Understanding the value of purpose
Energy companies are battling public concern over climate change. Tech companies are judged on whether big data and social media positively contribute to society. Pharmaceutical companies face growing calls to justify their use of patents, and to make lifesaving medications more affordable and accessible. Across all industries, leaders today face pressure from consumers, regulators, and investors alike.
When it comes to responding, we often hear similar questions. Who are our most critical stakeholders? What’s our purpose? How is it fulfilling stakeholders’ needs? What outcomes and investments will create the greatest value for them, and how do we articulate and measure that? And, importantly, if we create, articulate, and implement a long-term strategy aligned with our purpose, what will investors think?
To that last point, there’s a very public, broad shift of capital toward organizations with a clear long-term strategy anchored by a purpose that is authentic and well-communicated. In the United States, the Business Roundtable last August issued a much-heralded statement signed by 181 CEOs recognizing the need for companies to act “for the benefit of all stakeholders – customers, employees, suppliers, communities, and shareholders.”
The problem? While stakeholders increasingly agree organizations thrive when they create a broad spectrum of long-term value – financial, human, consumer, and societal – no one is sure how to measure value beyond dollars alone. In the absence of metrics that clearly articulate the value of a company’s long-term investments, it’s hard to blame investors for continuing to make decisions based on established, short-term metrics and reporting.
Yet that hurts companies and investors alike. With 48% of global enterprise value represented by intangibles2, it’s little wonder only 25% of investors believe current financial reporting clearly conveys how a company can create future value through its investments.3