measuring

IMPACTbeyond the bottom lineIMPACTIMPACTIMPACTbeyond the bottom linebeyond the bottom line

Why measuring impacts on society makes business sense

DisclaimerThis publication is released in the name of the WBCSD. Like other WBCSDpublications, it is the result of a collaborative effort by members of the secretariatand senior executives from member companies. A wide range of membersreviewed drafts, thereby ensuring that the document broadly represents themajority view of the WBCSD membership. It does not mean, however, that everymember company agrees with every word.

About the WBCSD The World Business Council for Sustainable Development(WBCSD) brings together some 200 international companies in ashared commitment to sustainable development througheconomic growth, ecological balance and social progress. Ourmembers are drawn from more than 30 countries and 20 majorindustrial sectors. We also benefit from a global network of about60 national and regional business councils and partnerorganizations.

Our mission is to provide business leadership as a catalyst forchange toward sustainable development, and to support thebusiness license to operate, innovate and grow in a worldincreasingly shaped by sustainable development issues.

Our objectives include:

Business Leadership – to be a leading business advocate onsustainable development;

Policy Development – to help develop policies that createframework conditions for the business contribution tosustainable development;

The Business Case – to develop and promote the business casefor sustainable development;

Best Practice – to demonstrate the business contribution tosustainable development and share best practices amongmembers;

Global Outreach – to contribute to a sustainable future fordeveloping nations and nations in transition.

Copyright © WBCSD March 2008.Photo credit Inside cover: HolcimPrinter Atar Roto Presse SA, Switzerland Printed on paper containing 50% recycled content and 50% from mainly certified forests (FSC and PEFC)

100% chlorine free. ISO 14001 certified mill.ISBN 978-3-940388-20-9

“Our obligation as business leadersis to leave the world better than wefound it.”

Sam DiPiazza, Global CEO,PricewaterhouseCoopers and Chairman,

WBCSD

Development Focus Area Core TeamChair: Roberto Salas (GrupoNueva)Focus Area Core Team: AES Corporation, Anglo American, BP,ERM, GE, GrupoNueva, Toyota, The Warehouse Group.

Website: www.wbcsd.org/web/development.htm

Introduction

Over the past few years, several WBCSD membercompanies have explored ways to measure theimpact of their business activities on the societies inwhich they operate. These innovations have in turnprompted the WBCSD, with its members, to developa common approach to measuring business impactthat can be used by all business sectors. Thispublication presents the resulting WBCSD MeasuringImpact Framework, and highlights the experiencesand lessons learned from those companies that havepioneered the thinking behind the Framework. Itexplains why measuring and understanding acompany’s impact is good for business and good forsociety.

The members of the WBCSD are not alone in theirendeavors to measure impacts. This publication alsohighlights the parallel work of the InternationalFinance Corporation (IFC), which has developed anew system to track the results arising from itsinvestment portfolio and advisory services.

The business case for measuring impacts

The nature of international business is complex, shaped byglobalization and rapid socio-economic and political change.Sustainability issues are increasingly contributing to thiscomplexity, not least climate change, resource constraints,endemic poverty and ecosystem degradation. In response tothese trends, the company executives who steer the WBCSD’sDevelopment Focus Area declared their commitment to creatinga more sustainable and inclusive form of globalization. Theyidentified four key objectives:

• Develop a deeper understanding of how global issues such aspoverty, the environment, demographic change andglobalization affect individual companies and sectors;

• Use the understanding of these issues to search for moreinclusive business solutions that help to address the issues atboth a local and global scale;

• Align core business strategies with the solutions identified;

• Incorporate long-term measures into the definition ofsuccess, targeting profitability that is sustainable andsupported by a responsible record in managing social,environmental and employment matters.

“Our corporate objective is notonly to generate attractive returnsfor our shareholders, but also tocreate a positive legacy for thecountries and communities wherewe work.”

Cynthia Carroll, CEO, Anglo American

These companies recognize the risks and opportunities theiroperations face in developing countries and the important rolethey play in influencing change. They rely on transparent legalsystems, access to markets and infrastructure services, socialstability, healthy and skilled employees and suppliers, as well asconsumers willing and able to purchase their products andservices.

