Post #52
December 1, 2021
Claire Bodanis
Claire talks to Professor Colin Mayer and Judith Stroehle, leading lights of a fantastic project that’s helping companies get to the heart of how to manage, measure and report on more than just the financials.
I don’t usually sell things in my blogs – at least, not things that have a monetary tag attached. But I’ve decided to make an exception this month, for three reasons. First, because I think many of you lovely readers might benefit from it; second, because it’s mind-bogglingly good value; and third because no cash accrues to me – or to FW!
So what is this incredible give-away, and what does it have to do with our latest favourite buzzphrase, environmental, social and governance issues, or ESG?
The gift that will keep on giving this Christmas is the opportunity to be part of the Oxford Initiative on Rethinking Performance, or ‘ORP’. Yes I know, sounds a bit ivory tower and highfalutin’, but bear with me.
The thing we are all struggling with when it comes to ESG issues is measurement. How do you determine what issues should be measured? Which metrics should you use? How do you collect and report that information? And how does that all relate to the financial performance of your business? Just a few challenges there, then.
The good people at ORP believe – and I concur – that the starting point is corporate purpose. And that’s not some wishy-washy marketing slogan thought up by copywriters (much as we love them) to tick the ‘purpose statement’ reporting requirement. Rather, it’s about a fundamentally strategic understanding of your business, and how you can measure and manage its performance in the round in the short, medium and the long term. Nothing new here then. But what is new is that the ORP team, rather than starting from the outside and looking at reporting requirements, are instead starting from the inside and helping companies rethink their whole approach to management accounting.
In the words of the project’s lead, Professor Colin Mayer: ‘Investors and companies are currently very focused on ESG, and that’s useful to some extent, but it’s not broad enough. Measurement of purpose is different. It starts from the inside, and is about determining the means by which companies are going to be able to solve their current problems. Understanding your purpose is fundamentally about performance in its widest sense. Of course it encompasses ESG issues, but it goes beyond that: it’s about your business model, your products and services, and the impact they have on the world. And that requires a new internal system of management accounting that suits the needs of companies, which will then deliver the information investors and other stakeholders are looking for.’
Sounds like a good idea, but what does it mean in practice? Over to Judith Stroehle, ORP’s programme lead: ‘Every company is different, so our team of researchers and analysts works directly with each one to help them determine how their purpose – and the problems it aims to solve in the world – gets translated into strategy, and from there into management actions across the organisation. This part involves working on the ground with business units to help them develop the right systems of measurement – financial and non-financial – which can then be aggregated into a system of accounting that feeds back up into the financial accounts. The other big benefit of being part of this project is the opportunity for companies to learn from each other. In fact those who’ve already joined the programme are finding that the knowledge transfer between them is as at least as big as it is between us and them.’
For those worried about potential confidentiality issues between companies, those signed up so far are Holcim, Shell, Neuberger Berman, Asahi Breweries Europe and Novartis. So, unless one of these companies is your sworn enemy on the corporate battlefield, you can only benefit.
And the price tag? For fantastic brains, at the forefront of their field, dedicated to your company? I hope you’re sitting down. It’s just £30k per year, for a minimum of three years. You’d barely get a scope of work from a management consultant for that.
I told you Christmas was coming early this year…
If you’re interested, please contact Colin (colin.mayer@sbs.ox.ac.uk) or Judith (judith.stroehle@sbs.ox.ac.uk).
And it just leaves me, on behalf of the FW team, to wish you all a safe, peaceful and happy Christmas.