Businesses still struggle to close the gap between purpose and action

David Christopherson. Chief Executive Officer at Black Sun Plc

98% of global business executives say that it is critical for organisations to have corporate purpose in the 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

Black Sun’s brief on how purpose drives profit

The brief was compiled by Black Sun with the Value Reporting Foundation and the Association of International Certified Professional Accountants, the unified voice of AIPCA & CIMA.

The brief 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 believed that managing organisations using corporate purpose 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.

Comments on the Purpose Drives Profit brief

“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.”

“To survive and thrive, 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,” said Andrew Harding, FCMA, CGMA, Chief Executive, AICPA & CIMA.

“Buy-in for the fact that purpose and profitability are interdependent is at an all-time high.”

“There is a growing understanding that integrating purpose, long-term value drivers, and transparency into business strategy enhances 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.”

“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,” said Janine Guillot, CEO, Value Reporting Foundation.

“The evolving disclosure and transparency needs of investors, customers, employees and public trust continues to grow in importance to global executives in our surveys since 2014.”

“At Black Sun we believe stakeholder communications is a vital foundation for building trust and is a necessary component of sustainable, long-term business success.”

“We know from our experience 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,” said David Christopherson, Group CEO, Black Sun plc.