While these conditions are critical for business growth andsuccess, the benefits resulting from the presence of multinationalbusiness and the associated in-flows of capital may not reach allsectors of society. The consequence can be a thriving middle andupper class while the low-income segment gets left behind. Thiscan lead to strained relations between business and thecommunities associated with their activities, increased scrutinyfrom civil society organizations and greater levels of politicalpressure from local and national governments, all of which canincrease commercial risks for investors.

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Companies have the capacity to positively influencedevelopment outcomes. In order to demonstratethis, they must be able to measure their impacts and,armed with these measurements, modify their businessmodels and strategies to further optimize theircontribution to both shareholders and society as awhole. It is about going beyond compliance andbuilding a more holistic perspective of value to businessand the societies where that business operates.

The diagram illustrates some of the benefits that canarise from measuring impacts and how these canresult in better business

“If you cannot measure it, you cannotimprove it.”

Lord Kelvin, Mathematical Physicist

better

Bene meas

im

Market share

• Protect market share by engaging broadly tobuild brand and consumer loyalty

New business opportunities

• Product and service innovations• New markets• Innovations in distribution• Supply chain localization

Risk management

• Anticipate and adapt to changing societalconditions and needs

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How measurements lead to better business

Communities

• Improve relations with communities throughbetter-informed and effective communication

business

fits ofuring pact

Governments and regulators

• Improve relations to underpin the businesslicense to operate

• Create a platform for discussion on frameworkcondition improvements

Partnerships

• Discover opportunities to partner with otherstakeholders to leverage resources tooptimize impact

Employees

• Attract and retain employees

• Foster greater productivity by improvingemployee loyalty and enthusiasm

3

Increase awarenesswithin the companyof how their operatingpractices and valuesare specificallyimpacting societieswhere they operate

Why mSome com

Substantiate claimsthat the company is“walking the talk” in terms of deliveringsocietal value – includingpoverty reduction – fromtheir business activities

Anglo American invested inSocio-Economic Assessment Toolbox(SEAT) to help its operations live upto the company’s stated goal ofmaking a contribution to theeconomic, social and educationalwell-being of the communitiesassociated with its operations,a fundamental part of its riskmanagement plans.

The company had taken steps to review itsimpacts on communities in the past. However, the SEAT tool movedit from an ad-hoc process to a more systematic, company-wideapproach to understanding the company’s impacts and assessing thesustainability of their operations – not least in balancing theextraction of natural resources with an enhancement of social andhuman capital. The company hoped the SEAT would initiate aprocess of aligning social investment plans with the needs ofcommunities and ensure that community initiatives worldwide arebased on engagement and solid facts. This allows communities andthe company to work towards agreed goals. The tools also helpstrengthen their social reporting capacity, develop indicators relevantto local conditions that the company can use to monitor progressover time, and share “best practice” within the firm.

For further details see www.angloamerican.co.uk

Anglo AmericanSocio-Economic

Assessment Toolbox

Unilever engages with many people around the world as suppliers,distributors and consumers. Yet prior to 2004, the company hadvery little understanding of how these interactions impacted on thelives of these people and contributed to poverty eradication andsocietal progress. With the Millennium and JohannesburgDeclarations in the backdrop, the company embarked on its first in-depth look at its impacts as a way to understandthe role the company and foreign directinvestment play in building sustainablelivelihoods. To do this Unilever engagedOxfam in a learning partnership toexplore the poverty impacts from itsentire value chain in Indonesia, frombuying from small-scale producers toselling to low-income consumers inremote locations.

In 2005 the company decided to build on thisresearch to look at Unilever’s impact on the South African economy.Unilever commissioned INSEAD professor Ethan Kapstein to conductthe South African study and, in contrast to the Indonesian study thatfocused specifically on poverty impacts, it used traditional economicmethodologies to measure the direct, indirect and induced impactsfrom Unilever’s operations.

For further details see www.unilever.com

UnileverImpact studies in

Indonesia and SouthAfrica

Just 20 years after the launch of the world’s first commercial mobile(cell) phone services, there are more mobile than fixed-line usersglobally, and nearly as many people have a mobile as a television.Despite the rapid increase in mobile phone users, little evidenceexisted prior to 2004 on the economic and social impacts of thephones on individuals, business and nationaleconomic development. To fill thisknowledge gap and build a betterunderstanding of the company’spotential future market,Vodafone commissioned a studyinto the Socio-economicImpact of Mobiles (SIM).

