This section explains the principles, methods and data used in quantifying the economic, social and environmental impacts associated with our operations; see valuing our impact for the findings. This analysis was carried out with Sustain Value, and is based on established social and environmental accounting techniques.
This is our third attempt to assess and quantify our impacts and the findings should be viewed in light of the following considerations:
Impacts: we have captured only a limited selection of the important sustainability impacts associated
with our business, although four more than last year. There are still opportunities to expand this further
to enable more comprehensive reporting.
Methods: to calculate our impacts we have used, wherever possible, recognized methodologies, models
and academic research.
Data: we have used proxy data, from secondary sources and extrapolations, to address any data gaps.
This means that findings in some areas are based on estimated figures.
Below we explain in more detail our approach to calculating each measure.
In the economic impact category we have reported Corporate Gross Value Added, supply chain impacts, tax contribution and contribution to our employees.
Corporate Gross Value Added
Corporate Gross Value Added (GVA) represents gross profit as disclosed in the Group’s audited financial statements for 2015. The direct GVA was calculated using primary data and no assumptions were made.
In 2015, we spent an estimated £6 billion with our suppliers. This figure was derived from data from our spend analytics system which tracks direct costs (advertising production and research operations) and indirect costs (facilities, IT, telecoms, travel and professional services). Our media spend on behalf of clients is excluded from these figures.
The impact of our supply chain, our indirect economic impact, was calculated using a weighted average multiplier based on last year’s analysis, which determined the total value of expenditure with suppliers broken down by sector and type of spend. The spend for each sector was converted into GVA using gross value added data from relevant sectors obtained from national statistics such as the UK’s Office of National Statistics Annual Business Survey (ABS).
There are two limitations associated with this approach. Firstly, data on supplier spend was incomplete for some WPP markets. Data was extrapolated to address these gaps. In addition, GVA sector estimates are not available for all countries and in these cases we have based calculations on UK data. To reflect the impacts arising in different countries we have also used purchasing-power parity indices from IMF datasets.
Contribution through taxes
Our contribution through taxes is calculated as corporation and overseas tax paid plus social security costs
as disclosed in the Group’s audited financial statements for 2015.
Payroll figures include the amount spent on employee remuneration and benefits, calculated as staff costs less social security costs, as disclosed in the Group’s audited financial statements for 2015.
Our social impact category covers the impact of charitable donations, pro bono work, free negotiated media space and the value of internships and apprenticeships.
To estimate the wider benefits of charitable donations we have drawn upon the outcome of last year’s review of secondary data from independent research reports that assessed the social return on investment (SROI) of similar projects. The overall average SROI multiplier from last year was multiplied by the overall 2015 donated amounts to determine the social value delivered.
We recognize that individual projects can deliver very different returns. However, in the absence of project-by-project reporting, this method provides a useful order-of-magnitude indication of SROI.
Pro bono work
The benefits of pro bono work (primarily undertaken for the benefit of charities) are difficult to quantify. Outcomes are often not measured and, if they are measured by the charity, results are not often shared with
WPP. For the purposes of this assessment, we have assumed that pro bono work has an impact similar to that
of charitable donations and the same assessment approach was used.
We believe this to be a conservative assumption, because pro bono work (costed on a time-sheet basis) is often worth more than the equivalent cash donation as WPP expertise is leveraged to create additional value above
and beyond the time spent.
Free media space
This is an additional value included this year. It represents the cost saving to our pro bono clients for them not to have to purchase media space for their environmental and social campaigns. For the purposes of this assessment, we have assumed that free media space has an impact similar to that of charitable donations and the same assessment approach was used.
Internships and apprenticeships
The value of internships and apprenticeships is based on the same value multiplier as developed last year.
This assumed that a certain proportion of interns find jobs at WPP or other companies and are therefore able
to earn a monthly salary faster than they would have done without the internship. The approach takes into account the number of interns worldwide and the proportion likely to find a position at the end of their internship/apprenticeship placement and with the average additional income that the person would have
earned as a result of the work placement. Further work is needed to calculate these benefits more accurately
and to capture regional variation.
