Consumers. Employees. Shareholders. We all demand that companies do more for society.
87% of consumers believe companies should integrate environmental concerns into their products, services, and operations to a greater extent than they have in the past (Source).
76% of millennials, or close to 40% of the global workforce, consider a company’s social and environmental commitments before deciding where to work (Source).
In response to investor demands, more than half of all global asset owners have started implementing exclusionary screening strategies or including ESG considerations in their investment strategies (Source).
Companies are busy redrawing the boundaries of business. We are witnessing the unprecedented rise of multistakeholder capitalism. It’s a fundamental shift, turning the focus from just shareholders to all stakeholders. We are called on to redefine how we measure success.
As companies grapple with this increasingly complex framework, one thing is clear: it will take serious, comprehensive ways of measuring progress to turn pretty words and good intentions into tangible results. In the past, maximizing ROI was the goal. Tangible and easy to grasp, that standard is no longer sufficient. It’s time to expand the metrics we focus on and reconsider what was once seen as too hard to measure consistently. The growth of ESG and previous attempts at measuring Purpose provided insight, but we know there is more to do. We want to know what actions lead to impact.
BCG BrightHouse has long led the way in integrated approaches to societal impact by fully embedding an organization’s Purpose in its core business. In 2019, we took the next step and embarked on developing a data-driven tool to measure a business’ actions for all stakeholders. A tool that paints an objective picture and reflects our belief that the strength of a company’s societal commitment depends on its ability to engage with all its stakeholders.
Enter the Living Purpose Index, which calculates a Living Purpose Score that compares individual companies and industries and tracks their progress over time. Experts from BCG GAMMA crafted the artificial intelligence required to measure our KPIs, in the process analyzing over one million document-based inputs. Our tool assesses companies across five stakeholder groups: shareholders, employees, partners, customers, and society. 24 comprehensive KPIs capture a company’s proven actions and its pending promises. So far, we have collected data two years’ worth of data and we will continue to refresh annually.
The aim of the Living Purpose Index is to numerically demonstrate the connection between a company’s commitment to society and its financial performance. While interest in whether a business can reconcile a profit-making role with a societal role is on the rise, consistent and iron-clad results remain elusive. Our results, first published for France in 2020, show that societal commitment is a critical factor in explaining a company’s financial performance. There is a positive and significant correlation between the French Living Purpose Index scores and Total Shareholder Return. These results reflect a simple truth: bringing genuine care for your stakeholders through your actions creates meaningful value.
The next version of the index will be released in Summer of 2021. After two years of developing the model and methodology, we have learned a lot and continue to learn more and refine our understanding. As we gather new data each year, we will deepen our understanding of how Purpose unlocks value for companies and all their stakeholders.