The SIM Project aimed to identify howpeople use mobile communication andhow this use affects the social and economicgrowth of both their communities and countries. The first in theseries of studies focused on mobile users in areas in Africa while thetwo subsequent studies looked deeper into particular ways in whichmobiles are used for such things as healthcare and microcredit.

For further details see www.vodafone.com

VodafoneSocio-economic

Impact of MobilesProgram

“Mining companies are having tounderstand how best to leverage theircore business to create betterdevelopment outcomes.”

Cynthia Carroll, CEO, Anglo American

“Put simply, I believe that mobiletechnology has enabled people whoseviews and needs were previouslyunheard to be active participants in themarketplace.”

Arun Sarin, CEO, Vodafone

“...companies do not normally measuretheir social, economic and environmentalfootprint in the markets in which theyoperate and, as we all know,communication without facts is tough.”

Patrick Cescau, Group CEO, Unilever

Examples of business approachesto measuring impact

In this section we present six examples of whycompanies decided to measure their impacts

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Prioritize socialinvestment programsto augment companyactivities

easure? mon reasons

Manage risksthat may threaten thelong-term sustainabilityof their operation

In 2002-2003, the Icelandic government approved one of the largest constructionprojects and private-public investments in Iceland’s history, the Kárahnjúkar PowerPlant Project, the Alcoa Fjarðaál Smelter Project and the transmission line from thepower station to the smelter. The government and municipality had a particularinterest in the ability of the projects to stimulate sustainable economic activity ineastern Iceland, as well contribute to thestability of the national economy.

The Environmental ImpactAssessments found that theimpacts could be mitigatedthrough measures defined in thefinal authorization. They alsopredicted social and economicbenefits from the projects. Despitethese findings, some groups remainedconcerned about the projects and their possible adverse impacts.

In line with their sustainability principles, the two companies leading the projects,Alcoa and Landsvirkjun, wanted to demonstrate a long-term commitment to the well-being of the communities connected to the operations. This resulted in the EastIceland Sustainability Initiative – a systematic approach to implementing sustainabilitypractices for both the construction and operation phase of the projects as well asindicators to monitor progress against specific objectives and concerns raised by thestakeholder group. At the heart of the initiative was a 40-member stakeholder advisorygroup consisting of both project proponents and opponents.

For further details see www.alcoa.com

Alcoaand Landsvirkjun EastIceland Sustainability

Initiative

StatoilHydro is committed to making decisions based on both theinterests of the company and those of the societies where they work.Measuring and understanding the company’s impacts on society istherefore important to fulfilling this commitment. In the case ofSnøhvit, Europe’s first liquefied natural gas export facility and thelargest ever industrial development in northern Norway, StatoilHydro –together with the Hammerfestmunicipality and Finnmark countycouncil – initiated a trailing researchand monitoring study todocument the various impactsfrom the construction andoperation of Snøhvit on theregion. As a geographically remoteregion suffering from a major dropin employment and little privateinvestment, the company is particularlyinterested in understanding how its operation is affecting small andmedium enterprise development and local economic growth. Theresearch project began in 2003 and will continue into the operatingphase.

The main objective of the monitoring study is to facilitate aconstructive dialogue concerning the course of the project betweenstakeholders at the local and regional levels, and thus identifyopportunities to modify, start or stop relevant activities.

For further details see www.statoilhydro.com

StatoilHydroSnøhvit: Trailing

research andmonitoring study

The Azeri-Chirag-Gunashli (ACG) oil field and Baku-Tbilisi-Ceyhan(BTC) pipeline are two of BP’s largest projects in Azerbaijan, acountry that has struggled economically since the break-up of theSoviet Union.

To support local economic growth, BP engaged the InternationalFinance Corporation (IFC) and other partners in the ACG/BTC SMELinkages Program, which comprises supply chain development,access to business services, and access to finance. These elementswere intended to help improve the capacity ofsmall- and medium-sized enterprises (SMEs)as well as have lasting effects on jobgeneration and socioeconomic conditionsin the target areas.

In order to determine whether any SMElinkages program is actually impactinglocal economic growth, the IFC developeda measurement system focused particularlyon measuring the expansion of employmentand the increase in annual sales for SMEs.

