Measuring Our Value to Society
Since 2014, we have been developing a framework to measure the impact of our business across the value chain.
Working in collaboration with external provider Route2, we have designed a pioneering model to analyze our impacts across six capitals, 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 integrated leadership model. Following several years of development, for the first 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 2017 . 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 Integrated Leadership Model comes in.
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SGS’s sustainability efforts have long been based on strategic KPIs, which were developed following a study of our material topics.
Measuring Our Direct Operations is currently the most developed section of our impact valuation. We have developed about 30 economic, social and environmental indicators based on our strategic KPIs and the availability of research literature, within each of the six capitals: financial, human, social, intellectual, natural and manufactured. For each indicator, both internal and external impacts are analyzed and quantified by assigning a monetary value:
Internal impacts: these impacts reflect the opportunity costs that could materialize with improved performance. Identifying indirect internal impacts not directly contributing to financial statements, such as loss of productivity due to suboptimal turnover, can serve as a sound tool for management decision purposes. Direct financial impacts, i.e. administrative costs due to sickness absence, have not been considered as they are considered to be included in financial capital performance.
External impacts: we have identified and evaluate financial and non-financial impacts in society caused by our business activities beyond our company boundaries.
The, inspection, verification, testing and certification services we provide to our customers represent our most significant and tangible value to society. Developing our impact valuation methodology is ongoing and requires the close collaboration of our business lines to ensure that the model produces meaningful outcomes. However, we are able to report the impact valuation of particular services. Mirroring the economic attribution method used with suppliers, we propose that SGS will take credit for a customer’s contribution equivalent to the economic value of the service it provides (relative to the economic value of all other customer inputs).
The way we are now approaching this topic is by analyzing how the particular service is changing the reality on the ground and what percentage of that change can be attributed to SGS. For example, if we look at the number of energy audits in a given country in a year, how much does that actually reduce electricity usage, and what is SGS’s market share of those audits? (See case studies below.) By taking this approach, we have been able to explore several case studies, and so begin to examine our impact. As we are still developing our approach in this area, we cannot yet provide full results across all services. However, these case studies help to demonstrate, in a concrete way, the direction we are presently taking.
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 352 million (based on 2016 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 248 million (based on 2016 figures).
Through our procurement of products and services, we indirectly contribute to our suppliers’ positive and negative impact on society, for example, their payments of taxes and release of greenhouse gas emissions. Our procurement activities enable impacts to society through the activities of direct (tier 1) and indirect (tier 2) suppliers. We use established “input-output” modeling based on spend at affiliate (country) level.
In 2017, we have estimated our impact valuation across four capitals: financial, human, natural and manufactured. This model enables us to calculate additional parameters such as the risk of modern slavery and child labor within the global supply chain. Mirroring the economic attribution method used with suppliers, we propose that SGS take credit for a customer’s contribution equivalent to the economic value of the service it provides (relative to the economic value of all other customer inputs).