Why Impact-Weighted Accounts?
In our current system, financial value is created too often at the expense of society and the environment. We cannot afford to do so. Organisations are moving toward creating sustainable value. In the (near) future, organisations that fall behind risk losing their licence to operate.
Managing sustainable value creation is impossible without measuring it first. However, that is challenging:
- How to reliably measure and compare (non-financial) value?
- How to engage stakeholders and ensure organisations act?
Sustainable value can be measured through impacts. Impacts show how activities affect societal welfare and the natural environment. Impacts can reflect different types of value (financial, manufactured, intellectual, human, social and relationship) and include effects on different stakeholders.
Impact-Weighted Accounts, or IWAs, are a way for organisations to quantify their impacts. The uptake of compiling and publishing IWAs is a key step in the transformation of our economy into an impact economy: a sustainable economy that creates value for everyone.
What are Impact-Weighted Accounts?
Impact-Weighted Accounts (or IWAs) supplement traditional financial accounts. They add information on impacts through quantitative and valued accounts. This shows the value creation or reduction for all an organisation’s stakeholders: employees, customers, the environment and the broader society. IWAs take a broad view on value through Financial, Manufactured, Intellectual, Natural, Social and Human Capital.
IWAs comprise two key accounts:
- The Integrated Profit & Loss (IP&L) extends the “normal” P&L. It shows all impacts on stakeholders in one year.
- The Integrated Balance Sheet (IBaS) extends the “normal” balance sheet. It shows impact assets and liabilities.
IWAs help companies steer on purposeful and intentional impact that benefit society, while ensuring their own licence to operate.
Why a framework for Impact-Weighted Accounts?
The Impact-Weighted Accounts Framework aims to fill the gap of a missing international standard that ensures complete and consistent IWAs. IWAF builds on concepts from other (non-)financial reporting standards and identified five common topics of (non-financial) impact assessment.
The IWAF answers these common challenges with ten principles to ensure that IWAs inform impact decisions. IWAF’s topics and principles are shown in the figure.
The Impact Economy Foundation is proud to present the Impact-Weighted Accounts Framework (IWAF). The framework itself is supported by (i) two documents that provide context: an introduction and a conceptual framework; and (ii) by three supporting documents: a summary, a guide for practitioners and a FAQ.
The IWAF is currently in a public consultation until 9 September 2022. Read more about the public consultation.
I want to read some of the frequently asked questions about IWAF: Download the FAQ.
IWAF is written on behalf of the Impact-Economy Foundation by a.o., experts from Harvard Business School, Singapore Management University, Rotterdam School of Management and Impact Institute.