For further details see www.bp.com and www.ifc.org/sme

BP & IFC BTC SME linkages

“Understanding and managing theimpacts of our operations is a crucialelement of sound project execution. Ithelps ensure our license to operate andthe relations of trust with stakeholdersneeded to succeed in our industry.”

Anders Kullerud, Senior Vice President, Corporate Integrityand Social Responsibility, StatoilHydro

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The knowledge gained canlead to new initiatives suchas marketing innovations,local enterprise developmentinitiatives, and more focusedsocial investment programs.

W did

comp le A company’s greatest

impacts may occur outsideits sphere of direct control

Since its launch in 2003, Anglo American has implemented the SEAT at more than 55 operations in 16 countries worldwide andtrained more than 350 employees in theSEAT method and its application. Thetool has facilitated a range ofmanagement initiatives andcommunication strategies byhelping the company focus onwhere it really adds value. Theseinclude a major enterprisedevelopment program in Chile andmany supply chain, training andhealth programs elsewhere. It is provingto be a valuable aid in planning for eventual mine closure and legacyissues.

Anglo American launched a revised version of the toolbox in thesecond half of 2007 to streamline the assessment process. Therevision also addresses the growing interest in the “resource curse”(the notion that abundant natural resources can actually hamperdevelopment) and health and human rights issues, and providesmore guidance on managing relationships with stakeholders. Thenew version is being rolled out with an improved training programand the encouragement of Anglo CEO Cynthia Carroll for sites todevelop ambitious management measures and targets in theirsecond SEAT assessments.

Anglo AmericanSocio-Economic

Assessment Toolbox

The Indonesia and South African studies have provided different butequally important lessons for the company. Not only have thestudies helped Unilever and its local operating companies identifyareas where it can enhance its societal impact and build businessvalue, they have also contributed to a greater understanding amongthe wider business community, governments, civil societyorganizations and academics about the relationship between amultinational business and development.

In Indonesia Unilever expected to see a large producer and supplierfootprint. This was confirmed by the study. They were howeversurprised by the scale of their impact in the distribution and retailchannels where they found they were impacting almost twice asmany people (190,000 people) than in thesupply chain (100,000 people).

The study in South Africa corroboratedthe company’s extensive reach beyondits direct impacts and highlighted areaswhere the company could providegreater support to the South Africaneconomy as well as boost its ownproductivity and competitiveness.

By looking at its operations through the lenses of its partners andexternal stakeholders, both studies have provided Unilever withextremely useful lessons. In parallel to the two country studies, thecompany has also started exploring a new tool called “Brand Imprint”that assesses the social, environmental and economic impacts of andchallenges and opportunities for its brands.

UnileverImpact studies in

Indonesia and South Africa

The impact of mobile phones is far more wide-reaching thanVodafone initially expected. Mobiles are used, valued and owned inthe developing world very differently than in established Westernmarkets. Although the absolute rates of mobile penetration are lowin Africa, this underestimates the real impact that mobiles are havingthrough the innovative and entrepreneurial ways in which thetechnology has been extended beyond the model of individualownership. In Africa, mobiles are informally shared between peopleand thus the impacts often extend far beyond the number ofsubscribers alone. Thousands of jobs have been created, and somevery successful indigenous companies have emerged as a result ofthe formation of private resellers of mobile services and the provisionof mobile phones for public use, even in rural communities

Vodafone is currently in the process of exploring newmobile services and products to enhance their socio-economic impact in developing countries. One suchprogram, M-PESA, allows customers to access cashthrough their mobile phones. With more than amillion M-PESA customers in Kenya, the company iscurrently working with the local government to testa pension payment program and is working withCitigroup to explore remittance payments throughmobile phones. The same mobile payment platformthat supports M-PESA will be scaled up to other countrieslike India, Tanzania and South Africa.

Vodafone is also working with governments to both further theirunderstanding of the impact of mobile phones on economic growth,and to establish more favorable regulatory frameworks that canfoster the economic potential of the mobile phone. The companysees the SIM studies as part of a new type of market research andplans to continue developing them for the various products andservices it offers in regions throughout the world.

VodafoneSocio-economic

Impact of MobilesProgram

What did the companies learnfrom the assessment?

