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Using impact accounting to reveal >500 Billion Yen per year in social value created through IoT solutions: KDDI 

KDDI provides 5G communication, data-driven services, and generative AI to both individual and corporate customers. Additionally, leveraging its communication infrastructure as a customer touchpoint, KDDI offers value-added services in growth areas such as Digital Transformation (DX), finance, and energy. 

Objective

While companies worldwide are being encouraged to pursue environmental and social issues, these initiatives are often viewed as separate from economic activities, making it difficult for them to understand how they relate to corporate value. This has ignited and accelerated the move by companies to try to value, in monetary terms, their social and environmental contributions and present them to various stakeholders. 

Several years ago, KDDI’s leadership set out to analyze and visualize the relationship between non-financial activities and corporate value in order to better understand, manage, and promote sustainable practices. An integral part of this effort was to include the impacts of business activities on society as a whole, which is where the concept of impact accounting seemed like an appropriate fit. 

KDDI has been operating its IoT business for over 20 years for a wide range of organizations, making this assessment a holistic, collaborative one. 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. By virtue of it being embedded within and across sectors, IoT generates efficiencies and value which are often difficult to measure and recognize.  

In the automotive industry, for example, KDDI provides 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 benefits, such as enabling automatic emergency alerts during traffic accidents. KDDI set out to use impact accounting to quantitatively visualize how the provision of such IoT services are impacting society. 

“As the CFO, I have come to realize that a company’s strength lies not only in its business performance. While business performance is a significant outcome of corporate activities, non-financial value has become an indispensable factor in representing a company’s true value. I believe that being a company with dignity requires businesses to prioritize their social impact and environmental responsibilities. We are convinced that by analyzing the social value created by IoT using impact accounting, we have been able to quantitatively substantiate our contribution to solving social issues through our business activities.”

Nanae Saishoji, Managing Executive Officer, Director; CFO Executive Director, Corporate Sector, KDDI

Application

Under the supervision of Professor Ryohei Yanagi, a visiting professor at Waseda University, KDDI, in collaboration with ABeam Consulting Ltd., used the Product and Service framework originally created by Harvard Business School’s Impact-Weighted Accounts Project, which is now part of the International Foundation for Valuing Impacts (IFVI). Given the wide range of use cases, the number of connections (e.g., over 40 million as of March 2024, as mentioned previously), and the reliance on these systems assessed by their continued used by customers, KDDI calculated the social impact of its IoT connections. 
 

KDDI classified IoT into categories such as “automotive,” “security,” “electricity and gas,” and “others” based on the recipients, and calculated the social impact using the specific value propositions for each category – please see the image below and the sample assumptions made for automotive in the description.  

IoT categories by end user group and respective, summarized impact assumptions.

Findings and outcomes

  • As a result of this initiative, 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 EBITDA:
  • The initiative has been well received by experts with an interest in impact investing, who see it as a pioneering initiative.
  • KDDI introduced this initiative in its “KDDI Integrated Sustainability and Financial Report” and presented it at various seminars.
  • Because this analysis enabled the non-financial value of businesses and services to be converted into monetary value in an easy-to-understand manner, KDDI had used the result to promote understanding of sustainability management internally, supporting widespread understanding of contributing/adjacent practices across the organization – from directors to field employees.

Future work

KDDI will continue to enhance and promote quantitative analysis and visualizations of the impact of its business activities on society. Additional topics or areas to expand this analysis to are being considered.

“IoT connections are integrated into industry and society, but because they are not something you pick up and use like a smartphone, their functions and effects are difficult to see. However, these roles played behind the scenes also hold value that cannot be fully captured by financial information. It is significant that we were able to quantify and visualize this value and communicate it effectively. Additionally, by clearly explaining the value that our business creates for society, we contribute to the internal promotion of sustainability management within the company.”

Masako Yano, General Manager, Sustainability Management Division, KDDI

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