The real drivers of value

A clear purpose is the starting point for successful companies

With recent political turmoil, distrust of big business, and an increased focus on corporate culture, the need to communicate a company’s purpose has risen quickly up the corporate agenda to address governance reform, the role of the board, directors’ responsibilities and long-term thinking. With more and more stakeholders everyday demanding to know why companies are in business and how they create value for society, we believe that a clear ‘purpose’ – why the company exists and what it is there to do – is the starting point for a successful organisation and the bedrock upon which all successful stakeholder relationships will be based.

In our role as communications specialists, we help companies every day in articulating their purpose and communicate how they deliver value. Done well, communication can help reach, engage and influence important stakeholders. Done badly or not at all, is another story. Encouragingly, we are witnessing progress and the growing focus on understanding how ‘purpose’ is helping to drive behavioural change and long-term thinking within leading companies across the globe.

What we’ve seen this year

Our annual research, the Complete 100 which analyses emerging trends and developments in FTSE 100 companies’ corporate annual reporting, encouragingly finds that that nearly 60% now set out their purpose as an organisation. This has nearly doubled from last year’s numbers. This could suggest that companies are recognising the value in defining and communicating a broader purpose - beyond profit - and starting to think about their purpose as the ‘lens’ through which to consider how they prioritise and operate as an organisation. We hope this is the case - as we believe that a clear purpose can give the underlying belief structure, culture and values that differentiate and define companies - what their investment case is and how they create long-term sustainable value for all stakeholders– all key components of a strong value creation story.

Evidencing a shift in thinking

The ability for an organisation to evidence how they are aligning business decisions with purpose and values, whilst focusing on how future strategic targets will be achieved, is fundamental to communicate over the long-term, and leads to more sustainable value creation. Our 2017 Complete 100 research is entitled, ‘The Real Drivers of Value: Lost and Found?,’ because we are hopeful that while companies may not yet have found a way to articulate the real drivers of value, they are at least beginning to, built around these three themes, which we will be covering in a series of forthcoming blogs:

  • Value creation – how companies employ their resources and relationships to take advantage of market drivers, describing what sets them apart in doing so
  • Stakeholder expectations – how companies discuss their stakeholder engagements and the degree to which they use the information to set the future direction of the company
  • Long term thinking – how companies evidence their long-term planning, preparedness and target setting

In our view, better understanding and more engaging communication of the wider factors contributing to long-term value creation, combined with building successful relationships with a range of stakeholders, will be important drivers of success in the future. The more business leaders understand the business case for better communication, the faster progress will be towards better business. We are optimistic that we will see incremental progress over time in stakeholder engagement and articulating purpose as companies start to feel pressure from regulators and other stakeholders in this debate - but most importantly, that organisations will begin to see the business benefits of doing so.