As companies begin to recognize that natural, social, human, and produced capitals are the bedrock of human wellbeing and economic prosperity, there is a growing appetite for accounting approaches that reflect this broader understanding of value. In this context, an Integrated Profit & Loss (IP&L) account is emerging as a powerful tool.
Members of the Capitals Coalition Advisory Panel recognized a growing need for an harmonized understanding of how to measure, manage, and communicate the broader capitals the economy impacts and depends on, driving value creation both for business and society. In 2024, a separate peer-to-peer learning group on IP&L statements and similar methodologies was initiated. The objective of this working group has been to convene practitioners and exchange experiences about approaches, methods, data, and overall learning to develop and deploy IP&L approaches.
What is Integrated Profit & Loss (IP&L) account?
Businesses increasingly recognize the need to move beyond being exclusively reliant on financial metrics as a measure of their overall performance. They are now moving towards valuing people and the planet. Such integrated thinking is a critical step for businesses to improve decision-making and planning, better withstand and recover from disruptions, and to identify opportunities amongst challenges.
Positioned as a specific application of an Impact Statement, the IP&L mirrors the structure of a traditional financial P&L account while quantifying, in monetary terms, an organization’s positive and negative performance and impacts across its value chain, beyond financial metrics. IP&L accounting provides a transparent and strategic lens through which organizations can understand the societal impacts of their operations. Key features of IP&L accounting include its comprehensive scope and structured alignment with financial reporting. Though in its early development, IP&L is ready to be used and is already proving to be an innovative framework for impact management – and for uses such as evaluation of projects and investments, strategic planning, and risk management, while supporting stakeholder engagement and communications.
Use cases of IP&L
Accounting for Value Report
The report “Accounting for Value: Emerging Approaches of Integrated Profit & Loss and Impact Statements” is one of the outputs of this working group and is the first publication arising from this collaborative effort, bringing together use cases across business, finance, and the public and third sectors. The IP&L approach presented in this report incorporates value perspectives from a broad range of stakeholders enabling the organization to effectively assess impact and potential trade-offs – something that is ever more important and urgent.
The report showcases current practices and real examples, to raise awareness about this innovative approach and ultimately promote its development and use. This publication is not intended to provide technical definitions or formal guidance on how to create an IP&L. Drawing from case studies of global companies and investors, this report outlines the benefits of adopting IP&L, the key features of IP&L, and what is needed for future development. This report is intended for business and finance professionals, especially those interested in exploring novel accounting approaches for impact, and regulators, supervisors, and policymakers who are keen to understand the relevance and state-of-the-art of integrated impact accounting.
Aims of the report:
- Assess the latest developments in understanding the relationship between nature, people, and society, and the financial performance of businesses and financial institutions.
- Identify common characteristics, use cases, and emerging practices in IP&L implementation across sectors.
- Highlight development areas and methodological refinements that could strengthen the IP&L approach.
- Promote interest and uptake of the IP&L methodology among organizations seeking to enhance resilience, transparency, and long-term value creation.
Next Steps
We invite you to explore these detailed case studies, and to join these front-runner businesses in their effort towards embedding the value of all capitals in operational and strategic decision-making, and ultimately, into our economic and financial systems.
