In the current global context ensuring this growth and well-being presents multiple challenges. Despite significant advances in economic development, persistent poverty, rising inequality, economic instability and a broadening skills gap are all impacting business value. No longer can companies rely solely on financial assets or returns on financial capital to evaluate business risks and opportunities. They must also understand how trends and shifts in society will affect them.
In September 2015 all 193 UN Member States ratified a set of 17 Sustainable Development Goals to provide a framework for achieving global prosperity within the limits of the planet. Momentum from this revitalized global agenda alongside government policy, investor requests and consumer sentiment, are all driving companies to better manage their social risks and integrate social impact into their core business strategies.
To do well in today’s world, companies must understand the value they create for their shareholders, for society, and for their business beyond financial returns.
Despite this growing awareness there is little consensus on how companies can measure and value this fundamental intangible asset. Many approaches exist, but they are based on different assumptions, offer different functionality, suit different purposes and compete for uptake. Even if CEOs and other decision-makers recognize the value of assets like community relationships, or employee talent, they are unable to translate this value consistently into terms that people inside and outside the company can understand and use. As a result companies struggle to embed these factors into processes such as strategic decision-making and communications. In many cases, this leads to undervaluing - and consequently, under-investing in - the social resources and relationships on which businesses depend.
Companies that truly value people will be most successful. The measurement and management of corporate performance must evolve to incorporate social and human capital alongside financial and environmental performance. A credible, comparable and broadly accepted approach to social impact measurement and valuation is essential to enable companies to truly value people as a driver of sustainable growth.