Businesses Still Struggle To Close The Gap Between Purpose And Action
29th July 2021 – A vast majority (98%) of global business executives say that it is now critical for organisations to have corporate purpose, according to a new brief Purpose Drives Profit: How Global Executive Understand Value Creation Today.
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 which demonstrated the links between protecting the well-being of key stakeholders and corporate performance.
However, a majority 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.
Compiled by Black Sun, in collaboration with the Value Reporting Foundation and the Association of International Certified Professional Accountants, the unified voice of AIPCA & CIMA, the brief, which is the fourth in the Value of Value reporting series, analyses the link between purpose and profit, and how to combine them to create value for all stakeholders.
Prior briefs in the 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 organisations 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.
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.
“This research perfectly illustrates that society’s expectations of business are changing. As a result, business strategies that worked in the past will fail in the future. The key challenge for business leaders is to reimagine how they create value for all stakeholders, embed it into their business model and measure results – if they want to survive and thrive now and in the future, businesses will need to adapt. Finance professionals are at the heart of any organisation, at the crossroads between finance, business and management. Their role is to provide, analyse, use and communicate decision-relevant financial and non-financial information to enable businesses to seize opportunities and mitigate risks. They have a key role to play in facilitating integrated thinking across their organisations and enabling them to improve strategic decision-making to generate and preserve value for all stakeholders.” Andrew Harding, FCMA, CGMA, Chief Executive – Management Accounting, Association of International Certified Professional Accountants, representing AICPA & CIMA.
“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. 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.” Janine Guillot, CEO, Value Reporting Foundation.
“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. At Black Sun 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, energise innovation and change behaviours; as well as help differentiate, shape reputation and build confidence with employees, customers, investors and wider society.” David Christopherson, Group CEO, Black Sun plc.
You can download a copy of Purpose Drives Profit: How Global Executive Understand Value Creation Today here.
About the Association of International Certified Professional Accountants, and AICPA & CIMA
The Association of International Certified Professional Accountants® (the Association), representing AICPA® & CIMA®, advances the global accounting and finance profession through its work on behalf of 696,000 AICPA and CIMA members, students and engaged professionals in 192 countries and territories. Together, we are the worldwide leader on public and management accounting issues through advocacy, support for the CPA license, the CGMA designation and specialised credentials, professional development and thought leadership. We build trust by empowering our members and engaged professionals with the knowledge and opportunities to be leaders in broadening prosperity for a more inclusive, sustainable and resilient future.
The American Institute of CPAs® (AICPA), the world’s largest member association representing the CPA profession, sets ethical standards for its members and U.S. auditing standards for private companies, not-for-profit organisations, and federal, state and local governments. It also develops and grades the Uniform CPA Examination and builds the pipeline of future talent for the public accounting profession.
The Chartered Institute of Management Accountants® (CIMA) is the world’s leading and largest professional body of management accountants. CIMA works closely with employers and sponsors leading-edge research, constantly updating its professional qualification and professional experience requirements to ensure it remains the employer’s choice when recruiting financially trained business leaders.
About Black Sun
Black Sun is a global stakeholder communications company. We help ambitious organisations understand their audiences, bring to life their value creation story and build enduring relationships with all of their stakeholders. We have been studying the power of communications in changing behaviour, increasing transparency and improving engagement between businesses and their key stakeholders since 2005.
Our research is focussed on demonstrating the business case for communications and reporting and the role that strategic storytelling has to play in helping organisations around the world build vital trust and communicate their value creation story across multiple channels – whether it is demonstrating accountability of the Board, helping capture the ‘spirit’ of regulation in reporting, creating a corporate website which reinforces purpose or engaging wider stakeholders on sustainability.
About the Value Reporting Foundation
The Value Reporting Foundation is a global nonprofit organisation that offers a comprehensive suite of resources designed to help businesses and investors develop a shared understanding of enterprise value – how it is created, preserved or eroded over time. The resources — including Integrated Thinking Principles, the Integrated Reporting Framework and SASB Standards — can be used alone or in combination, depending on business needs. These tools, already adopted in over 70 countries, comprise the 21st century market infrastructure needed to develop, manage and communicate strategy that creates long-term value and drives improved performance.