The risky attempt to put a price on the planet

Imagine a large Swiss corporation publishing its latest sustainability report. Rather than discussing reduced emissions in tonnes or water savings in litres, the company presents one impressive figure: a positive social contribution of 50 million Swiss francs last year. An increasing number of companies are experimenting with this approach, known as monetary impact valuation.

The language of money

Pressure on companies is growing as investors, customers and politicians demand verifiable evidence of sustainable business practices. This is where monetary impact valuation comes in. It promises to integrate sustainability directly into the heart of the business. After all, managers and investors find it easier to understand a monetary value than complex ecological indicators. According to proponents of this approach, it creates transparency and provides sustainability experts and financial decision-makers with a common analytical lens. However, companies use very different methods to convert environmental impacts into monetary values, says Prof Dr Judith Ströhle from the Institute for Accounting, Controlling and Auditing at the University of St.Gallen, who criticised together with other researchers this approach in the journal Nature Sustainability. Often, all environmental impacts are added together to produce a single monetary amount that is supposed to represent the company's net contribution to society.

But what is the Value of a Human Life?

The authors of the commentary highlight several key criticisms of this approach. The biggest concern is ethical in nature. Can everything be given a price? While the monetisation of CO₂ emissions is widely accepted, other topics are more sensitive. What is the monetary value of a human life lost to air pollution? Or of the survival of a rare animal species? Such assessments could be profoundly rejected by society. According to the authors, there is a danger that the intrinsic value of nature and human beings will be undermined if they are reduced to a simple monetary amount.

The Danger of "Impact Washing"

Another major risk is the manipulation of figures. If calculation methods are not rigorous and transparent, companies can easily interpret figures in their favour. The authors warn against so-called "impact washing". Furthermore, a single aggregated value can be misleading as social and environmental trade-offs are complex and cannot be easily compared with each other. There is also concern that voluntary efforts by companies distract from the actual responsibility of politicians. If corporations appear to internalise their external costs, the pressure on cantonal councils to enact binding laws, taxes and regulations that apply to everyone could decrease.

A Checklist for Companies

In view of these risks, the researchers call for a rigorous, scientifically based approach. Rather than rejecting the method outright, they propose eight guiding principles that can serve as a checklist for companies and policymakers.

• Ethical consideration: Respect the fact that not everything can be monetised.
• Stakeholder involvement: Affected communities and critical NGOs must be involved throughout the process.
• Materiality: Focus on the truly important impacts instead of wasting resources on trivialities.
• Balanced standardisation: Methods must be comparable, yet flexible enough to accommodate local circumstances.
• Internal control: The assessment should primarily inform internal decision-making rather than external PR.
• Transparent methods: The calculation bases must be open and comprehensible.
• Disaggregated data: Rather than presenting a single net value, the data should be broken down to reveal nuances and conflicting objectives.
• Scientific rigour: The process must be methodologically sound, self-critical, and capable of learning.

The authors believe that the method should not be demonised outright. Taking these criticisms seriously can help companies align their strategies with global sustainability goals.