Measuring Our Value to Society
Since 2014, we have been developing a framework to measure the impact of our business across the value chain: the SGS Impact Valuation Framework.
We have designed a pioneering model to analyze our impacts across the six capitals determined by the Integrated Reporting Framework <IR> to encourage holistic thinking and to nurture a deeper understanding of the interdependencies along the value chain. The purpose of quantifying our Value to Society is to enable us to better understand our material issues, set our sustainability priorities and make better strategic decisions within our Purpose-driven Leadership model. Following several years of development, for the third time in our Annual Report, we showed an estimated economic valuation of our value to society. This information has also been made available in the Sustainability Report 2020. Ultimately, we create value to society through thinking about sustainability in the same way, and giving it the same importance as all other strategic concerns. This is where our Purpose-driven Leadership Model comes in.
SGS’s impact across the entire value chain is explored through an analytical process that spans three pillars: our operations, our supply chain and our services.
SGS’s sustainability efforts have long been based on strategic KPIs, which were developed following a study of our material topics.
Currently, we are able to calculate the value we add to society through our supply chain and direct operations. In 2019, according to traditional metrics, SGS added CHF 4,374 million to society, notably through the salaries and taxes of our (then) 95,000 employees worldwide. With our model we have calculated that our direct operations and supply chain activities created CHF 2,205 million of additional positive impact, which was distributed to society through our stakeholders, for a total value to society of CHF 6,579 million. To date, we have unveiled significant societal benefits arising from training and development programs, while our main negative societal impacts were caused by the environmental footprint of our supply chain.
Our calculations demonstrated that in 2019 SGS generated CHF 7,380 million of positive societal benefit, primarily created through profit generation, the paying of taxes and wages, and training and development programs, and CHF 801 million of negative societal impacts, primarily driven by the environmental footprint of our supply chain.
The inspection, verification, testing and certification services we provide to our customers represent our most significant and tangible value to society. The development of our impact valuation methodology is ongoing and requires the close collaboration of our business lines to ensure that the model produces meaningful outcomes.
As new research is conducted, and new approaches to impact evaluation are deemed robust enough, we will evolve our methods of calculation accordingly. In addition, we are continuing to explore ways in which we can calculate the value of our services to society. Our diverse service portfolio and geographic spread make impact evaluation at a global level extremely complex. However, we have no doubt that through assisting other organizations, large and small, to achieve their own quality, efficiency, safety and sustainability targets, we are adding positive value to society.
Additionally, while we are as yet unable to conduct an impact evaluation across our entire service portfolio, we have studied certain individual services in relation to our capitals. An example is provided below.
Case Study: ‘Next Normal’ Solutions
We brought together a wide range of solutions – both existing and newly developed – to help our customers mitigate potential risks associated with the pandemic.
Our ‘Next Normal’ solutions contribute to the mitigation of both health and business risks associated with COVID-19. Due to the novel nature of the virus, the full impacts are still unknown. However, a review of research literature has enabled us to estimate the potential impacts avoided thanks to the implementation of these solutions.
The main impacts we have identified have been:
- Human capital: the well-being of people around the globe has been protected, due to the reduced impact of COVID-19 on morbidity and mortality
- Financial capital: governments and individuals have had lower out-of-pocket medical expenses, and our customers have suffered lower productivity losses
Our SGS Impact Valuation Framework enables us to evaluate, in an integrated way, the total value we add to society, beyond purely financial returns to SGS. Using the Framework, we have estimated the total value to society of our ‘Next Normal’ solutions to be CHF 149 million.