Maximization of shareholder value has been the dominant business strategy in recent decades. As a consequence, these companies are focused on short-term financial profits and loose sight of the real value which they are creating for consumers and society.
This narrow focus is changing. Many businesses are currently shifting their attention from short term profits to long term value creation. They are also looking at a broader set of stakeholders, beyond their shareholders: customers, employees, suppliers and nature.
This helps companies re-focus their goal or “purpose”. How do products and services contribute to the well-being of customers? How are companies affecting their employees, their human capital? How is the company contributing to environmental problems or social disruption? Which risks do these impacts pose in the long run? Will it affect their license to operate?
Studies have shown that businesses that focus on value creation, in the broad sense, do better in the long run. They make better decisions related to their customer value, impacts, opportunities and risks. However, this management style requires metrics that go beyond the financial accounts which currently dominate business reporting.