Key terms and concepts
Explore key terms below or watch this short video for an introduction to some core concepts.
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A
Accuracy
The extent to which information is free from error.
Source: Merriam-Webster Dictionary
Allocation
Apportioning to organisations or other human populations fair, just and proportionate shares of the responsibility to produce and/or maintain a resource at no worse than the level set by social or ecological thresholds. Learn more about Thresholds and allocations.
Source: Adapted from Global Thresholds and Allocations Council
Asset
Used on this site to refer to a security such as debt or equity issued by an organisation, or a physical asset such as land or a building.
Source: Adapted from Investopedia (definitions of ‘financial asset’ and ‘real asset’)
Assurance
The methods and processes employed to evaluate an organisation’s disclosures about its performance, as well as its underlying systems, data and processes, against suitable criteria and standards in order to increase confidence in the information for use in decision-making. The results are shared in a written conclusion called an assurance statement.
Source: Adapted from AccountAbility
Assurance standard
Standardising how to evaluate information against a defined set of criteria.
Source: Impact Management Platform
B
Baseline
A starting point used for comparisons.
Source: Oxford English Dictionary
Baseline data
Database of information that can be used as a baseline for performance.
Source: Impact Management Platform
Benchmark
The evaluation (of something) by comparison with a point of reference. Putting performance into a common unit (using ratings or valuation) is necessary to enable comparison of performance at different units of analysis.
Source: Oxford English Dictionary
Business activities
The resources and relationships that the organisation draws upon for its business activities.
Source: OECD Development Assistance Committee
C
Capitals
The resources and relationships affected and transformed by an organisation. The capitals are characterised in the Value Reporting Foundation’s Integrated Reporting Framework as financial, manufactured, intellectual, human, social and relationship, and natural. The OECD’s Well-being Framework groups financial, manufactured and intellectual capital into one category: economic capital. Capitals Coalition do not include intellectual capital, and use the term produced capital, instead of manufactured capital.
Source: Capitals Coalition; Value Reporting Foundation (VRF); OECD
Certification
The action or process of providing someone or something with an official document attesting to a status or level of achievement.
Source: Oxford English Dictionary
Completeness
Criteria are complete when the subject matter information prepared in accordance with them does not omit factors that could reasonably be expected to affect decisions of the intended users made on the basis of that subject matter information. Complete criteria include, where relevant, benchmarks for presentation and disclosure.
Source: International Standards for Assurance Engagements (ISAE) 3000
Context
Refers to the circumstances that form the setting for an event, statement, or idea, and in terms of which it can be fully understood. Here the term specifically refers to the other information that an organisation needs to collect to fully understand what type of impact has occurred, in order to make a judgement about the nature of the performance. This contextual information is sometimes referred to as the multi-dimensional nature of impact. See Assess Impacts.
Source: Oxford English Dictionary
Counterfactual
The situation or condition which hypothetically may prevail for individuals, organisations, or groups were there no intervention. Measuring the counterfactual answers the question: what would have happened to people or the natural environment if they/it had not interacted with the organisation?
Source: OECD Development Assistance Committee
Criteria
The benchmarks used to measure or evaluate the underlying subject matter.
Source: International Standards for Assurance Engagements (ISAE) 3000
D
Dependencies
When an organisation’s impacts, or changes in the external environment in which it operates, affect an organisation’s cash flows, or future cash flows, and therefore create or erode investors’ determination of its enterprise value.
Source: Value Reporting Foundation (VRF)
E
Enterprise value
Market capitalisation (shareholder value) plus the market value of net debt. It is determined by capital market participants based on their estimation of the present value of expected cash flows spanning the short-, medium-, and long-term. Essential inputs in determining enterprise value include corporate reporting in financial statements, as well as reporting on sustainability matters that it is reasonably possible will positively or negatively affect the company’s cash flows over time (i.e. affecting revenue, costs, assets, liabilities, cost of capital and/or risk profile). The term is widely used and is technically specific in capturing the notion of expected value creation/preservation/erosion over time for a company’s equity and debt investors. This expected value creation/preservation/erosion is fundamentally interdependent with a company’s creation/preservation erosion of value for its other stakeholders.
Source: Value Reporting Foundation (VRF)
Environmental Social and Governance (ESG) integration
The explicit and systematic inclusion of ESG issues in investment analysis and investment decisions. Put another way, ESG integration is the analysis of all material sustainability topics in investment analysis and investment decisions.
