Summa Equity: Impact accounting to measure and manage impact for a more stakeholder-centred economy

PRI Awards 2024

Organisation:  Summa Equity 

Signatory type: Investment manager 

HQ country: Sweden 

The approach, initiative, or process 

Summa Equity is dedicated to driving systems change to ensure a long-term positive impact on our world. Recognising that issues such as climate change, biodiversity loss, inequality and civil unrest stem from the systems we have built, we understand that these systems are functioning as designed. Therefore, if we seek different outcomes, it is essential to fundamentally transform these systems. 

Systems thinking allows us to approach stewardship activities holistically, ensuring we grasp the full context of portfolio strategies and challenges before devising solutions. This prevents the inadvertent creation of new problems while addressing existing ones. For example, focusing solely on reducing CO2 emissions could lead to biodiversity loss if we rely on unsustainable biomass feedstock. Likewise, high carbon taxes without proper support for vulnerable groups can exacerbate social inequalities. 

The Theory of Change framework is instrumental in our strategy and sourcing efforts. It helps us conceptualise the systems we aim to transform, envision their future state and adopt a structured approach to tackling challenges. This methodology enables us to identify subthemes and companies that align with our impact goals, ensuring our contributions are meaningful and effective. 

One of the methods we use to implement strategies aligned with the Theory of Change framework is impact accounting. Impact accounting is pivotal in measuring and managing impact, driving us towards a more stakeholder-centred economy. This approach goes beyond traditional metrics that focus on easily quantifiable inputs, activities and outputs, and instead emphasises the importance of outcomes and impact, which are often harder to measure but critical for creating real-world change. 

Impact accounting integrates elements of the Theory of Change to identify impact pathways, providing a comprehensive view of a company’s positive and negative impacts. By translating these impacts into monetary terms, we can enhance decision-making for management teams, investors and consumers. This holistic assessment of company performance helps identify resilient and forward-looking business models. It also fosters greater transparency and accountability for corporate impacts on society and the environment. 

For several years, Summa has employed impact accounting to measure environmental and employment impacts across portfolio holdings. However, in 2023, we recognised the need to put more emphasis on impact valuation – a fundamental part of impact accounting – throughout the value chain, helping managers incorporate the value of human, social and natural capital in their strategies and decision-making. To achieve this, Summa partnered with a specialised impact valuation consultant in a collaborative project with three pilot companies. 

The project with the portfolio companies has been completed, and according to the head of sustainability at one of the companies, the process and results have helped the company be more objective and quantitative when setting priorities. Specifically, the company can better assess whether its sustainability strategy addresses the most critical aspects; identify data gaps for more detailed and precise reporting beyond global averages; and provide essential input for double materiality assessments as required by CSRD. 

The impact accounting analysis model included several impact drivers relating to human capital, social capital, and natural capital. The model highlights different drivers, depending on the business being analysed. For instance, for an online food retailer, the model focused on: 

• Human capital: Assesses the value of employment and the risks of child labour and forced labour, which are prevalent in the food sector. 

• Natural capital: Looks at energy consumption and food production emissions, considering various environmental factors such as land use, climate emissions and pollution.  

• Social capital: Measures factors such as income tax contributions. 

Unlike the companies’ internal carbon analysis, the model considered various environmental indicators, including land use, climate change, air pollution, resource use, water pollution and water use. This detailed analysis highlights negative impacts beyond carbon emissions. For the online food retailer, for example, these included land use change, which contributes significantly to species extinction and the overall environmental footprint of food production. 

Ultimately, this comprehensive impact accounting analysis can provide valuable insights that can help guide the companies’ future strategies and decision-making processes towards more sustainable practices. 

The online food retailer is currently going through a strategy and reporting process where the model is one of many inputs and considerations. When prioritising sustainability targets and efforts leading up to 2028, the company will follow recommendations included in the EU double materiality assessment framework. Furthermore, the company has stated that the model’s results and recommendations will also be an input. In particular, critical topics will be brought to the fore in procurement practices and supplier collaborations. These include: 

• Land use: Improving reporting and data to better understand not only climate impact, but also land use impacts.   

• Human rights: Exploring the risk of human rights abuse in the supply chain. 

• Operational impacts: A focus on operational targets that are under the company’s direct control and an important factor for stakeholders (customers, investors, employees). 

In summary, impact accounting supports long-term value creation by identifying companies that effectively manage social and environmental impacts and align with ESG objectives. This leads to better portfolio management and informed decision-making. Summa’s commitment to systems change, guided by systems thinking, the Theory of Change framework and impact accounting, enables significant, sustainable impacts across our portfolio, focusing on transforming the systems underlying global challenges to create a better future. 

The measures to ensure transparency 

Our approach to systems change and impact accounting is centred around collaborative partnerships, particularly with our portfolio companies and specialised partners such as the  Harvard Business School, the International Foundation for Valuing Impacts, and specialised consultants. These are exemplified by: 

Active involvement of pilot companies: The pilot companies were integral to the project, providing essential data and insights. Their active participation ensured that the impact accounting model was both practical and tailored to real-world business operations.   

Enhanced decision-making: The collaboration allows these companies to integrate the findings into their strategic planning and sustainability initiatives, leading to more informed and impactful decision-making. 

Practical outcomes and transparency 

The collaborative efforts in the project resulted in several practical outcomes, as described in the example above. Transparency is a cornerstone of our approach, ensuring that all stakeholders are informed and engaged in our impact accounting processes. We employ several measures to maintain this transparency: 

Annual reporting: We publish detailed results of our impact accounting analyses in our annual report. This includes comprehensive data on environmental, social and human capital impacts, providing stakeholders with clear and accessible information on the results and methodology. 

Workshops, roundtables, and university programmes: Summa actively participates in and organises workshops and roundtables to share insights and methodologies for stakeholders and peers to learn about impact accounting and its implementation.  

Full model transparency: During these events, we provide full transparency into our impact accounting model and the drivers of the results. This openness ensures that other organisations can learn from our approach and apply similar methodologies in their contexts. 

 

PRI disclaimer:This case study aims to contribute to the debate around topical responsible investment issues. It should not be construed as advice, nor relied upon. It is written by a guest contributor. Authors write in their individual capacity – posts do not necessarily represent a PRI view. The inclusion of examples or case studies does not constitute an endorsement by PRI Association or PRI signatories.