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Impact accounting at scale: Richmond Global Sciences (RGS)

Technology company RGS uses impact accounting to produce decision-useful insights for its investor clients.

Richmond Global Sciences (RGS) is a technology company empowering investors and corporate leaders to integrate an impact lens into their decision-making processes. 

Objective

What makes a successful company? Today’s markets have aligned on a clear definition of success based on sustained growth and profitability according to well-established accounting standards. How would profitability change if environmental and social costs and benefits were included? Would the same companies still be profitable or successful? 

To address these questions, RGS leveraged the work published on impact accounting by IFVI and the Value Balancing Alliance (VBA), the former Impact-Weighted Accounts Project at Harvard Business School, and other sources. RGS recognized the potential for impact accounting to supplement quantitative measures of a company’s financial health and profitability with information that reflects a company’s impact, in dollars, on the environment, employees and society. 

A guiding objective for RGS is to incentivize more companies and investors to produce and use impact accounts. 

By onboarding new investor clients and other organizations to their Real Impact in Financial Terms (RIFT) platform, RGS is exposing new users to impact accounting and showcasing its usefulness. 

Figure 1: Screenshot of the RIFT platform in use. 

“Impact accounting allows companies and investors to display financial and impact performance within the same reporting and infrastructure, enabling the use of existing financial and business analysis tools to assess corporate performance. It is time for inaccurate sustainability reporting to make way for impact transparency. Our results show that companies can be successful and have positive impacts.”

Sakis Kotsantonis, Co-Founder and CEO, RGS

Application

RGS first gathered publicly available data on over 10,000 companies. Advanced research and technology were then used to analyze this data and apply impact accounting calculations at scale. The RGS team conceptualized and modeled their original impact accounting methodology based on the Impact-Weighted Accounts Project while applying certain assumptions for the sake of scalability.  

Company impact was then assessed across three key stakeholder groups: customers, employees, and the environment.

  • Customers: RGS’s customer impact assessment measures the customer’s perceived benefit when buying a product. The nature and extent of this impact will vary depending on what is being sold, where it is sold, who is buying it, and the quality of the product.
  • Employees: RGS’s model impacts on employees include wage impact (remuneration), wage distribution, diversity, and equal opportunity.
  • Environment: Impacts to the environment include carbon emissions, plastic waste, hazardous materials, food waste, and water consumption.

For more details about the impacts included, see RGS’s RIFT platform demo and explore the impact areas.

Findings and outcomes

  • In assessing 10,000 companies along approximately a dozen impact indicators, managing for data gaps, RGS has produced some of the first ever impact accounting assessments at scale, slicing across region, sector, and other factors.
Figure 2: Shows the total impact, quantified in monetary terms, per dollar (USD) of revenue.
  • When assessing impact trends and aggregating the results by sector, leader and laggard sectors emerge (see Figures 2 and 3):
    • The healthcare sector stands out as the top performer, driven by the substantial positive impact of its products on customers’ well-being, the relatively high wages paid within the industry, and its comparatively lower environmental costs. On the other hand, sectors with negative total impacts are characterized by high natural resource intensity and significant negative environmental impacts, often linked to high carbon emissions, waste generation, or resource depletion. Sectors that are more service-oriented or involved in the production of discretionary goods tend to demonstrate a balance between social and environmental impacts.
    • This comprehensive analysis reveals clear patterns in how different industries contribute to or detract from societal well-being.
Figure 3: Shows the impact by affected stakeholder, as valued in monetary terms, per dollar (USD) of revenue. The first chart shows these values for the Health Services sector, while the second shows the same values for the Producer Manufacturing sector.
  • RGS is able to use this data for a variety of customer use cases, from portfolio selection, investment management, reporting and compliance, equity research, portfolio impact analysis, benchmarking, index creation, and initiatives integrating impact into accounting.
    • RGS has traditionally seen the most demand for impact accounting from thematic equity investors and impact investors.
    • Lately, it has been seeing more interest from limited partners (LPs) and allocators, including pension funds, endowments and family offices, that want to utilize an impact framework aligned with industry standards to conduct due diligence on fund managers’ portfolios, confirming their sustainability messaging and investment processes align with their portfolio construction in delivering impact.
  • Most interestingly, RGS has recently used its impact accounting assessments to develop an equally-weighted portfolio of top impact performers (the Impact Leaders Portfolio), which has been found to consistently outperform the market. [See Figure 4]
Figure 4: Shows the performance of the Impact Leaders Portfolio versus a market benchmark since 2016. Benchmark used: iShares Trust (iShares MSCI ACWI ETF).

Future work

  • RGS is focused on enabling new investors and companies to adopt and utilize impact accounting. By onboarding new investor clients and others to the platform, RGS is exposing new users to impact accounting and showcasing its usefulness.
  • Additionally, RGS continues to showcase the versatility of impact accounting by developing new insights and assessments using the methodology. For example, RGS recently released an Impact Leaders list, showcasing the publicly traded companies across all 11 sectors that are performing best on impact according to their impact accounting assessment. RGS plans to update this list annually.
  • RGS plans to continue to build on its findings with the Impact Leaders Portfolio and seek additional ways to demonstrate the likely correlation between financial and impact performance, as assessed through impact accounting.
  • RGS plans to continue to update its platform to align with best practices in impact accounting, embedding the latest methodological developments from IFVI-VBA whenever possible.
  • RGS plans to add the impacts of biodiversity, nutrition, and occupational health and safety, among others, to its offerings in 2025.

“Impact accounting is Sustainability 2.0. Discussions around impact monetization across boardrooms and investment committees is the future. Both companies and investors recognize the need to move away from communicating solely qualitative program results to understanding the tangible financial impact to stakeholders. Not only does impact accounting optimize decision-making for corporations looking to build sustainability programs with measurable impact, but also provides investors with transparent, comparable data across sectors, uncorrelated to current ratings, and aligned with industry standards.”

Nidhi Chadda, Chief Impact Officer at RGS, Co-Founder and CEO of Enzo Advisors LLC