This 100 plus page report highlights key statistics and the problem businesses face around long term value orientation. We’ve summarised key points below for you. For deeper interest in this space, the report is well worth the read.
EY and 31 companies, asset owners and asset investors collaborated for 18 months. Their goal? To identify and create new metrics to measure and demonstrate long term value to financial markets. Their Vision: to make long-term orientation the norm.
The Embankment Project has a solution developing an incredibly considered and substantive framework and process to help guide organizations on this path. A way to recognise the value of intangibles assets on the balance sheet. Things such as how to capture stakeholder value not just shareholder value.
The changing shape of business value: we have gone from the last century where most of the value determined by a business was a direct result of their tangible assets (manufacturing era) however with the ever increasing service based economy it’s those intangible assets such as Intellectual Property and Innovation are driving a much larger proportion of a company’s overall value.
The stats:
50% of a company’s market value is now represented by intangible assets and in some industries up to 80%
As little as 20% of a company’s entire value is actually captured on the balance sheet - a decline from about 83% in the mid 70’s
The embankment project categorises stakeholders as employees, customers, suppliers, governments and investors and long term value categories as Consumer, Human, Societal and Financial. What underpins this framework is the measurement of all of these categories across all stakeholders to measure the true value of a company.
This is not a silver bullet – but necessary progress. Requires companies and investors to play their part. For companies - identify the non tangible metrics and get the narrative right. For investors – engage more strategically with companies.