The value of training WPP staff has been included this year but only based on the actual cost of course fees incurred. This reflects only part of the benefit that staff receiving the training will gain in terms of their enhanced human capital value, which will be manifested when they leave the company (along with the human capital gained through their on the job experience). It is also recognized that this training will generate benefits (i.e. SROI) for WPP (e.g. from improved staff productivity and recruitment cost savings), which should effectively
be captured through future measures of WPP’s gross value added (GVA).
We looked at environmental impacts related to greenhouse gas (GHG) emissions (primarily carbon dioxide, the main contributors to man-made climate change), as well as water use and waste generated.
Each tonne of GHG released into the atmosphere damages society, the environment and the economy by impacting on, for example, climate, health, and the built environment. The economic cost of this damage is called the social cost of carbon (SCC). Many studies have identified a range of estimates for the social cost of carbon. The estimates span from 0 to over £400/tCO2e as they take into account uncertainties in climate and climate change impacts.
For consistency, we apply the same approach and value as last year (i.e. based on the Stern Report), but adjusted upwards to allow for inflation (i.e. £36.45 tCO2e). For greater transparency, we have split the value into the negative impact of our gross emissions and the positive impact of our carbon offsets. In addition, we assume
zero emissions for the purchase of renewable electricity. We have been recording our emissions in line with international standards since 2006 and as part of our reporting process we capture scope 1, scope 2 and a number of scope 3 emissions.
This year, we have added a societal cost of using water. This is based on actual water consumption data for 11 offices located in water-stressed areas (an average 11.6m3 water per person – using 2014 ) and an average assumed consumption rate of water for all other offices (15m3 per person per year). For each of the 11 office locations and for each country, a water stress ratio (total water withdrawals to total renewable supply) was established from the WRI Aqueduct Water Risk Atlas (for office locations) and from the FAO AQUASTAT data (for countries). An indicative societal value for water was determined using the PUMA (2012) water scarcity valuation graph, with values updated to 2015 values based on World Bank global consumer price inflation data. The results suggest a potential societal cost in the order of £540,000 (with a weighted average of £7.60/m3) for the 11 offices combined and £730,000 (with a weighted average of £0.40/m3) for all other offices combined. Actual market costs incurred for purchasing water are included in the financial accounts.
A value for waste has also been included this year. This is based only on the non-recycled data, although it is acknowledged that the recycled waste will have an overall net negative impact too. Societal costs per tonne of incinerated (with and without energy recovery) and landfilled waste have been derived from Rabl, Spadaro and Zoughaib (2008), and updated using World Bank consumer price inflation data. Societal costs are estimated to
be £36,000 for landfilled waste, £5,000 for incinerated waste with energy recovery, and £9,000 for incinerated waste with no energy recovery (based on costs of £19, £7 and £30 per tonne respectively). However, these values
are based on average societal costs determined for European countries. More detailed country-specific costs
could be estimated in future assessments. Actual market costs incurred for waste disposal are included in the financial accounts.
UN FAO AQUASTAT, www.fao.org/nr/water/aquastat/water_res/index.stm
PUMA (2012) Water use valuation method,
Rabl, A., Spadaro I.V., and Zoughaib A. (2008)
Environmental impacts and costs of solid waste: a comparison
of landfill and incineration
. Waste Management Research 2008; 26: 147.
Stern, N. (2007) Stern Review: The Economics of Climate Change. Cambridge University Press.
WRI Aqueduct Water Risk Atlas, www.wri.org/applications/maps/aqueduct-atlas/#x=8.00&y=-32.35&s=ws!20!28!c&t=waterrisk&w=def&g=0&i=BWS-16!WSV-4!SV-2!HFO-4!DRO-4!STOR-8!GW-8!WRI-4!ECOS-2!MC-4!WCG-8!ECOV-2!&tr=ind-1!prj-1&l=3&b=terrain&m=groupOther