What does good growth look like?
Growth sounds good, but is it always good? Bad growth can quickly evaporate (‘boom and bust’). Bad growth brings little benefit to society, depletes more resources and exacts more resources and exacts a bigger cost on society than the short term resources it generates. The benefits of bad growth are not shared.
Good growth is real, inclusive, responsible and lasting. Good growth benefits everyone – consumers, employees, suppliers, shareholders and society alike. Good growth makes sound business sense as business perform better in a society that is stable, healthy and prosperous. But it may not always be reflected in conventional financial and management reporting.
So what do we mean by real, inclusive, responsible and lasting?
Real growth doesn’t simply shift market share from one business to another (‘zero sum growth’). Expansion into new and untapped markets drives real growth. So does innovation, providing solutions to help meet people’s changing needs and aspirations.
Inclusive growth shares the benefits by combining expansion in business output with improvements in living standards and outcomes that matter for people’s quality of life (e.g. good health, jobs and skills, clean environment, community support).
Responsible growth considers the impact of doing business rather than just the profits. Financial return can’t be gauged in isolation from the tax contribution, environmental and economic impact and effect on community stability, health and prosperity.
Lasting growth is maintained over the long term. The focus on meeting short term financial targets may obscure the underlying strengths, weakness and potential of the enterprise. The long-term view is at the heart of good growth
Total impact is on the CEO Agenda
Public backlashes against businesses' increasing profits are becoming more high profile, as consumers, campaigning groups and governments question whether a business is paying its fair share of tax, driving water scarcity, depleting resources or destroying natural habitats. The impact not only rocks reputations, but can damage revenues, and leave the door open for competitors to step in.
A holistic view allows risks to business to be identified and managed.
“74% of CEOs told us that measuring and reporting their total (non-financial) impact contributes to their long term success.” – PwC’s 17th Annual Global CEO Survey
Total Impact Measurement and Management (TIMM)
PwC has developed the ‘Total Impact Measurement & Management’ with our clients to provide the total perspective on business impact. This provide a new language for business decisions and the benefits of embedding it into decision making.
- Total – A holistic view of social, environmental, fiscal and economic dimensions – the big picture
- Impact – Look beyond inputs and outputs to outcomes and impacts – understand your footprint
- Measurement – Quantify and monetize the impacts – value in a language business understands
- Management – Evaluate options and optimize trade-offs – make better decisions
We see a need for more holistic measurement systems that take account of global mega-trends and allow management to make decisions based on a broader set of criteria than traditional management accounts.
We think that if the measure of business success goes beyond financials, and a value (and a cost) is calculated for the social, environmental, fiscal and economic activities of a company, business can see at a glance the impact they're making and the trade-offs between their strategies. In effect, the business can see the optimal decision for all its stakeholders.