Senior management buy-inis critical to ensuring follow-up actions are put inplace.

“The SIM project set out to provide asystematic analysis of the impact ofmobiles, going beyond the rich butscattered array of anecdotal evidence.This rigorous approach to providing dataand estimating impacts is essential for aproper understanding of the partVodafone is playing in its activities aroundthe world. This in turn can help improveboth business and policy decisions.”

Diane Coyle, Chairperson, Vodafone 6

Stakeholderengagement is importantto understanding acompany’s role in society and identifying risks andopportunities but needs to be handled carefully.

hat the aniesarn?

Any impact study shouldconsider working withexternal experts to balanceinternal biases and seecompany activities through anexternal lens.

For Alcoa the stakeholder advisory group underscored the need to engage thecommunity at the earliest phase of the project. The sustainability initiative laid thefoundation for the company’s integration into the community as well as theformulation of its policies and goals forIceland at the national and local level. It also helped strengthen relationshipsbetween Alcoa and its partnerLandsvirkjun by building a culture ofopen and effective communication.

For Landsvirkjun the project changedits approach to both sustainability andcommunity consultation. The companyis now developing its own sustainabilityprinciples and is also working with communities more openly and with a broaderperspective.

Alcoa and

Landsvirkjun EastIceland Sustainability

Initiative

Although StatoilHydro has only assessed the impacts from theconstruction phase of the Snøhvit project, the study has begun tounravel some of the complexities of the economic and social impactsassociated with it. They found a steady increase in the number oflocal supply contracts from NOK 600 million (US$ 110 million and6% of the total) in 2001 to more than NOK 1.9 billion (US$ 350million) in 2007. However several national suppliers have establishedlocal branches in Hammerfest, creating a potential overestimate ofthe “local” sourcing used.

The research also revealed that StatoilHydro’s investments in capacitybuilding and requirements for quality assurance systems for health,safety and the environment have played a positive role in fosteringgrowth and improved performance from business in the region. Theyalso found some negative externalities suchas the difficulty in attracting skilledworkers due to the doubling ofhousing prices since 1999. Thishighlighted that any municipalhousing planning processes shouldstart in due time to keep pacewith labor migration. In additionthe study found that the regionalpolicy instruments – traditionallyaimed at countering economic crises –are not fully developed to maximize thegrowth opportunities and economic linkages created by investments ofthis scale.

Engaging stakeholders throughout the research and monitoringprocess has provided extremely important lessons on how thecompany can adapt its operations to meet both commercial andsocietal needs. In 2008, the monitoring study is entering theoperations phase of the project.

StatoilHydroSnøhvit: Trailing

research andmonitoring study

The evaluation revealed that in 2006 BP spent approximately US$ 77million per year on procurement from some 444 local SMEs. It alsorevealed that 35 new small-business management courses weredeveloped in Russian and Azeri, with demand for these fee-basedcourses outpacing availability.

The newest component of the program, the Supplier Finance Facilitypilot, evaluated applications from a number of industry sectors –from transportation services to printing to engineering to wastemanagement. Two applications were approved and disbursed. Asubstantial increase in credit applications and disbursements isexpected in 2008.

The evaluation not only demonstrated thepower of the linkages program to enhanceBP’s impact on SME growth, but alsoallowed all parties to identify strategiesfor further enhancing impacts. Inparticular, the SME Linkages evaluationnoted that the local supplier base inAzerbaijan could be expanded throughgreater access to finance, focused technicalassistance and customized components basedon local needs. In addition, they found that usinga central entity such as the Enterprise Center provided a uniqueplatform to advance the initiative in an efficient fashion.

BP & IFC BTC SME linkages

“I was very pleased how Alcoa andothers came to the table to discuss theprojects and focus on what we need todo to lessen the impact. I would haveliked the industrialization to havehappened a little slower, but we had nochoice. The advisory group has helpedus with managing the impacts, and Ithink the managers of Alcoa andLandsvirkjun are trying their utmost tobe responsible in every aspect. Theseprojects have given us renewed hope forthe future of our community.”

