As demands for corporate sustainability intensify, companies are under mounting pressure to demonstrate not just financial results but also their broader impact on people and the planet. Regulatory developments, such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), reflect a global shift toward more standardized and transparent sustainability disclosures. The CSRD, which came into effect for large public-interest entities in 2024 and will gradually extend to a wider range of companies, represents a significant step forward. It requires companies to report according to the principle of double materiality, which considers both how sustainability issues influence a company’s performance and how the company’s activities affect society and the environment. In doing so, it moves beyond traditional ESG metrics and supports more integrated, impact-driven reporting.
Yet converting complex environmental and social outcomes into data that supports meaningful decision-making remains a significant challenge. In this context, impact accounting is emerging as a promising solution. This innovative approach aims to address many of the shortcomings of conventional ESG reporting, which often focuses on inputs and outputs rather than long-term outcomes. Current sustainability metrics also tend to lack the consistency, comparability, and credibility needed to guide action or build trust. As a result, ESG disclosures are often perceived as compliance-driven or superficial branding tools, reinforcing concerns about greenwashing and undermining their usefulness.
Impact accounting introduces standardized principles to measure and monetize an organization’s environmental, social, and human capital impacts, including externalities typically excluded from financial statements. By using value factors to translate non-financial indicators, such as greenhouse gas emissions or changes in employee well-being, into monetary values, it provides a more comprehensive, comparable, and actionable understanding of total value creation. Despite its potential, impact accounting faces challenges. Data gaps, especially across global value chains, can affect reliability. Some impacts, like well-being or social cohesion, are difficult to quantify and risk being oversimplified when expressed in financial terms. Ethical concerns also arise around monetizing fundamental human rights, which may reduce complex experiences to economic values. When applied with transparency and care, however, impact accounting can significantly enhance sustainability reporting. It enables companies to align financial performance with long-term social and environmental outcomes, responding to growing stakeholder expectations for meaningful accountability.
Several key organizations are leading the development and refinement of impact accounting methodologies. The International Foundation for Valuing Impacts (IFVI), born out of Harvard’s Impact-Weighted Accounts Project in 2019, advances global research and pilots the implementation of innovative tools. The Value Balancing Alliance (VBA) collaborates with multinational firms to co-create a globally applicable methodology supported by the EU and OECD. The Impact Economy Foundation (IEF) promotes integration through tools such as Impact-Weighted Accounts Frameworks and Integrated Profit and Loss statements. To ensure transparency and consistency in valuation, the Value Commission has issued the Governance for Valuation guide, which sets standards for developing and disclosing value factors. Broader coalitions, including the Global Steering Group for Impact Investment, Impact Management Platform, UNEP Finance Initiative, and Capitals Coalition, contribute to aligning methodologies with global goals, such as the SDGs and the Paris Agreement. Platforms like the Value Accounting Network are helping consolidate these efforts, laying the groundwork for embedding impact into core business and financial systems and aligning profit with long-term value creation for society.
By fostering standardization, auditability, and methodological rigor, impact accounting strengthens sustainability reporting and reduces greenwashing risks. Transparent impact data empowers regulators and investors, encourages sustainable business practices, and supports a more inclusive view of corporate value that integrates both shareholder and stakeholder interests.
If you are curious to know more about impact accounting, join us at “Driving Change: Católica-Lisbon & PwC’s first Impact Accounting Conference” on June 3rd, from 9:30 AM to 12:00 PM, on the 3rd floor of Católica-Lisbon. This event will bring together leading international experts and practitioners to discuss the role of impact accounting in the evolving landscape of non-financial reporting. Through dynamic discussions and practical insights, we will delve into the latest methodologies, real-world challenges companies face in implementation, and emerging solutions shaping the future of corporate accountability. It’s an opportunity to connect, learn, and engage in shaping a more sustainable and transparent business world.
Have a great and impactful week!
Sofia Conde
Researcher at the Center for Responsible Business and Leadership at CATÓLICA-LISBON
Filipa Lancastre
Assistant Professor of Business Ethics and Corporate Sustainability (adj.) at CATÓLICA-LISBON