Source: Principles for Responsible Investment (PRI)
Evidence
Information used by the assurer in arriving at the assurer’s conclusion. Evidence includes both information contained in relevant information systems, if any, and other information.
Source: International Standards for Assurance Engagements (ISAE) 3000
F
Financial objective
Financial performance aimed at or sought.
Source: Adapted from Oxford English Dictionary
G
Governance
The system of rules, practices and processes by which a company is directed and controlled.
Source: Institute of Chartered Accountants in England and Wales (ICAEW)
Guidance
Information or instructions on how to do something.
Source: Cambridge English Dictionary
I
Impact
A change in an aspect of people’s well-being or the condition of the natural environment caused by an organisation.
Source: Impact Management Platform; Well-being defined as in OECD Well-being Framework
Impact classes
A classification methodology, akin to financial asset classes, that groups investments with similar impact characteristics based on their impact performance data (or, in the case of new investments, their impact objectives). Impact classes bring together the impact performance (or objectives) of the assets being invested in and the strategies that the investor uses to contribute to that impact.
Source: Impact Management Project (IMP)
Impact risk
The risk to stakeholders that the desired impact is not occurring, or that unexpected negative impacts are occurring. This risk is distinct from financial risk, since it is risk of consequences for affected stakeholders, rather than risk to the financial value of an organisation. There are 9 types of impact risk currently identified.
Source: Impact Management Project (IMP)
Impact thesis
The overall intention of the investor, and their contribution to achieving that intention.
Source: International Finance Corporation (IFC)
Input
The resources and relationships that the organisation draws upon for its business activities.
Source: Adapted from Value Reporting Foundation (VRF)
Integrated report
A concise communication about how an organisation’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation, preservation or erosion of value in the short-, medium- and long-term. The primary purpose of an integrated report is to explain to providers of financial capital how an organisation creates value over time.
Source: Value Reporting Foundation (VRF) Integrated Reporting Framework
Integrated thinking
The active consideration by an organisation of the relationships between its various operating and functional units and the capitals (or resources) that the organisation uses or affects. Integrated thinking leads to integrated decision-making and actions that consider the creation, preservation or erosion of value over the short-, medium- and long-term. In considering value, the organisation recognizes that the value created for itself (and, by extension, its providers of financial capital) is linked to the value created for other stakeholders and society at large.
Source: Value Reporting Foundation (VRF) Integrated Reporting Framework
Investor
A person, organisation, or country that puts money into an business or other organisation.
Source: Cambridge English Dictionary
Investor action
Investment decisions; stewardship of investees; engagement with policy makers and key stakeholders.
Source: Principles for Responsible Investment (PRI)
Investor contribution
The contribution that the investor makes to enable enterprises (or intermediary investment managers) to achieve impact.
Source: Impact Management Project (IMP)
L
Limited assurance
- Reasonable assurance: risk of misstatement of the assurance opinion is reduced to a low level through extensive procedures. The assurance provider obtains sufficient evidence to confirm whether the subject matter conforms to the criteria.
- Limited assurance: risk of misstatement is reduced through the collection of evidence but not to the low level required by reasonable assurance. Assurance providers provide comfort over whether the underlying subject matter plausibly meets the criteria.
Source: Based on International Standards for Assurance Engagements (ISAE) 3000
M
Management
The processes used by the organisation to identify, assess and manage sustainability performance.
Source: Task Force on Climate-related Financial Disclosures (TCFD)
Material
Information is considered material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users make on the basis of the reported information.
Source: Adapted from International Accounting Standards Board (IASB)
Metrics
A standard of measurement. The words ‘metric’ and ‘indicator’ are typically used interchangeably. Metrics are used to measure the state of something at a point in time. Repeated measurement makes it possible to determine change over time.
Source: Adapted from Meriam Webster Online Dictionary
Monetisation
The estimation of the relative importance, worth or usefulness of impacts to the people who experience the impact, expressed as a monetary value. Impacts can be experienced by people directly, or through changes to the planet or the economy.
Source: Consensus definition based on discussions with Capitals Coalition; Impact Weighted Accounts Initiative (IWAI); Social Value International (SVI); and Value Balancing Alliance
O
Objective
Something that efforts or actions are intended to attain or accomplish. Objectives are SMART if they are: specific, measurable, achievable, realistic and time-bound.
Source: Cambridge English Dictionary; Management Review
Outcome
The resulting level of well-being experienced by a group of people, or the condition of the natural environment.
