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Bringing purpose to life

Assessing and reporting progress

The Board also need to develop suitable and effective ways of assessing progress and reporting – in a way that goes beyond statutory requirements and informs stakeholders of how the company is creating value for society.

In addressing this it is helpful to bear in mind two apparently contradictory truths – what counts is what gets counted and what really counts can’t be counted. Purpose cannot be measured directly and evaluating social outcomes and the quality of human relationships is difficult. However, particularly for large companies, some measures are essential to enable oversight, inspire progress and assess alignment to the purpose, and help enable the right conversations with management and investors.

Two things are needed:

Firstly – an integrated business model derived from the purpose which identifies key relationships alongside other inputs and outputs, and material non-financial outcomes alongside financial outcomes

Secondly – the development of simple and appropriate non-financial proxies including qualitative and quantitative measures accompanied by an explanatory narrative:

  • to help assess how the purpose is changing culture and driving decision-taking
  • to give insight into the evolving quality of external relationships material to business success
  • to assess specific social and environmental outcomes (some of which are directly measurable) deriving from an assessment of the company’s impact alongside financial results

These steps give the basis on which management can bring social, environmental and financial outcomes together in decision taking and reporting to the Board. These combined outcomes also furnish a Board with necessary insights to inform strategic decisions on capital allocation and investments aligned to the purpose.

Non-financial measures need to be easily understood and deployed alongside financial measures, emphasising that they are of first-tier import. Arriving at the best proxy measurements is itself a key task. They need to be chosen – and then used – in a way that stimulates learning and action in pursuit of the purpose but at the same time averts the risk that the proxy measures become boxes to tick or substitutes for the true goals of a purpose-led company in creating social value – thereby skewing priorities and behaviour.

For more on these considerations see the course: Assessing progress in becoming purpose-led