Essec Business School

With ESSEC Knowledge Editor-in-chief

How do we measure the value that companies create and distribute to the world? 

Value-added statements are one way, and the Value Footprint is another social reporting tool widely used in Latin America. ESSEC professor Adrian Zicari and Luis Perera Aldama explain the origin story of the Value Footprint in their recent paper, using an auto-ethnographic account of its development.

What is auto-ethnography? 

It is a novel qualitative research approach wherein one uses their personal experience and self-reflection and connects it to a broader cultural context. It offers a richer view than would a purely quantitative approach. It is still a nascent model in the social sciences, and has barely been used in accounting, with the authors only noting one other paper (Malsch and Tessier, 2015). Dr. Zicari identifies this as an opportunity for a different type of research, a type that could respond to the Social Accounting “call for passion” (Correa and Laine, 2013). Using a first-person perspective infuses the research with emotion and makes for a more engaging read. While some posit that it might make for subjective research, Dr. Zicari contends that it can make for deeper conversations. 

In this case, Dr. Zicari used the approach by interviewing Perera Aldama to understand how his life experiences led him to develop the Value Footprint model, and combined the interview with those of other stakeholders and relevant documents. An advantage of this approach is that it offers unique insight into a phenomenon, in this case how the Value Footprint model came to be. 

What is the Value Footprint model? 

Perera Aldama became interested in social and environmental issues over the course of his career in auditing in different South American countries, eventually connecting it to professional practice and involving his company, BigOne (a large audit firm), in a CSR initiative. He then became the head of sustainability advisory services at BigOne Chile and developed the Value Footprint model: a way of measuring the value a company creates and diffuses. This model is an elaboration on the  value-added statement: a financial statement on an organization’s value and wealth, that explains how value is created and distributed. A value-added statement goes beyond a standard financial statement in that last point: offering an explanation on how value is created. The purpose is to explain the financial numbers of a company and show the results of a sustainability strategy. It also includes some non-financial information, forming a more clear picture of a company and is more user-friendly than other tools, with a format that permits benchmarking, making it useful for comparison purposes. 

During the process, Perera Aldama worked with multidisciplinary partners, which informed his development of the sustainability advisory and of the development of the Value Footprint model. It is more focused than other social reporting tools like the Global Reporting Initiative, as it focuses on the Value created by the company (sales - input) and the Value Distributed by the company (employees, government, shareholders, community, re-investment in the enterprise). For example, when looking at employee indicators, the Value Footprint approach looks at their demographics and average annual income; when looking at the government, at taxes paid; for the community, investment in social interest and environmental projects and hours donated for volunteer work; and for financing, at the average external financing cost, average profitability of liquid funds, and collection and payment periods.

In this model, companies must also disclose their policies for: 

• corporate governance

• code of ethics

• safety, health and labor 

• the environment

• community development

• responsible marketing and consumer protection

• social dialog 

• social investment

• donations, volunteer work and philanthropy

• education

Together, this collection of data provides a thorough but concise social reporting framework. 

Perera Aldama also notes the pros and cons of developing a CSR initiative from a for-profit organization (BigOne Chile). Profitability goals are a constraint, as sustainability consulting is not necessarily a priority. On the flipside, the global network and connections of the firm allowed for amassing a large international client base and an environment that encouraged risk-taking. This made for a social reporting model that was rooted in conventional accounting, but built with the input of multidisciplinary professionals. 

Lessons learned and future directions

What can we learn from the Value Footprint model and from using an auto-ethnographic approach?

• The story can hold valuable insight for those looking to develop social reporting models in Latin America, and possibly in other geographies..

• The accounting profession is still finding its footing in the field of CSR , but it has much to offer. Making value-added reporting, as seen in the Value Footprint approach, more mainstream would help cement the accounting profession’s role in CSR. 

• Openness to new research methods can offer unique insight and perspectives, particularly when using a qualitative approach in a field dominated by quantitative methods.

• Accounting professionals, and indeed researchers in general, can turn to auto-ethnography as a way to infuse their research with passion, thus presenting the “inside story”, which usually goes untold.  

To read more, check out the article :

Zicari, A., & Perera-Aldama, L. (2020). Building from Scratch: An Auto-ethnographic Approach for the Development of a Social Reporting Model. Social and Environmental Accountability Journal, 40(2), 101-115.