Valuing Impact: Panacea or Money-washing?

In recent years, businesses have been under growing pressure to demonstrate their commitment to sustainability. Target setting, diligent measurements and lengthy reports have all been part of the increased push towards transparency in this area. Yet, often, managers still find it difficult to use sustainability-related information – often expressed in environmental and social entities – for strategic decision making. One increasingly popular way of responding to this is Impact Measurement and Valuation (IMV)– a process that attempts to not only measure but monetize the social and environmental impacts of corporate activity. At first glance, this seems like a win-win: if companies can assign financial value to their societal impact, they can manage sustainability with the same rigor as financial performance. The financial language, after all, managers understand.

But is this approach really the golden ticket to responsible capitalism? Or is it not rather a form of money-washing, where complex social and ecological issues are reduced to misleading figures on spreadsheets?

The Promise of Impact Valuation

At its best, monetizing social and environmental impacts of companies can serve as a useful decision-making tool. By translating sustainability impacts into monetary terms, companies make these issues legible to business decision-makers who are used to dealing in euros, dollars, or yen. This translation can bring sustainability into the core of financial and strategic planning, rather than leaving it in the realm of peripheral CSR departments.

Take, for example, a company deciding between two innovation pipelines—perhaps two new product lines with different environmental and social footprints. Monetary valuation can help assess the relative social and environmental impact of each product within a local context, alongside its financial potential. By calculating the health benefits, emissions, and job creation in a particular region and weighing those against expected revenue and costs, companies can more clearly understand the trade-offs involved. This makes it easier to prioritize innovations that are both profitable and beneficial for society—without ignoring the complexities of the local setting.

But It’s Not a Panacea

While useful in certain contexts, monetary valuation also has serious limitations—especially when used as a one-size-fits-all solution. Social and environmental issues don’t behave like financial assets. In fact, corporate impacts are often non-linear, incommensurable, and deeply embedded in local contexts.

For instance, imagine a company weighing the decision to build a factory in India or Poland. A purely monetary valuation might try to compare the labour costs, carbon emissions, and infrastructure benefits in each country. But this would ignore the vastly different ecological systems, social structures, and cultural values that shape what “impact” really means in each place. Attempting to reduce these complexities to a single global metric – that of money –, risks ignoring local realities and perpetuating inequities. While some IMV methodologies try to capture these local differences by using purchasing power parity or locally adjusted prices (for, e.g., legal minimum wages), the real problem of inequity is often not addressed by this.

This is where the term money-washing becomes relevant. Similar to greenwashing, money-washing refers to the oversimplification of sustainability issues through financial proxies. When companies add up all their “positive” and “negative” impacts into one neat net value, they risk creating a false sense of clarity. This practice assumes that, for example, planting trees in Germany could offset the health impacts of poor labour conditions in Bangladesh. It can’t—and it shouldn’t.

The Dangers of Oversimplification

Oversimplified impact valuation brings three main dangers:

1. Loss of Ethical Nuance: Monetization can strip away the intrinsic value of certain impacts. Not all harms—or benefits—can or should be priced. Is the loss of a life or a cultural heritage site really something that can be assigned a dollar value? And even if it can be (because methodologies exist), it is not obvious that it should be.
2. Perverse Incentives: When everything is boiled down to a number, companies may focus only on what can be measured—leading to neglect of hard-to-quantify issues like biodiversity loss or systemic inequality. Additionally, companies may be inclined to focus on managing the impact with the biggest return on monetized value. This is however not equal to the magnitude, severity, or indeed relevance of impact.
3. Illusion of Objectivity: Numbers can carry a false sense of neutrality. But valuation methods are riddled with subjective choices—what to measure and why, how to assign value, how to weight valuations, which stakeholders to include in considerations, etc. These decisions are often opaque, and in some cases, controlled by a small circle of non-academic experts, raising questions of rigour, legitimacy and inclusiveness.

Impact Valuation is a Tool, not a Truth

Instead of abandoning monetization altogether, we should use it cautiously and contextually. Companies could, for example, use it to compare alternative investments within the same local context where local values, costs, and impacts can be understood more clearly. They should, however, avoid using it to compare projects across countries or cultures, where the social and environmental landscape differs fundamentally. Here, absolute impact measures (such as tons of CO₂ emitted or number of injuries prevented) may offer more transparent and meaningful insight, especially when contextualized against local benchmarks. Moreover, companies should resist the urge to summarize their entire sustainability footprint with a single number. Instead, disaggregated reporting—by geography, stakeholder group, or impact type—can offer a more nuanced and truthful picture.

This reveals one important and often overseen truth: impact valuation is a tool, not a truth. A tool has useful application areas, like a hammer if you want to hang a picture on the wall. But it also applications for which you would not want to use it. To eat cereal, you would certainly choose a spoon over the hammer. The problem is that to hammers, often everything in the world looks like a nail. The same applies to IMV enthusiasts. Yet valuation is only useful if it is ethically grounded, transparently implemented, and context sensitive. It has the potential to inform better decisions and foster accountability. But when misused or oversimplified, it risks doing more harm than good—masking real issues, obscuring local complexities, and creating the illusion of progress.

Let’s remember: Sustainability is not an accounting problem to be solved with neat formulas. It’s a moral, cultural, and ecological challenge that demands diverse tools, critical thinking, and a willingness to engage with ambiguity.

So, is impact valuation a panacea? Certainly not. But used wisely, it might just help us ask better questions—and make better decisions. And that’s a start.

Further Reading:

• Stroehle et al. (2025): A Critical Examination of Corporate Environmental and Social Impact Measurement and Valuation. Journal of Management Inquiry.
• Edinger-Schons et al. (forthcoming): Monetary Impact Valuation for Sustainable Business. Nature Sustainability.

 

Photo by Karsten Würth on Unsplash