of experience or data structures of a company. In our experience, piloting requires good PMO and stakeholder engagement. Internal functions involved in the piloting include finance and accounting, CSR, environmental/sustainability management, health and safety management, human resources, and procurement. They are instrumental in providing the data needed for the calculations. As a rule of thumb: 1 FTE would be required for 4 months, working on coordination and data availability.

Do the results of the company´s impact using the VBA methodology have to be published? 

Members are obliged to share their piloting results and their feedback with the VBA. The results, however, are not published such that a trackback to the company is possible (unless the company so wishes). Moreover, the results are not shared with other VBA members in a way that identifies the individual companies, neither are members obliged to publish their piloting results. It is at the sole decision of the member whether to use the results and, if so, in what form.

Do companies need to fulfill certain prerequisites for piloting? 

No. In principle, every company can pilot the methodology. However, the availability of resources to conduct a pilot needs to be assessed. To apply the methodology, a company must have in-depth knowledge of its business model, company structure, processes, data availability and data ownership.

Partnerships, cooperations and mandates

To what organizations does the VBA compare? How is it different from others? 

Organizations such as the Capitals Coalition, the World Business Council on Sustainable Development (WBCSD), the Harvard Impact-Weighted Accounts project, the Impact Management Project or the WEF IBC, and a few others deal with similar topics. These organizations vary in their subject-matter focus, scope and legal structure.

The Value Balancing Alliance does not intend to duplicate their efforts. Our ambition is to harmonize, test and scale the monetization of non-financial impacts and include the practitioners’ view. To this end, we cooperate with numerous key initiatives in this field.

What is the difference between the WEF Metrics Initiative and the VBA? 

The International Business Council (IBC) of the World Economic Forum (WEF) has launched the Stakeholder Capitalism Metrics project. Similar to the Value Balancing Alliance, this initiative promotes new ways to consider the wider economic, environmental and social impacts of organizations. The two initiatives are complementary and signed a joint statement in early 2021. The Stakeholder Capitalism Metrics project identifies a set of universal, industry-agnostic indicators to measure sustainability performance. The Value Balancing Alliance is building on these metrics and assesses outcomes and impacts. The alignment in the proposed reporting metrics allows companies to consider adopting both.

Does the VBA aim to replace standards such as GRI, SASB or TCFD? 

No. the Value Balancing Alliance is working to develop a standardized methodology for impact measurement and valuation in line with already existing frameworks. While GRI, SASB etc. define what to report, the Value Balancing Alliance provides a method for how to measure and monetize it.


What are the VBA membership models? 

The Value Balancing Alliance currently has two models: “Core” and “Expert”. Both are suitable for large, listed companies. Under both membership models, Value Balancing Alliance members commit to applying (piloting) the commonly developed methodology in their organization.

How can companies apply? 

Following individual discussions, the applicant company informs the VBA of its preferred membership model. Then, all relevant legal documentation is prepared for the formal application. The signed application letter is submitted to the Steering Committee for approval.

Is it possible for a subsidiary to become a member? 

The applicant company needs to be a legal entity acting on behalf of the executive board and/or the supervisory board. The subject matter of our organization – non-financial accounting and reporting – is largely consolidated and steered at HQ/group level. To benefit from our membership, we recommend you have the full buy-in of your company’s finance & controlling leadership.

What are the practical benefits of a Value Balancing Alliance membership for businesses? 

Members build internal know-how in relation to non-financial reporting, a field that has been gaining more prominence in corporate decision making and regulation. By implementing the methodology in a pre-competitive setting, Value Balancing Alliance members build expertise and support transformation efforts within their organization. Members also benefit from our global high-level standardization and sustainability reporting network, including the EU, UN, IFRS and other key initiatives.

Is the Value Balancing Alliance relevant for all industries?

The Value Balancing Alliance is open to companies from any industry. The methodology is industry-agnostic. 

Is the Value Balancing Alliance relevant for non-EU companies?

The Value Balancing Alliance is a global alliance of companies developing a standardized methodology that can be applied to all companies across diverse industries, geographies and sizes. Current members are headquartered mostly in Europe and Asia, with operations worldwide.

Do companies need to hire an external consultant before joining the Value Balancing Alliance? 

The piloting phase requires project management capabilities and expertise, especially the preparation of data and the performance of various calculations. Value Balancing Alliance’s peer learning sessions accompany the process. However, many members choose to bring in external support for the more complex calculations. Thus, external support can be useful, but is not mandatory.

As a member, how can a company influence the design of the methodology? 

The methodology is developed in collaboration with the International Foundation for Valuing Impacts (IFVI). By testing the methodology and providing feedback on practicability, applicability and decision-making relevance, our members provide essential input for further methodology updates. In addition to the feedback, our members can make proposals for additional methodology components. The feedback and proposals of our members are then presented to a methodology expert committee (the Valuation Technical and Practitioner Committee – VTPC), which takes up this input and decides which methodology updates will be implemented. The VTPC is a joint body of the IFVI and VBA.

Do members receive a label or certification?

No. Members may use the Value Balancing Alliance logo in their communication, but there currently is no label or certification as such.

Does Value Balancing Alliance perform factory audits or issue reports, such as ISO14001? 

No. Value Balancing Alliance does not monitor or assess companies. As a network of global organizations, Value Balancing Alliance provides members an opportunity to be involved in discussions on future methodologies for measuring and valuing non-financial impacts and to help in piloting practices based on these methodologies.

Who should be assigned as a contact person for the Value Balancing Alliance? 

Member companies choose a contact person and/or a secondee. Many member companies designate a sustainability expert with experience in sustainability reporting, but an expert in finance, HR or the environment can be a good match.

Does the VBA methodology help companies achieve the UN Sustainable Development Goals (SDGs)? 

Becoming part of the Value Balancing Alliance can help a company obtain a transparent, holistic view of how the company contributes to fulfilling the SDGs along its value chain. This novel view can be used to make steering decisions regarding resource allocation, product portfolio, geographical expansion of business and CAPEX/OPEX. In this sense, Value Balancing Alliance’s approach can help companies achieve the UN SDGs.

Does the Value Balancing Alliance provide consulting services? 

No. While consulting and audit firms work alongside our corporate members, the Value Balancing Alliance does not provide consulting services, as such, at this time.

Is the Value Balancing Alliance an alternative to ESG rating agencies or sustainability indices?

The Value Balancing Alliance provides standardized, comparable and monetized data that could in the future be used by ESG rating agencies and index providers as input for their ratings, rankings and assessments.

Policy and standard setting

Does the Value Balancing Alliance represent my company in Brussels?

No. The Value Balancing Alliance is not a lobby organization. The Value Balancing Alliance provides its expertise, but does not, as such, represent its member companies in European legislative processes. VBA strives to provide constructive input for more usable and practicable regulations as well as standards, with the ultimate goal of enhancing relevance, meaningfulness, effectiveness and credibility.