Changing the way value is measured to help companies focus on the long term
The Embankment Project for Inclusive Capitalism (EPIC) was founded on a simple idea: for societies and economies to thrive, business needs to focus on the long term. The Coalition for Inclusive Capitalism and EY brought together more than 30 global business leaders, including asset owners, managers, and companies representing almost $30 trillion of assets under management (AUM), to develop a standardized, material, and comparable set of metrics for the measurement of activities that create long-term value and that affect a broad range of stakeholders including customers, employees, suppliers, communities, and shareholders.
A series of workshops were held over 18 months to reach consensus on existing and new metrics to standardize the measurement of activities generating long-term value. The methodology focused on outcomes, measured the execution of a company’s strategy, and linked the metrics to long-term financial value for shareholders.
The result is an open-source framework and an initial set of metrics with principles, guidance, and tools for companies to better articulate their long-term performance. The full report, which attracted the attention of the Securities and Exchange Commission and the U.S. Congress, is available online at www.epic-value.com.
To guide business decisions, metrics for non-financial performance need to reflect what decision-makers and their businesses value. EPIC participants determined the following as core issues for long-term value creation.
Coming out of this work, the Coalition for Inclusive Capitalism encouraged the following actions for participants:
Set and communicate longer-term mandates for asset managers (see Pension Fund Coalition for Inclusive Capitalism).
Engage more strategically with companies
Explore the link between intangibles and financial value
Select and develop metrics and a narrative appropriate to their business
Review and change current reporting practices