Introducing Impact-Weighted Accounts Framework to Evaluate the Social Impact of Corporate Activities
―Generating a value of 502.3 billion yen a year through IoT business―
KDDI Corporation
Tokyo, May 16, 2024―KDDI introduced the impact-weighted accounts framework (hereinafter "this initiative") to enhance awareness of its corporate value by evaluating the social and environmental impact of its corporate activities, thereby applying the weighted accounting to the IoT business that KDDI provides. This initiative, supervised by Visiting Professor Ryohei Yanagi of Waseda University, is being conducted in collaboration with Abeam Consulting based on the framework of impact-weighted accounts proposed by IFVI [
1].
As a result, the social impact created through the provision of IoT business, including reduction in damage caused by sending out emergency alerts during traffic accidents, was estimated to be worth 502.3 billion yen (for the fiscal year ending March 2024), equivalent to approximately 1.6 times that of EBITDA [2].
Going forward, KDDI will disclose these initiatives in its Integrated Sustainability and Financial Report and continue to enhance and promote quantitative analysis and visualizations of the impact of its business activities on society.
| Impact-weighted accounting (for fiscal year ending March 2024) (million yen) [3] | |
|---|---|
| [A] Sales | 1,264,739 |
| [B] EBITDA | 309,368 |
| [C] Social impact of IoT lines | 502,266 |
| Total profit by impact-weighted accounting (= [B] + [C]) | 811,634 |
| Ratio of impact against sales (= [C] / [A]) | 39.7% |
| Ratio of impact against EBITDA (= [C] / [B]) | 162.4% |
■Background
- While companies worldwide are being encouraged to pursue environmental and social issues, these initiatives were often viewed as separate from economic activities, making it difficult for them to contribute to corporate value. This has ignited and accelerated the move by companies to appraise their social contributions and present them to various stakeholders.
- Impact-Weighted Accounts is a new accounting method proposed by various parties, including Professor George Serafeim of Harvard Business School in the United States. It measures and evaluates both the positive and negative impacts of corporate activities on the environment and society, as generated by corporate programs, including sustainability.
- KDDI also considered it important to understand and analyze the impact of its business activities on society as a whole and introduced impact-weighted accounting at this opportunity.
■Breakdown of the social impact of KDDI's IoT business
KDDI has been operating its IoT business for over 20 years. The total number of KDDI's IoT lines reached 41.97 million (as of the end of March 2024), and they are being provided to industries including automotive, security, and utilities such as electricity and gas. KDDI used impact-weighted accounts to quantitatively visualize how the provision of such IoT business is impacting society.
For instance, KDDI provides the automotive industry with a global communication platform for high-quality and stable communication to store data on clouds and servers sent through automotive communication devices. This platform and the provision of the IoT lines have created various societal values, such as enabling emergency alerts during traffic accidents.
| Breakdown of social impact of IoT lines (fiscal year ending March 2024) (million yen) | ||
|---|---|---|
| Provided to: | Social impact | Value we embrace used for estimation [4] |
| Automotive | 417,337 | Reducing damages during traffic accidents through emergency alerts |
| Reducing CO2 emissions from vehicles by proposing the best route | ||
| Security | 56,591 | Avoiding deaths by fire through the use of home security devices |
| Avoiding break-ins through the use of home security devices | ||
| Freeing up work hours through the use of GPS location information devices | ||
| Electricity and gas | 20,969 | Improving productivity by automating metering |
| Reducing CO2 emissions from traveling vehicles by automating metering | ||
| Reducing CO2 emissions by visualizing electricity and gas consumption | ||
| Other | 7,369 | Improving productivity by other means than above through the stable provision of IoT lines |
| Total | 502,266 | - |
■Comments from Visiting Professor Ryohei Yanagi of Waseda University
Visiting Professor Ryohei Yanagi of Waseda University, the creator of the Yanagi Model which translates ESG into corporate value and the first person in Japan to introduce impact-weighted accounts, has commented as follows.
This estimation represents a remarkable achievement, characterized not only by its high quality but also by its bold logic and the significant estimated value. Evaluating such a complex business and product was challenging, but the underlying logic is both robust and insightful. Additionally, the way financial figures and calculated amounts are rounded feels appropriate, and the segmentation of value provided to different parties, also seems particularly well-conceived. It stands as an advanced example of how a company can visualize its social impact on society and the environment. I hope this leads to more active utilization and disclosure of such evaluations.
In KDDI VISION 2030, the KDDI Group announced its goal as "The creation of a society in which anyone can make their dreams a reality by enhancing the power to connect." Together with its partners, the Group aims to drive sustainability management for a sustainable society and enhance the Group's corporate value.
Reference
■Visualizations of KDDI's non-financial activities so far
KDDI has been driving the program to analyze and visualize the relationship between its corporate activities and corporate value.
In April 2021, KDDI conducted an interrelation analysis [5] of non-financial data and the price book-value ratio (PBR) to enhance ESG disclosures, utilizing "Digital ESG Data Analytics" provided by Abeam Consulting, which incorporates the Yanagi Model.
In September 2022, to enable deeper analysis, KDDI utilized Accenture's "AI Powered Enterprise Value Cockpit" and carried out a quantitative analysis, including cause-and-effect relationships. This analysis was performed in collaboration with ARISE analytics, a joint venture between KDDI and Accenture [6].
- [1]An international impact evaluation foundation developed in 2022 by Harvard Business School's Impact-Weighted Accounting Initiative (IWAI).
- Impact-Weighted Accounting Initiative (IWAI). 2019. "Impact-Weighted Financial Accounts: The Missing Piece for an Impact Economy"
- International Foundation for Valuing Impact (IFVI). 2024. "GENERAL METHODOLOGY 1 Conceptual Framework for Impact Accounting (350KB)"
- [2]The total of sales, depreciation and amortization, Retirement cost of property, plant and equipment, and impairment losses.
- [3]Financial figures are taken from the business segment figures from the time.
- [4]The approach to the reduction of damage in cars during accidents through the use of emergency alerts is used as an example. The targets are connected cars that can be constantly connected to the Internet, and this description includes systems such as those that can send out emergency alerts in accidents.
The effects of avoiding traffic accident deaths are estimated by the rate of traffic accident deaths estimated from the macro data of the United States Department of Transportation, Japan's Cabinet Office, etc., multiplied by the survival rate of cases when emergency alerts accelerated life-saving responses and by the victim's business net worth, further multiplied by the number of IoT lines provided by KDDI. - [5]Integrated Report 2021
Exploring the relationship between non-financial information and corporate value (8.2MB) - [6]Integrated Sustainability Report 2023
Improving non-financial activities by visualizing them (15.4MB)
- *The information contained in the articles is current at the time of publication.
Products, service fees, service content and specifications, contact information, and other details are subject to change without notice.