Quantifying the true value of infrastructure | KPMG | AU
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Quantifying the true value of infrastructure

Quantifying the true value of infrastructure

Infrastructure owners, operators and promoters often talk about the ‘intrinsic’ value of their assets: reduced carbon emissions, better quality of life or improved safety, for example. Yet few infrastructure companies report the financial value of those benefits. Fewer still use that data to drive decision-making across their business. According to one European railway operator – NS Group – the benefits of measuring environmental and socio-economic impacts in financial terms can be tremendous.


Partner in Charge, Climate Change & Sustainability

KPMG Australia


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Train in tunnel

Changing expectations drive new approaches

As regulators, shareholders and customers start to demand greater transparency into the ‘real’ impact of their infrastructure, a number of organisations are starting to explore how they might quantify the value the company creates for society.

One such organisation is NS Group, the largest public transport operator in the Netherlands. Working with KPMG in the Netherlands, NS Group began to calculate its environmental impacts in financial terms using KPMG’s True Value methodology. According to Carola Wijdoogen, Director of Corporate Sustainability at NS, the move to quantify its social and environmental impacts was driven by the need to meet society’s expectations of the company. “NS’s core purpose is to provide mobility for society and it is important that we show how we have fulfilled that core purpose,” notes Ms. Wijdoogen.

While some organisations struggle to place a financial value on societal and environmental impacts, Ms. Wijdoogen believes that financial accounting actually enriches the value of the data. “In order to understand and compare all kinds of value creation, we have to use a common denominator to express that value,” she says. “We believe that the best common denominator is money.”

Measuring the value

In 2015, the company released a report highlighting the financial value it creates, and reduces, for society. “Putting a financial value on our environmental and social impacts helps us to have fact-based discussions with our stakeholders about the trade-offs between sometimes conflicting values of people, planet and profit,” notes Ms. Wijdoogen.

The largest positive impact came from the social value that its mobility services delivered which, on its own, was estimated at EUR7 billion. However, Ms. Wijdoogen notes that there were also around EUR5 billion in ‘costs’ to society related to time spent in trains, crowded or delayed trains or time passengers spent waiting at stations or changing trains. “We look at the entire journey from door to door and put a value on passengers’ time,” she adds.

The company also assessed its safety and environmental impacts which suggested that they had created some EUR560 million of positive value for society by enabling passengers to avoid car accidents (far outweighing the negative impacts of rail accidents on customers and staff) and had created an estimated EUR196 million of positive environmental value through avoided externalities such as emissions from car journeys (but this was somewhat offset by an estimated EUR107 million of environmental costs, largely due to emissions from electricity used to power trains).

Making smarter decisions

According to Ms. Wijdoogen, this approach delivers far more insight than simply enabling an organisation to quantify its footprint. “It helps us to prioritise our investments, for example when deciding whether to invest in reducing overcrowding, increasing parking at stations or improving the seating on our trains. This information helps us to understand how we can allocate resources in the most effective way possible to maximise the value we deliver to society,” she explains.

By understanding its environmental impact in financial terms, NS Group is now focused on finding ways to reduce it. The company has committed to a 10-year agreement to use green electricity generated by offshore wind turbines which, in turn, enabled the wind farm to be built, adding new renewable generation capacity to the Dutch power industry.

The analysis also uncovered areas where the organisation would need to work with aligned partners to achieve incremental value. The safety assessment, for example, suggested that the most effective way to increase the safety value would be to improve the safety of journeys to the station rather than making improvements to the trains themselves.

The journey to quantifying social and environmental impacts

Ms. Wijdoogen’s advice to other companies looking to value their social and environmental impacts is to start with manageable projects. “Don’t make it too big. We started by focusing only on our environmental impacts. You need to take it step by step. If you want to do it, it can be done and there are people keen to help you, including academics and professional services firms. There are also other companies out there looking for the same answers, and there is a collaborative spirit among the innovative businesses that are pioneering this type of analysis.”

However, Ms. Wijdoogen is also clear that the journey for the NS Group is only just starting. “So far we have measured what we have already delivered in social and environmental terms. Our next challenge is to develop our true value analysis into a forward-looking tool that enables us to assess and compare potential investments and make decisions based on the social and environmental returns, as well as the financial returns. For instance, we have started to look at how we can improve the social and environmental value of using buses to reduce overcrowding on trains at rush-hour. We hope that will lead us to a better balance between people, planet and profit.”

Lead from the top

Ms. Wijdoogen is proud to be leading her organisation’s charge towards more transparent reporting. However, she also believes that sustainability is core to the mission of the NS Group and, as such, argues that it should be owned and implemented by the whole company, not just by sustainability experts. “It starts with a belief that this is important; the process must be owned by those at the top of the company. If you are to succeed, then your decision to understand your true value creation must be aligned with your core values and purpose as a business.”

© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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