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 2019. 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 2017, according to traditional metrics, SGS added CHF 4,045 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 2,131 million of additional positive impact, which was distributed to society through our stakeholders, for a total value to society of CHF 6,176 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 in 2017 demonstrated that SGS generated CHF 7,149 million of positive societal benefit, primarily created through profit generation, the paying of taxes and wages, and training and development programs, and CHF 974 million of negative societal impacts, which were primarily driven by SGS’s supply chain environmental footprint, in particular by water consumption and Greenhouse Gas emissions. SGS’s positive impacts were primarily driven by the Company’s own operations, which accounted for 68% of the total positive impacts.
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. Two such examples are provided below.
Case Study: Human Capital – Social Responsibility Audits
Social Responsibility Audits detect and assess the controls in place to prevent issues such as forced labor, discrimination and sexual harassment in the workplace. They include audits against third party standards and corporate codes of conduct, corrective action monitoring and other tailored audits. SGS analyzed the socio-economic benefits of reducing the prevalence of forced labor, exploitation, discrimination and sexual harassment. The avoided social costs equate to a value to society of CHF 333 million (based on 2017 figures).
Case Study: Natural Capital – Energy Management Certification
ISO 50001 Energy Management certification helps organizations save money and conserve resources while tackling climate change through energy efficiency and the development of an energy management system. SGS has helped around a thousand companies achieve ISO 50001 certification, resulting in an estimated reduction in CO2 emissions that equates to an estimated value to society of CHF 219 million (based on 2017 figures).