What if it were possible to measure the social and environmental impact generated by a company with the same level of rigor used to assess its financial performance? A few years ago, this question might have sounded utopian, but today it lies at the heart of a profound transformation in how companies relate to society and the planet. The answer is beginning to take shape through the innovative approach of Impact Accounting.
For decades, companies’ performance was measured almost exclusively in financial terms: revenue, profits, growth, or returns for shareholders. More recently, the ESG (Environmental, Social, and Governance) movement aimed to expand this perspective by incorporating concerns such as environmental protection, human rights, and business ethics. However, as ESG became mainstream, criticisms arose regarding its actual effectiveness. Many ESG reports continue to be seen as exercises in compliance or branding, with limited comparability across companies and little value for decision-making.
It is in this context that Impact Accounting emerges, an innovative approach seeking to transform how we measure and communicate the value that companies create (or destroy). The key difference lies in the monetary quantification of social, environmental, and human impacts generated by an organization. Rather than relying solely on indicators like tons of CO₂ emitted or hours of volunteer work, Impact Accounting assigns a financial value to these externalities, making them comparable, auditable, and integrable into management systems.
The concept may sound technical, but the principle is simple: if a company benefits or harms society, this should be objectively reflected in its performance reports. For instance, if a training program improves employees’ job prospects, that benefit can be measured in terms of the economic value created. Conversely, if an industrial process emits greenhouse gases, the impact can be monetized based on the social cost of carbon. In this specific case, experts estimate that the total social cost of each ton of CO₂ emitted is $236.
This practice is gaining traction internationally, with organizations such as the International Foundation for Valuing Impacts (IFVI), the Value Balancing Alliance (VBA), and the Impact Economy Foundation (IEF) leading the development of robust methodologies. The European Commission has also shown interest by incorporating the principle of double materiality into the new Corporate Sustainability Reporting Directive (CSRD), which requires companies to report not only on how social and environmental risks affect their financial performance but also on how their activities impact society and the environment.
Portugal is not standing on the sidelines of this evolution. On June 3, Católica-Lisbon, through its Center for Responsible Business and Leadership, and PwC Portugal hosted the first national conference on Impact Accounting. The event brought together academics, international experts, and business leaders for a discussion that demonstrated how this methodology can be applied in a practical and strategic way. Real-life case studies were shared by companies already on this path, alongside conversations about implementation challenges and the need for international collaboration to ensure credible and consistent standards.
The message was clear. Impact Accounting is not just another reporting mechanism, but rather a new approach to measuring business value in a fairer, more transparent, and sustainable way. It offers a language that aligns the interests of investors with those of society, encouraging more informed and responsible decision-making.
Naturally, challenges remain, such as lack of data, methodological complexity, or cultural resistance within organizations. Still, the potential benefits are significant: reducing the risk of greenwashing, strengthening stakeholder trust, supporting strategic decision-making, and, above all, contributing to a more sustainable and inclusive economic model.
As Peter Drucker once said, “what gets measured gets managed.” Impact Accounting invites us to do exactly that: to go beyond financial performance and start measuring what truly matters.
Filipa Lancastre, professor at CATÓLICA LISBON