Davíð Baldursson, Christian Minister, East Iceland resident,and member of the Sustainability Initiative Advisory Group

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The International Finance Corporation approachto measuring impact“Measuring the results of our work is critical to understanding howwell our strategy is working – and whether IFC is reaching thepeople and markets that most need our help.” Lars Thunell,Executive Vice President and CEO, IFC

The International Finance Corporation (IFC) fosters sustainableeconomic growth in developing countries by financing private sectorinvestment, mobilizing capital in the international financial markets,and providing advisory services to business and governments. Theirclients include many WBCSD member companies operating inemerging markets.

Over the past years, IFC has taken major steps to better track, reportand understand its development results. In 2007, IFC integrated forthe first time financial, sustainability and development effectivenessreporting for its entire portfolio into its Annual Report. IFC is the firstmultilateral development bank (MDB) to do this and to seek externalassurance for the report’s development results. IFC has also led thedevelopment of private sector indicators on which several MDBs aregoing to report in 2008 – a joint effort to help improve developmentresults measurement and reporting. Knowing the results – forexample how many people IFC is reaching through its clients – ishelping it achieve its vision: that poor people have the opportunityto escape poverty and to improve their lives.

Why did IFC create the Development OutcomeTracking System?IFC launched the Development Outcome Tracking System (DOTS) in2005, enabling IFC to track the development results of its activitiescontinuously and contemporaneously, in order to:

• Assess to what extent IFC is achieving its mission of promotingsustainable private sector investment in developing countries,helping to reduce poverty and improve people’s lives

• Calibrate its engagements to achieve more effective operationsand refine its business strategy more quickly

• Articulate and report on successes and areas for improvement, topromote learning throughout IFC and to improve transparencyand accountability to its stakeholders

• Foster a culture in which achieving development results is a keyincentive for staff – development results inform incentivesthroughout IFC, cascading from a corporate scorecard toindividual staff.

ResultsThe 2007 Annual Report discusses the expected results of the year’snew business as well as the performance and development results ofIFC’s entire portfolio.

For example, through the DOTS tracking system IFC was able toreport on how its investments touch the lives of stakeholders bycollecting data across standard development reach indicators: incalendar year 2006, IFC-supported clients treated 4 million hospitalpatients, educated 353,000 students, and provided electricity to 9.5million, water to 15.3 million, and new phone connections to 53million customers. IFC-supported clients also extended 5 millionloans worth US$ 57 billion to micro, small and medium enterprises.

As a comprehensive measure of the development effectiveness of itsinvestments, IFC reports an overall development outcome rating thatmeasures the proportion of the portfolio that outperforms both themarket and IFC’s high evaluation standards. For 2007, 63% of IFC’sinvestments exceeded these performance criteria and had highdevelopment results. Having comparable development results acrosssectors, regions and business lines helps IFC make strategic business

decisions. Based on the potential for reducing poverty andgenerating significant improvement to people’s lives – and based onthe superior development results that have been or are expected tobe achieved – IFC has emphasized certain sectors. For example,investments in infrastructure are prioritized, given the extraordinaryinvestment need of up to 9% of GDP in some developing countrieson the one hand, and the positive development results on the other.Another focus is the development of financial markets, given theimportance of stable financial systems and access to finance – whereIFC emphasizes particularly underserved groups.

Next stepsAs more data becomes available with time, IFC will be in a betterplace to monitor its development impact year-on-year. In the AnnualReport 2008, IFC will be able to report on the change in itsdevelopment effectiveness and deepen its analysis of the factorsdriving better or worse performing projects.

For further details see www.ifc.org/results

The DOTS tracking system

The new DOTS tracking system builds on IFC’s long-standingframework for evaluating private sector investments. IFCmonitors the results of its entire active portfolio of bothinvestments and advisory services through DOTS, assessesdevelopment outcomes throughout a project’s life againsttargets established at the outset, and aggregates andcompares performance across industry sectors, regions,programs and business lines using standard performanceindicators.

Overall, results monitoring of IFC’s investments in DOTSincludes principally:

• A development outcome rating for each investment in IFC’sportfolio, which is assigned at least once a year. Theoverall assessment of a project’s development outcome isbased on four performance components: financial,economic, and environmental and social performance, aswell as broader private sector development impacts. Eachcomponent captures impacts on key stakeholders affectedby the project (e.g., suppliers, employees, customers,community, government and others) and has specificcriteria to assess performance. IFC applies specificevaluation standards for financial and non-financial sectorprojects that are consistent with agreed good practicestandards for private sector evaluation. Under theenvironmental and social component, for example, IFCanalyzes the impacts on the surrounding communities anduses its performance standards to assess the project’sperformance.

