Great companies measure their worth, not just their wealth—here’s how.
Companies have traditionally measured corporate health and success solely in financial terms. Specifically, income statements and balance sheets, in some form or fashion, have been used for hundreds of years to communicate the financial wealth and prospects of an enterprise. But the best companies go beyond measuring their wealth—they measure their worth.
Since the 1970s, select companies have moved beyond financial reporting to measure their success. These organizations have been holding themselves accountable to reach a higher bar by evaluating their performance in relation to the environment, society, and appropriate controls (governance), also known as ESG. These companies have correlated focus on these areas to their corporate values.
ESG acknowledges the sustainability and ethical impact of a business. ESG reports are used to measure these intangible assets that add to a company’s reputation, intellectual property, and brand value. ESG includes the following:
Environmental – climate change, pollution, water management, biodiversity
Social – human rights, labor relations, health and safety, community relations, diversity
Governance – board structure and accountability, executive pay, bribery and corruption
But company results have proven an ESG focus impacts much more than intangible brand value. It can deliver tangible top- and bottom-line improvements as well. ESG companies have been outperforming others in their peer group. The data would support the fact that companies that “do good” also “do well.”
Even more recently, some companies are raising the bar again to increase their worth. These companies are stepping up to meet 17 bold, broad-based Sustainable Development Goals (SDGs) set by the United Nations in 2015.
The SDGs each have specific measurable objectives with enabling supportive metrics and goals. They include global issues of poverty, hunger, health, education, justice, equality, energy, economic growth, infrastructure, climate and environment protection, sustainable communities, and responsible consumption and production.
In short, today’s best organizations are focused on sustainable growth to increase their worth. They’ve learned that increasing their worth also increases their wealth.
Said differently, a company’s value increases when they focus on their values.