Companies are navigating through an increasingly complex world of risks and opportunities amid unprecedented technological advances, growing public scrutiny and intensifying competition. At the same time, they are benefiting from advances in technology and the ever-increasing availability of data.
But, they are also challenged to better communicate with their stakeholders. Why? Technology is making it easier for stakeholders to access a wider range of information - and potentially misinformation - about companies. And, a growing proportion of this information is generated outside of the companies and may be beyond their control.
Stakeholders are increasingly asking companies to demonstrate their commitment to social issues in addition to delivering the bottom line. As a result, stakeholders are seeking more transparency on how companies' strategies consider these broader issues.
Against this backdrop, a new ecosystem is forming. It is characterized by a freer flow of information accessible by stakeholders. This information may be from companies, their customers, their employees, machine learning of customer behaviors or other sources. For companies, the increased availability of data and information requires them to reconsider how, what and when they communicate to stakeholders.
It's estimated that over 20 billion devices will be connected to the internet by 20201, all of which provide valuable information on companies', consumers', and other stakeholders' behavior. As technology continues to transform businesses' interconnection with their customers, suppliers, and other stakeholders, data is becoming increasingly valuable. Entire business models are being built around data, focusing on activities like measurement, aggregation, analysis, and decision making.
There has also been a proliferation of data vendors that provide information about companies and their competitors. These vendors search through vast quantities of digital information and sell it to investors who want to gain an edge in the markets. Consumers, business partners and activists also purchase this data to inform their decisions. This industry is estimated to double in size in the next five years to $400 million in annual sales.2
"Technology provides information to people quickly and democratically. Companies can't selectively evolve a story. They need to be engaged earlier, with fuller disclosure."
The challenge for companies? How best to position themselves to take advantage of this new technology and data to tell their story. And the story stakeholders want to hear is how technology is impacting the business, how it is creating areas of competitive advantage and details about potential risks of disruption.
While stakeholders want more insight into companies—from understanding their values and long-term strategy to their position on social and environmental issues, there are real concerns related to trust in the information communicated by businesses and business leaders. This is partly because stakeholders may have access to information about a company matter or issues with its products and services before a company discloses it. Stakeholder confidence can be eroded when there are inconsistencies in a company's messages and what is being reported by other sources. In a digital age, it takes only a few clicks to point out inconsistencies, because consumer-generated messages about company activities and products are commonplace.
1Business Insider UK, The Internet of Things 2017 Report, July 12, 2017
2Source: ForexRepository, http://www.forexrepository.com/news/hedge-funds-see-a-gold-rush-in-data-mining.htm
3PwC, Global investor survey, February 2017
In our 2017 global investor and CEO surveys, we noted the following:
So what steps can a company take to build trust in a digital age? They can:
Increased transparency can show how management is taking a holistic view of the business and its prospects for long-term value creation. For example, by providing non-financial data along with financial data, a company can provide deeper insights into how it manages its business, maximizes competitive advantages, mitigates risks and safeguards its reputation. In our 2017 global investor survey, 90% of respondents indicated that their perception of the quality of a company's reporting impacts their perception of the quality of its management.
Social media is also changing the communication game. While the appetite for distributing information via social platforms is still emerging, it is becoming more prevalent. In 2016, 80% of investor relations executives used social media for their work,4 and 40% of Fortune 500 CEOs were active on at least one of six major social networks (Twitter, Facebook, Google+, Instagram, LinkedIn and YouTube).5 It's clear that the accelerated pace of digital media, combined with the proliferation of social channels, is changing how companies communicate with their stakeholders. Social media provides an additional platform for companies to showcase their products and services and engage with the investment community.
4IR Magazine, Changing currency of investor relations professionals, August 2016
As online platforms increasingly become core to strategic communications, some companies are breaking down traditional internal silos among functions like investor relations and marketing. Having these functions work together helps with consistency of message and more timely response in providing the company’s story online.
Companies have an opportunity to proactively respond to marketplace expectations by establishing clear communications channels with stakeholders to influence their story. This may mean leveraging digital and analytical tools to improve stakeholder engagement, reevaluating the role and composition of its investor and public relations teams and enhancing governance and controls over the use of new data and technology.
"Good CEOs spend time making sure the company strategy makes sense to stakeholders."
Source: Tim Ryan, PwC US Chairman & Senior Partner
5CEO.com, 2016 Social CEO Report, May 31, 2017