30 Jun Business Matters: Why it’s critical to measure non-financial value of developments
Luke Axe, Strategic Land & Planning Manager at Keyland Developments, discusses why development should be about so much more than financial capital and why Keyland’s new game-changing technology is the first in the UK.
I think it’s fair to say that recent events have acted as a catalyst for people and businesses to take a closer look at how they operate and an even brighter spotlight has been cast on the need for us all to do things better. How we do this has long been occupying my thoughts and I believe that central to the challenge is our relationship with – and understanding of – the ‘value’ we create from development.
The purpose of development shouldn’t be to simply deliver something that’s fit-for-purpose, it should be about really considering how towns and villages will look in the future and engineering places that inspire people and unite communities with innovation and sustainability at their heart.
Of course the world is motivated by financial value, but by prioritising this we almost always diminish other forms of ‘value’ which, incidentally, are those that really matter to the people who live in the places we create. Present circumstances have only highlighted the importance of things like; environment, design quality, health and well-being and access to nature, to name a few.
So is there a better balance to be struck – one where the trade-off between financial and other values is less severe, or ideally removed? What if our balance sheets could focus less on the pounds spent and received? What if we were able to quantify and measure the things that make a great place, not only as a means of measuring performance, but also directing what approach is best for a particular site? These are just some of the questions we at Keyland have been asking ourselves.
Over the last 18 months or so, we’ve embedded the six capitals model of sustainable development into every aspect of our business. Originally developed by the big financial institutions, this model considers value in a more holistic sense – natural, social, human, intellectual, manufactured and financial. We think that by understanding and embracing these capitals, we can make better decisions on design, strategy, disposal and partnership. We can also better measure the ‘total impact’ of our work, truly maximising the value we create.
The thing that excites me most about the six capitals is our Valuation Model, which is the first of its kind in the UK. We’ve been working closely with like-minded organisations and academic institutions to develop a tool that can quantify the value of all six capitals – not just the financial. The model is essentially a huge database of data sources, reasoned assumptions and complex formulas that allow us to assess value created in a range of circumstances – whether taking a Keyland or a business as usual approach.
So, how do you measure non-financial value? How do the calculations work? The very crude example I tend to rely on is that by providing houses that allow older people to stay in their home for longer, those people needn’t move into residential care. It costs the state around £1,000 per week for a person to live in a care home, whilst the cost of a warden to home-visit is a fraction of this. This saving is the number that will find its way to a six capitals balance sheet under social value.
Now, I would be doing a disservice to those that masterminded this model if I didn’t make it clear that my example fails to do justice to the complexity and intricacy of a machine that is capable of calculating the various different aspects of value across all six capitals – at the touch of a button.
Looking ahead, the Valuation Model will be useful in measuring performance retrospectively, but it’s how we use it right at the outset of a project that interests me most. Being able to get right under the skin of the value generated in a range of development scenarios will unquestionably enable us to make decisions that optimise the total value we create for people, society and our planet.
Having the Valuation Tool at our disposal is incredibly powerful, in fact it’s game-changing and it reflects our bold ambitions to change the shape of development for the better.