Practitioners should be aware that some available standards and guidance (e.g. OECD, IFC, Capitals Coalition) define outcome as a change in-, rather than a level of-, well-being. Whilst collecting data about performance over time usually involves measuring the level (e.g. wage paid in prior period relative to wage paid in current period), it is not always the case that this data is disaggregated for decision-making (e.g. if management or the board of a company are only provided with a figure about the change, such as ‘percentage increase in wages paid’). Using information about the change alone prevents comparison of performance against a social or ecological threshold, and therefore determination of whether the level of performance is ‘sustainable’ or ‘unsustainable’.
Additionally, if an outcome is defined as a broad aspect of well-being (e.g. ‘health’) it may be too general to inform which metric should be used. To help with accurate measurement, a well-defined outcome is needed. See Glossary term Well-defined outcome.
Source: Impact Management Platform
Output
An organisation’s products and services, and any by-products and waste.
Source: Value Reporting Foundation (VRF)
P
Practice
A way of doing something that is the usual or expected way in a particular organisation or situation.
Source: Oxford English Dictionary
Practice standard
Sets of procedures that represent best practices within a field. Practice standards generally operationalise principles by providing an approach for incorporating them in systems and processes (with an intention to bring a level of consistency and comparability across practitioners).
Source: Impact Management Platform
Principles
Guidelines followed by a professional group that may form a fundamental basis of the field.
Source: Impact Management Platform
Proxy
A proxy is an indirect measure of the desired outcome which is itself strongly correlated to that outcome. It is commonly used when direct measures of the outcome are unobservable and/or unavailable.
Source: Johns Hopkins
R
Rating
A classification or ranking of something based on a comparative assessment of their quality, standard, or performance.
Source: Oxford English Dictionary
Reasonable assurance
- Reasonable assurance: risk of misstatement of the assurance opinion is reduced to a low level through extensive procedures. The assurance provider obtains sufficient evidence to confirm whether the subject matter conforms to the criteria.
- Limited assurance: risk of misstatement is reduced through the collection of evidence but not to the low level required by reasonable assurance. Assurance providers provide comfort over whether the underlying subject matter plausibly meets the criteria.
Source: Adapted from International Standards for Assurance Engagements (ISAE) 3000
Reporting framework
Guiding principles and content elements for a report, and the fundamental concepts that underpin them.
Source: Impact Management Platform
Reporting standard
Standardising reporting requirements. This includes universal reporting requirements for all entities as well as topic-specific or industry-specific reporting requirements.
Source: Impact Management Platform
S
Safeguarding principles
Guidelines recommending minimum actions to protect against harm.
Source: Impact Management Platform
Science-based Target
Measurable, actionable, and time-bound objectives, based on the best available science, that allow actors to align with Earth’s limits and societal sustainability goals.
Source: Science-Based Targets Network
Significant
An impact is significant if the change in well-being (or the condition of the natural environment) caused by the organisation is big and/or occurs for many people, lasts for a long time and is important to those affected. See Assess Impact for information on collecting these data points..
Source: Social Value International (SVI)
Societal or ecological threshold
A level or range of performance that divides sustainable from unsustainable performance. These ranges are set with reference to social norms or planetary limits that have been identified through scientific research. Learn more about Thresholds and allocations.
Source: United Nations Environment Programme Finance Initiative (UNEP FI); United Nations Conference on Trade and Development (UNCTAD) (The Cocoyoc Declaration, 1974); Kate Raworth
Stakeholder
An entity or individual that can reasonably be expected to be significantly affected by the organisation’s activities, products and services, or whose actions can reasonably be expected to affect the ability of the organisation to successfully implement its strategies and achieve its objectives.
Source: Global Reporting Initiative (GRI); OECD Due Diligence Guidance for Responsible Business Conduct; OECD Well-being Framework; Value Reporting Foundation (VRF) Integrated Reporting Framework
Standard
Rules or guidelines for common and repeated use to which organisations demonstrate adherence with which compliance is not necessarily mandatory in law. Standards are created through a process of multi-stakeholder consultation.
Source: Adapted from ISEAL
Strategy
A plan for achieving something or reaching a goal.
Source: Cambridge English Dictionary
Sustainability reporting
A company’s practice of reporting publicly on its most significant economic, environmental, and/or social impacts, and hence its contributions – positive or negative – towards the goal of sustainable development.
