Teet Tender, PwC Advisors leader
31 May 2016
PwC’s recent Global CEO Survey drew attention to a fundamental shift in how CEOs are perceiving their metrics of success and the impact of their businesses: 84% of respondents said that their business is expected to address wider stakeholder needs.
Moving away from a shareholder-centric position to one that takes into consideration other influencers is a very different way to look at business, and one that could drive very different strategies and outcomes. Shifting the emphasis from shareholder and share price, and appeasing investor pressure for results in the short term, is difficult – it takes a clear vision and strong leadership to achieve. But CEOs have told us they are moving down this road. They say they are in it for the long haul (82% of CEOs say they prioritise long-term profitability over short term) and recognise that their reason for being is centred on creating value for their stakeholders, not just their shareholders (67% of CEOs said yes, increasing to 76% for CEOs running firms with over $10bn turnover).
CEOs are aware of their business dependencies – without customers, there is no business; with non-compliance comes fines or even closure; without workers, revenue declines. In fact, 90% of CEOs say their customers and clients have a high or very high impact on their organisation’s strategy; 69% of CEOs say that governments and regulators do as well; and 51% of CEOs point to employees as a big influence.
In the past, for some companies, the relationships between business and society and business and the environment were conveniently overlooked. Much was hidden from view, happening behind the scenes. However, with new technology for data and image collection and storage, and the ability to share quickly and widely, secrets are harder to keep and old school behaviors are easily exposed.
Furthermore – it’s no longer sufficient nowadays for a business to do just enough. In recent years (the Panama papers affair being just latest example), tax decisions have been in the spotlight, with certain companies paying the right amount of tax in the eyes of the law, but not in the eyes of the people (or necessarily the government). Issues around a moral acceptability and accountability are coming into play.
PwC believes that with a focus on financial metrics alone, it’s hard to create a holistic view of any business and its impact. When inputs and outputs are the focus of attention, the impacts and outcomes are lost and the real value and contribution a business makes never sees the light of day. The right balance is needed between the business imperative and the social imperative.
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