Valuation transparency is on the horizon: how to report more accurately in the meantime 

Managing impact without understanding impact value (i.e. relative importance) is like navigating a ship without a compass.

Valuation in social value and impact management practice can be thought of as measures to understand the positive or negative impact you create for the environment and people you affect. Just like a compass provides sailors with a clear direction, valuation is instrumental in keeping you on course towards positive change. When you can understand what’s most important, both positive AND negative, you can turn data into actionable insights, creating positive ripple effects across your organisation, the environment, and the people you are impacting.

However, ‘successful’ valuation requires decision-making.  On the level of accuracy, confidence or rigour that you and your audiences need. 

Yet, there is little practice in place to check value data and no well-known framework to follow to assess what should be published with the valuation to assess its accuracy. But without transparency over the assumptions and sources of the value data, it undermines the accuracy of the valuation, your confidence in its applicability to your context, and ultimately, the point of reporting on your impact in the first place.

Say your recent initiative was successful, and the impact is calculated to be worth the equivalent of £50,000. Largely, that number will be accepted. It will be reported, built on, and even used in decision-making such as contract awards. But is that enough?  Without understanding what is included in that social value figure, its sources, and underlying assumptions, how can it be used with any level of confidence? 

This next layer of critique unfolds a myriad of questions. What is the £50,000 based on? What sources are we getting the data from? Is that for the entire community, or just the men or women, or children, or the older generation? What period contributes to the data? What do we know about the data collection itself? Is it the raw primary data, or have secondary sources influenced it? And so on. 

As the industry tightens its belt on what’s acceptable with impact management, it’s becoming increasingly important to be confident in the accuracy of your data and what it is telling you. There may not be strict frameworks now, but there are damaging repercussions.

When you don’t have an accurate overview of the factors that have gone into your valuation in your impact reporting, you risk:

• Misreporting information leading to misinformed decisions
• Green or impact washing and creating a negative backlash
• Damage to stakeholder trust
• Risking licensing and accreditation
• Regulatory compliance issues
• Lost tender opportunities and sales 
• Increased operational costs and fines
• Lack of competitive advantage
• Difficulty attracting talent

If the metrics used to measure impact are flawed or unreliable, you’re likely to misreport to customers, clients, and stakeholders unintentionally. This can irreparably impact your tenders, as you’re not accurately representing commitment fulfilment and end up overpromising and underdelivering (it’s rarely the other way around). This information trickles into your marketing, posing the risk of accidental green or impact washing and overstating business impact. 

Stakeholders, including customers, investors, and the community, increasingly value transparency and sustainability. So when you appear false, even if it’s an accident, that damage can be catastrophic. The potential reputational damage, regulatory issues, missed opportunities, and potential environmental and community harm are not worth the risk. 

We must adopt accurate and transparent impact reporting practices collectively. And we’re not the only ones that think so. The good news is the Capitals Coalition is taking action. In October 2023, the Value Commission opened the consultation on the Global Transparency Criteria to create a transparency process for valuation factors and aims to launch the Transparency Criteria in January 2024. The next stage of The Value Commission will be focused on delivering an open-access platform of values by the end of 2025. 

This is brilliant news for helping you measure your impact more accurately. It gives you confidence that you’re reporting on valid values and can demonstrate transparently where your data comes from. In the meantime, just because the framework isn’t finalised yet doesn’t mean you can’t start taking the proper steps within your organisation today. 

With any values you’re currently reporting, take some time to conduct further due diligence on the data before taking action. 

To help you, here are ten questions derived from the draft Transparency Criteria you can use to be more accurate with your reporting:

Ten questions 

1. Is the reason “why” and the overall goal behind the need to measure an impact clear? 
2. What time frame does this value span?
3. What are the important measurables from this value, and why? 
4. Are the limitations/omissions of the value clearly stated?
5. Geographically, where does this impact take place? Is it national or individual territories? 
6. What periods does this impact span?
7. Who are all the stakeholders that are affected by the impact pathway?
8. What are their demographics regarding age, gender, culture, society, and any other key determining features?
9. What are the justice, equity, diversity & inclusion considerations?
10. Which framework does this value require?

Anything you report is only as useful as the accuracy of the value you’re using. While the Capitals Coalition is taking action in due course, nothing is stopping you from adopting better transparency in your reporting now. 

For more resources on achieving better impact management, stay up-to-date with our insights here. If you’d like to learn more about Impact Reporting, schedule a demo or contact our team at 0161 532 4752.