Source: Global Reporting Initiative (GRI)
Sustainability topic
A term used broadly to denote aspects of stakeholder well-being (e.g. health, wealth, safety), or business activities or practices that are evidenced drivers of well-being (e.g. employment, diversity and inclusion). This term is synonymous with ‘sustainability matters’, ‘impact areas’, ‘impact categories’ or ‘general issue categories’ which are similar terms used by different standard setters.
Source: OECD Well-being Framework; Global Reporting Initiative (GRI) Sustainability Topics; Sustainability Accounting Standards Board (SASB) General Issue Categories; IRIS+ Categories; United Nations Environment Programme Finance Initiative (UNEP FI) Impact Areas
Sustainability-related financial disclosure
Disclosures about an entity’s performance on sustainability matters that drive enterprise value, including information about an entity’s governance, strategy and risk management of those matters.
Source: Value Reporting Foundation (VRF)
Sustainable
Meeting the needs of the present without compromising the ability of future generations to meet their needs or overshooting Earth’s ecological limits (Brundtland Commission). In context of impact measurement, outcomes for people are sustainable if they are within the acceptable range determined by societal thresholds, and outcomes for the natural environment are sustainable if they are within the acceptable range determined by ecological thresholds (Science-Based Targets Initiative and Kate Raworth). Sustainability is the quality of being able to continue over a period of time (Cambridge English Dictionary).
Source: Brundtland Commission; Science-Based Targets Initiative; Kate Raworth; Cambridge English Dictionary
T
Tool
Software- or Excel-based resources (in this context, tools help automate aspects of an action, or multiple actions of impact management).
Source: Impact Management Platform
Total impact of a portfolio
In aggregate, all significant impacts on the well-being of people and the condition of the natural environment, caused by the assets in the portfolio (valuation, classification or taxonomy approaches are required to assess the total impact of each asset), and the investor’s contribution towards that impact.
Source: Impact Management Project (IMP)
Total impact of an organisation
In aggregate, all significant impacts on the wellbeing of people and the condition of the natural environment, caused by an organisation (valuation, classification or taxonomy approaches may be are required to aggregate impacts).
Source: Impact Management Project (IMP)
Total impact of assets
In aggregate, all significant impacts on the well-being of people and the condition of the natural environment, caused by the assets in the portfolio (valuation, classification or taxonomy approaches are required to assess the total impact of each asset).
Source: Impact Management Project (IMP)
U
Underlying subject matter
The phenomenon that is measured or evaluated by applying criteria.
Source: International Standards for Assurance Engagements (ISAE) 3000
V
Valuation
An estimation of the worth of something.
Source: Oxford English Dictionary
In the context of Sustainability: a process that seeks to understand the relative value that an organisation creates, preserves or erodes for its stakeholders, which is understood by expressing sustainability performance information as a common unit of value. Estimating value to different types of stakeholders sometimes requires different methodologies. See Glossary terms Value to society and Value to the organisation.
Source: Value Accounting Network
Value to society
The relative importance, worth or usefulness of impacts to the people who experience them, expressed in a common unit of value. Impacts can be experienced by people directly, or through changes to the planet or the economy. Also known as impact valuation.
Source: Consensus definition based on discussions with Capitals Coalition; Impact Weighted Accounts Initiative (IWAI); Social Value International (SVI); and Value Balancing Alliance
Value to the organisation
How an organisation’s stakeholders, along with changes in the external environment in which the organisation operates, affect the amount and timing of the entities cash flows, including in the long-term.
Source: Value Reporting Foundation (VRF)
Verification
The act of showing or checking that something is true or accurate.
Source: Oxford English Dictionary
W
Well-being
The state of being or doing well in life; happy, healthy, or prosperous condition; moral or physical welfare. The OECD Well-being Framework states that the 11 dimensions of well-being are comprised of the outcomes that matter most to people.
Source: Oxford English Dictionary, Organisation for Economic Co-operation and Development (OECD)
Well-defined outcome
The specific aspect of well-being or condition of the natural environment that is most appropriate to measure. For example, a healthcare organisation might identify the outcome of ‘good health’ before identifying the specific health condition, which is the well-defined outcome. Organisations then select metrics to measure the outcome periodically, e.g. blood sugar level, self-reported mental health, body mass index. Social Value International promotes the practice of engaging with stakeholders to define the specific outcome that is of most value to them, to help with identifying the well-defined outcome.
Source: Social Value International (SVI)