NEW YORK, August 11, 2021 – A vast majority (98%) of global business executives say that it is now critical for organizations to have corporate purpose, according to a new report, Purpose Drives Profit: How Global Executive Understand Value Creation Today Produced by Black Sun, in collaboration with the Value Reporting Foundation and the Association of International Certified Professional Accountants, the unified voice of AICPA & CIMA, the report analyzes the link between purpose and profit and how to combine them to create value for all stakeholders.
The interdependency of purpose and profit is clearer than ever before, with executives reporting a significant jump in investor interest in purpose, values and culture. This was reinforced during the Covid-19 pandemic that demonstrated the links between protecting the well-being of key stakeholders and corporate performance. However, a majority of executives do not feel that they have the tools and techniques to incorporate broader performance measures into strategic decisions. And only a small minority, 11%, are making extensive use of broader performance metrics in strategic decisions.
Prior reports in this series argued that changing societal expectations meant that businesses were increasingly expected to achieve both profits and purpose. Purpose Drives Profit: How Global Executive Understand Value Creation Today revealed that business executives overwhelmingly believed that managing organizations using corporate purpose as a strategic framework – including as a filter or lens for decision-making – is critical to making good decisions and creating sustainable profits over the long-term.
“While 99% of those surveyed agree that understanding all dimensions of value creation is necessary to make timely, well-informed decisions, we must also recognize that enterprise value is becoming more intangible and will be created further and further into the future,” said Ash Noah, CPA, FCMA, CGMA, vice president and managing director – Management Accounting, Association of International Certified Professional Accountants. “This creates a real challenge in a world where the next quarter’s earnings continue to drive management and investor behavior. This is borne out by the fact that a substantial majority of executives surveyed (75%) believe that company performance would improve if management used longer-term perspectives. We need to develop alternate metrics that can be used as a reliable indicator of the enterprise’s ability to create future value.”
Other key research findings include:
Nearly all companies now have a statement of purpose but only about half (51%) of business leaders believe that their purpose statement is very clear.• Nearly all executives surveyed (99%) continue to agree that understanding all dimensions of value creation is necessary to make timely, well-informed decisions.
A substantial majority of executives surveyed (75%) believe that company performance would improve if management used longer-term perspectives. Only 28% work with a time horizon of more than three years, although 58% would like to do so.
A majority of business leaders (62%) believe that their current reporting meets the information needs of key external stakeholders, however, executives acknowledge that there is still room for improvement.
75% of executives think that integrated reporting better enables a company to communicate the full range of factors that materially affect its ability to create value over time.
“Buy-in for the fact that purpose and profitability are interdependent is at an all-time high. There is a growing and global understanding that integrating purpose, long-term value drivers, and transparency into business strategy can enhance economic, environmental and social outcomes,” said Janine Guillot, CEO, Value Reporting Foundation. “This report indicates that tools such as the Integrated Reporting Framework and Integrated Thinking Principles can help businesses deliver these outcomes. That said, we also acknowledge the findings that there is still a gap between buy-in and action. The newly formed Value Reporting Foundation remains committed to supporting businesses getting started on this journey.”
“Meeting the evolving disclosure and transparency needs of not just investors, but customers, employees and public trust continues to grow in importance to global executives in each of our surveys since 2014,” said David Christopherson, Group CEO, Black Sun plc. “We believe stakeholder communications is a vital foundation for building trust – a necessary component of sustainable, long-term business success. We know from our experience of working with clients around the world that it can be a powerful and dynamic tool to engage with stakeholders, stimulate thinking, energize innovation and change behaviors; as well as help differentiate, shape reputation and build confidence with employees, customers, investors and wider society.”