The Value Commission brought together over 30 expert Commissioners from across the world to drive transparency and accountability for application and use of value factors and valuations by organizations and businesses. It has now sunset, and it merged into the Impact Value Standards Board (IVSB), together with the Valuation Technical & Practitioner Committee (VTPC).
To deliver value to their shareholders, companies depend on, and impact, natural resources, people, and social cohesion, as well as finance and manufactured goods. Recognizing this interdependence, companies are increasingly required or motivated to disclose details about these relationships with their environmental, social, and human capital. Therefore, gathering and working on accurate information on these very relationships, alongside traditional financial information, is essential to making better-informed decisions.
What is a Value Factor?
A value factor is an expression of the relative importance, worth or usefulness of changes in the capitals to people. Read more on Value Factors here.
Value factors for impacts and dependencies act as a lens through which businesses can view direct and indirect changes in the well-being people experience caused by shifts in natural, social, and human capital due to organizational or business-related activity. They can be expressed in different ways: with quantitative metrics, monetary, such as lost wages due to poor health from pollution, or non-monetary, such as changes in life satisfaction due to training programs. They can also use qualitative metrics implying descriptive terminology of impacts experienced by different individuals or groups.
Developed and based on assessments and studies, value factors help to translate the information that organizations collect across operations and supply chains and transform it into actionable insights based on the assessment of their impacts and dependencies across natural, social and human capital. This enables them to make better-informed decisions that deliver value across all capitals in a consistent way.
The Work of The Value Commission
While value factors have the potential to be transformative, there is currently little transparency, accountability, or consistency in the way that these factors are developed and applied in valuation assessments. The process used to calculate and implement them can be proprietary and opaque, and therefore confidence in results can vary significantly.
To ensure that decisions are taken on the most accurate information available, we must improve clarity and governance on value factors that are used. Therefore, the Value Commission has developed the Governance for Valuation. This framework is designed to enable assessment of value factors or capitals impact information and their suitability for a given purpose, and it is designed to apply to a wide range of decision-making scenarios, including those of financial institutions, corporate entities, and government bodies.
This transparency may be related to the scope of the decision they intend to inform, the methodologies used to create them, or the level of detail included in source data used to develop the factors, as well as how justice, equity, diversity, and inclusion were considered in their development. There are currently 53 criteria drafted around these and other broad themes.
The Governance for Valuation comprises three distinct yet interconnected parts:
- Transparency Requirements
Encompass pre-existing value factors and methodology decisions in an assessment, structured as tables detailing how these decisions should be reported (i.e., Transparency Reports documenting measurement of impact drivers, bespoke value factors and generic value factors). - Confidence Criteria
Provide decision-makers with a framework to assess whether the capitals information provided to them is fit for the intended purpose or not. They draw on the Transparency Requirements with a series of decision-trees (. i.e., for scope and boundary, specificity in estimating impact drivers, etc). - Value Notes
Analogous to notes on financial statements, they briefly present any pertinent information on how figures were calculated, how they should be interpreted, and any caveats to bear in mind.
