How to Handle Purpose-Led Reporting? Go Back to Basics

The Business Roundtable’s decision to move away from its 30-year stance on shareholder primacy serves as yet another data point further propelling forward corporate social responsibility initiatives. And with credit rating agencies making a strong push to grade companies on environmental, social and governance metrics, business leaders have a lot to think about.

In the revised definition of the purpose of a corporation, nearly 200 CEOs of major U.S. companies — including PwC — said corporations should commit to providing value to all stakeholders, not just shareholders. The updated definition urges companies to work to exceed customer expectations, invest in employees, protect the environment, and deal fairly and ethically with suppliers.

At PwC we believe businesses should view the Business Roundtable’s position as an evolution, not a revolution. Serving society and creating value for shareholders needn’t be mutually exclusive. And of course, all companies will need to determine how to best answer this call.

But it’s clear that companies are subject to heightened expectations from all directions. People are watching to see if they’ll work harder to better serve customers while protecting their sensitive data, prioritize the well-being of their employees, and limit their negative impact on the environment.

However, the lack of established guidelines for monitoring and measuring these purpose-driven activities begs the question: Where and how should companies get started?

Enter purpose-led reporting—that is, establishing ways to measure the progress you’re making in these new areas, then reporting on that progress at regular intervals. 

Taking a page from the financial reporting playbook 

You may understandably have questions about exactly how to do this. Fortunately, companies don’t have to start completely from scratch. You can take cues from financial reporting to help determine how to get started with purpose-led reporting — and how to get it right. Here are three ways financial reporting fundamentals can inform your efforts:

Concrete metrics—In financial reporting, standards of accuracy and consistency are paramount. The same holds true here. Purpose-led metrics are informed by knowing your stakeholders and what value your company strives to create for them. Consider what measures allow you to quantify stakeholder value, taking into account your industry and markets. For example, if you commit to ensuring employees are prepared to do their jobs as your industry integrates emerging technologies, you could measure how many employees enroll in company-funded training programs — then track the number of promotions or transfers that go to existing employees compared to new-hires. Another example: While preventing climate change might be a goal that aligns with stakeholder and company values, it is so immense and far reaching that it gives you little structure to act upon or measure against. Instead, becoming carbon neutral is a more concrete objective that lends itself to a specific timeline and progress tracking.

Demonstrated progress and comparability—Comparing a company’s financials from one quarter or year to the next, or against others in a specific industry is a given. It enables stakeholders to evaluate changes over time and assess relative performance. Similarly, purpose-led reporting should be as easy to understand as a financial statement and there should be consistency in how often reporting is issued. Consistent reporting provides a way to demonstrate meaningful progress over time and provides a view into how a company compares to its peers. Clearly communicate value by organizing metrics in a systematic way and in a singular place. Bring together information that might currently reside in other reports or websites.  Additionally, adhering to appropriate industry or business standards wherever possible lends credibility to what you’re reporting.

Independent assessment—Financial statement reporting is a relatively mature discipline, with established standards and independent assurance. Just as external auditors evaluate companies’ financial statements, independent assurance services could also be applied to purpose-led reporting to assess metrics on progress. This could help to satisfy stakeholder questions around whether a company’s assertions are supportable or whether it has appropriate controls, policies, and governance in place. Companies can and should create policies, process, and controls to reliably measure progress and metrics to enhance the quality and consistency of judgments while also seeking out independent assurance services. 

Meeting expectations

A company’s reporting is ultimately driven by the need to provide critical information to stakeholders so they can make informed investments or otherwise gain clarity on how a company is doing. As expectations continue to change and grow in scope, purpose-led reporting will allow companies to share the progress they’re making to achieve their goals. Yet it’s the fundamentals of credible reporting that will make this possible.