• Industry-specific standard indicators measure thedevelopment reach of our investments on stakeholders.For each industry – or business line for advisory services –a menu of standard indicators captures the sector’s typicaldevelopment impacts. In addition, there are IFC-widecorporate indicators that are mandatory for trackingparticular impacts related to environmental and socialperformance and corporate governance issues. Standardindicators allow IFC to aggregate and compareperformance and development reach by sector or regionand across IFC. As a result, IFC knows how many peoplegot access to services or job opportunities globally and inevery region. For example, in Africa alone IFC’s clientsprovided 11 million new phone connections in 2006.

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The WBCSD approach tomeasuring impactIn the spring of 2006, the WBCSD embarked on a two-year effort todevelop a framework to assess the contribution of business to theeconomic and broader development goals in the societies wherebusiness operates. This grew out of a request by WBCSD membercompanies to develop a measurement framework that can underpintheir license to operate, improve the quality of stakeholderengagement, help manage risks more effectively and identify waysto enhance the business contribution to society.

The companies requested a clear and practical measurementmethodology that could be adapted to different business sectors, beused by operations anywhere in the world and be tracked over time.Unlike environmental impact assessments (EIAs) or environmental,social and health impact assessments (ESHIAs) that are normallycarried out as part of due diligence to determine future potentialimpacts arising from a greenfield or brownfield business investment,they wanted to be able to measure actual impacts at any stage inthe life cycle of an operation.

To do this the WBCSD made use of the lessons learned from existingapproaches, including those outlined in this publication, to developan overarching framework for assessments across sectors, sites,product-lines and/or countries.

Features of the WBCSD Measuring Impact Framework

• Grounded in what business does – built by business forbusiness

• Moves beyond compliance – attempts to answer questionsabout what business can contribute beyond traditional reporting

• Encourages stakeholder engagement – supports opendialogue with stakeholders to create a shared understanding ofbusiness impacts and societal needs, and to explore whatbusiness can and cannot do to address these needs

• Flexible - designed for any business and/or industry at any stagein its business cycle, operating anywhere in the world

• Complements existing tools – makes use of what is already outthere (for example, the Global Reporting Initiative and IFCPerformance Standards).

Primary usersThe output from the Framework is designed for company decision-makers on a site or product line, and/or at a country level. Theassessment itself should be carried out by a skilled practitioner. While theFramework has been developed for operational managers, differentpeople within the company, such as procurement and tax advisors, mayalso use the Framework to refine company policy and/or strategies.

For more information see www.wbcsd.org/web/measuringimpact.htm

Better relations

Better decisions

ConclusionSociety now expects large companies to do more than generateprofits and pay taxes. The WBCSD believes that the leading globalcompanies of the future will be those that do business in ways thatalso address the world's major challenges – including climate change,poverty and inequity – through their core business strategies.

Building businesses that are truly inclusive – benefiting both businessand society – is not easy. It requires clear measures of success thatcan be tracked over time. Today it is inconceivable to launch a newproduct without conducting market research or to establish a majoroperation without an environmental impact assessment. Increasingly

companies are expanding this research to understand the broaderimpacts of their business on the societies where they operate.The WBCSD’s Measuring Impact Framework aims to help companies do this.

“The only man who behaved sensibly was mytailor; he took my measurement anew every timehe saw me, while all the rest went on with their oldmeasurements and expected them to fit me.”

George Bernard Shaw

Stakeholderengagement

STEP 1 – Set boundariesDetermine the scope and depth ofthe overall assessment in terms ofgeographical boundary and types of business activities to be assessed..

Step 3 – Assess contribution todevelopmentAssess what your direct and indirectimpacts contribute to the developmentpriorities in the assessment area.

Step 2 - Measure direct and indirect impactsIdentify and measure your direct and indirect impacts,mapping out what is within your control and what you caninfluence through your business activities.

Step 4 – Prioritize management responseExtract the key risks and opportunities relative to your societalimpact and based on this, develop the management response.

Approach adopted in the Framework

The Framework is based on a four-step methodology

Measuring Impact Framework

Decision by individual companies

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