There is a lot of confusion out there with many a CEO, Leadership team and Board scratching their heads as they try and make sense of the plethora of corporate themes currently being bandied around – culture, transparency, trust, purpose, responsibility, behaviour, reputation, sustainability, inclusive capitalism etc….
However bewildering the terminology may be, one thing is clear: times are changing and companies ignore this movement at their peril. Customers are buying brands that they associate with; institutions are buying shares in companies which are well managed and offer sustainable long-term value; employees are looking to work for companies that have a compelling purpose; and regulators and watchdogs are turning the heat up as regards how they expect organisations to behave, including their dealings with society and all stakeholders, not just shareholders.
This is not simply a question of compliance, nor is it a question of sacrificing profits for the greater good; this is about acting responsibly and thinking above and beyond the immediate needs of the business and its shareholders so as to maintain relevance in today’s society and create sustained value. It requires a longer term, holistic approach, as opposed to simply satisfying shareholders at the next set of results.
Some organisations are well prepared and set up to both cope and prosper within this new order. Many are not and still remain uncertain where to start. Engaging with all their stakeholders, listening to what they have to say and acting appropriately is not a bad first step. Historically, it has been the custom to audit shareholders which has often provided valuable, but potentially blinkered insight. Today, the greater value lies in companies auditing all their stakeholders – including shareholders – as it is there that the ultimate valuation of a company lies.
This increased focus on non-financial matters – call it what you like – is not going away. As the Financial Times so succinctly put it, this is the “new normal” and successful companies will be those that respond.