Delivering sustainable value in the business world
By Malini Parkash
Going into 2022, defining what value means for businesses has never been more important. At C-suite level, value is widely demonstrated in terms of financial gain. However, we are in an age where it is vital for business to see the importance of people and planet, not just profits.
January is a month of planning and when designing corporate reputation and communication programmes to support business goals, we need to be actively addressing and articulating companies’ wider impact if we are to deliver real strategic value. However, there is still more to do to convince the C-suite that sustainability related impacts are of strategic value. Recent research by PwC reveals that just 22% of survey respondents have made net-zero commitments and as few as 13% of CEOs have targets related to greenhouse gas (GHG) emissions in their annual bonus or long-term incentive plan. This is in stark contrast to the emphasis placed on other risks, such as a cyberattack, which is seen as directly impacting on company’s financial goals – the same goals that most executive compensation packages are still tied to.
There are of course instances where CEOs of large companies are putting sustainability front and centre – but not without some criticism. This was clearly demonstrated by one of Unilever’s top shareholders, Terry Smith, who publicly accused Alan Jope of pioneering the company’s sustainability credentials to the detriment to its financial performance. While this view is not wholly representative of the investment community, the debate around whether investing for impact can garner the same levels of returns, and therefore deliver value, rumbles on.
In recent years, Larry Fink’s letters have sought to make the point that impact and profit can go hand in hand. In his most recent letter, he said: “Most stakeholders – from shareholders, to employees, to customers, to communities, and regulators – now expect companies to play a role in decarbonising the global economy. Few things will impact capital allocation decisions – and thereby the long-term value of your company – more than how effectively you navigate the global energy transition in the years ahead.”
Ultimately, delivering business value is based on not only meeting the demands of your key stakeholders, but minimising the adverse impacts that you have on them. Combatting climate change is in the interest of all and therefore firmly meets these criteria. Added to this, the financial case has never been clearer with the UK government’s Risk Assessment report revealing that the climate crisis could wipe out 1% of GDP by 2045.
How can we, as communicators, enable businesses to best articulate their value? Mr. Fink highlights that the most commercially successful businesses stay true to their purpose. This is similarly the key to success for corporate reputation and communications strategies. We witness over and over how CEOs that are guided by their purpose are far better placed to forge stronger connections with their stakeholders. We should be demanding that the C-suite establishes an authentic, multi-stakeholder purpose that is its north star in 2022.