New Metrics

New Alliance Creating Metric for Assessing Companies’ Real Value to Society

Alliance founded by eight international companies — including BASF, Deutsche Bank and SAP — to create a standard for measuring and disclosing the real value companies provide to society.

Published 5 years ago | About a 3 minute read

Image: Value Balancing Alliance e.V.

As a player in the global business landscape, you've hopefully arrived at the conclusion that business as usual is not only unsustainable from an environmental and social point of view, but also an economic one. Transforming the way we do business will require the cooperative power of all players in the business ecosystem.

With this in mind, a cross-industry coalition of companies has come together to form a nonprofit organization, aimed at addressing the need to rethink the value contribution of business as it pertains to the many different types of capital in play throughout that ecosystem.

The objective of the Value Balancing Alliance e.V. (VBA) is to develop and standardize a model to empower decision-makers to optimize the value they create — through a standard for measuring and disclosing the environmental, human, social and financial value companies provide to society. It aims to do this by:

Standardizing calculations, ensuring comparability of methods, establishing a pilot for management accounting and publicly providing outcomes within three years
Increasing transparency of business decisions, and creation and loss of value
Working with external bodies to develop and extend accounting frameworks
Shifting the priority from maximizing profit to optimizing value creation (an objective well in line with Business Roundtable’s recent redefinition of the Purpose of a Corporation).

VBA was founded in June by BASF, Bosch, Deutsche Bank, LafargeHolcim, Novartis, Philip Morris International, SAP and SK; It is supported by Deloitte, EY, KPMG, PwC and the OECD; leading universities such as Oxford and Harvard Business School; and additional stakeholders from government, civil society, business, financial market and standard-setting organizations.

“It is about changing the perspective on how companies create value,” said Saori Dubourg, Member of the Board of Executive Directors of BASF SE. “With a holistic view on values, we want to take into account our impacts on the environment, society and businesses. Creating long-term values is the foundation for sustainable business success.”

BASF has measured its value creation throughout its business with its “Value-to-Society” program since 2013, through which it has been able to assess the economic, ecological, and social impacts of its business activities along the value chain. Now, the company aims to share its learnings to help create standardized metrics for use by the rest of the business world.

“In the alliance, we want to standardize the different approaches that are currently used by the companies to make the results comparable. In this way, we can make the real value creation to the society by companies transparent,” explains VBA CEO Christian Heller, former Senior Consultant Sustainability Strategy at BASF.

“Along our 10-year sustainability journey at SAP, we have consistently embraced the idea that social, environmental and economic performance are interrelated,' said Daniel Schmid, SAP’s Chief Sustainability Officer. 'Being part of this alliance will allow us to work with like-minded companies to create the foundation for widespread implementation. It's another step for us to live up to our vision and purpose — to help the world run better and improve people's lives.”

“As businesses, we play a crucial role in enabling sustainable value creation. To create and protect long-term value for society, we strive to make human wellbeing the principle to measure success,” VBA said in a statement. “We need to take the financial, environmental and social impacts of our business activities into account — reconsidering positive and negative value drivers based on the concept of impact valuation. Further, to integrate this thinking into our accounting systems, a common metric for different forms of capital is required.”

A dedicated VBA team started to work in Frankfurt this month.