Prof. Dr. Timo Meyn­hardt

is hold­er of the Dr. Arend Oetk­er Chair of Busi­ness Psy­chol­o­gy and Lead­er­ship at HHL Leipzig Grad­u­ate School of Man­age­ment, and Man­ag­ing Direc­tor of the Cen­ter for Lead­er­ship and Val­ues in Soci­ety, Uni­ver­si­ty of St. Gal­len. His teach­ing and research focus­es on pub­lic val­ue / Gemein­wohl in dif­fer­ent sec­tors.

Prof. em. Dr. Peter Gomez

is the for­mer pres­i­dent of the Uni­ver­si­ty of St. Gal­len and for­mer pres­i­dent of the SIX Group. Today, he is involved in a num­ber of insti­tu­tions and projects in the ser­vice of pub­lic val­ue / Gemein­wohl.

Prof. Dr. Thomas Berndt

is Chair of Account­ing and Direc­tor of the Insti­tute for Pub­lic Finance, Fis­cal Law and Law & Eco­nom­ics of the Uni­ver­si­ty of St. Gal­len. His teach­ing and research focus­es on (inte­grat­ed) finan­cial report­ing, cor­po­rate val­u­a­tion, cor­po­rate gov­er­nance and com­pli­ance.

Non-finan­cial report­ing – Get­ting seri­ous about soci­ety

How non-financial reporting can make use of Public Value

By Timo Meyn­hardt, Peter Gomez & Thomas Berndt

More than ever, firms need to know how they impact on soci­ety, our val­ues and our ways of liv­ing. In a world of high uncer­tain­ty, it is nec­es­sary to devel­op a sense of what real­ly makes an orga­ni­za­tion valu­able to the peo­ple. In research, the notion of Pub­lic Val­ue address­es this type of val­ue cre­ation. It is about a firm’s con­tri­bu­tion to the com­mon good as per­ceived by the peo­ple.

Pub­lic val­ue score­card with the five pub­lic val­ue dimen­sions of a pro­duct, ini­tia­tive, and orga­ni­za­tion

With the advent of Pub­lic Val­ue in the busi­ness world, firms dis­cov­ered a num­ber of strate­gic oppor­tu­ni­ties. Next to an improved risk man­age­ment, a more detailed iden­ti­fi­ca­tion of the cor­po­rate pur­pose and a much wider view on busi­ness oppor­tu­ni­ties, orga­ni­za­tions learned to make use of Pub­lic Val­ue to bet­ter legit­imize their rea­son of being and their license to oper­ate.

Beyond sus­tain­abil­i­ty and CSR approach­es

Pub­lic Val­ue is con­cerned with the val­ues peo­ple attach to a speci­fic orga­ni­za­tion when reflect­ing about the soci­ety they live in. It goes beyond sus­tain­abil­i­ty and CSR approach­es, because it puts an orga­ni­za­tion into a broad­er pic­ture of soci­etal sta­bil­i­ty and pro­gress. The ratio­nale is sim­ple and yet com­pelling: it is the peo­ple which buys prod­ucts, votes for ini­tia­tives, and decides whom to work for. Thus, it makes sense to bet­ter under­stand the social collective’s con­cerns beyond stake­hold­er approach­es.

Ulti­mate­ly, Pub­lic Val­ue refers to an extend­ed notion of val­ue cre­ation. As a con­se­quence, it also extends the grounds of report­ing. Need­less to say, new statu­to­ry pro­vi­sions and reg­u­la­to­ry trends (like the EU direc­tive 2013/34 on dis­clo­sure of non-finan­cial and diver­si­ty infor­ma­tion) force orga­ni­za­tions to not only con­sid­er non-finan­cial infor­ma­tion in man­age­ment activ­i­ties, but to also con­se­quent­ly align busi­ness activ­i­ties to soci­etal needs.

Incor­po­rat­ing Pub­lic Val­ue into account­ing and report­ing

A group of lead­ing firms and orga­ni­za­tions in Switzer­land recent­ly joined forces with the authors to devel­op new approach­es to enhance exist­ing report­ing mea­sures. Basi­cal­ly, three options are under con­sid­er­a­tion:

1 Take advan­tage of the Pub­lic Val­ue Score­card

This tool mea­sures the five Pub­lic Val­ue dimen­sions of a pro­duct, ini­tia­tive, or an entire orga­ni­za­tion (see infobox). For exam­ple, Swiss Mobil­iar inves­ti­gat­ed the Pub­lic Val­ue change entailed by a poten­tial acqui­si­tion. Soc­cer club Bay­ern Munich stud­ied Pub­lic Val­ue chal­lenges in the con­text of its growth strat­e­gy. Last, but not least, Fre­se­nius Med­ical Care used the Pub­lic Val­ue Score­card to oper­a­tional­ize a miss­ing part in its Bal­anced Score­card.

2 Relate Pub­lic Val­ue  to your mate­ri­al­i­ty matrix

Mate­ri­al­i­ty analy­ses adjoin top­ics rel­e­vant for the orga­ni­za­tion to top­ics rel­e­vant for the stake­hold­ers. To date, this analy­sis does not nec­es­sar­i­ly account for top­ics rel­e­vant for the gen­er­al pub­lic. There­fore, redefin­ing the axes of the mate­ri­al­i­ty matrix strives to make a case for the link­age of an organization’s Pub­lic Val­ue cre­ation with its val­ue chain and thus also with its busi­ness strat­e­gy. Alter­na­tive­ly, Pub­lic Val­ue could appear as a new top­ic in the exist­ing analy­sis.

3 Find levers to boost your Pub­lic Val­ue per­for­mance

Exist­ing data bases com­prise rich infor­ma­tion rel­e­vant to Pub­lic Val­ue. Cur­rent­ly, a research team allo­cates more than 1000 ESG key per­for­mance indi­ca­tors to Pub­lic Val­ue dimen­sions. This enables firms to iden­ti­fy levers to not only gain a detailed under­stand­ing of the dif­fer­ent Pub­lic Val­ue dimen­sions and their asso­ci­at­ed KPIs, but also to improve their Pub­lic Val­ue.

Val­ue cre­ation instead of val­ue wash­ing

We con­sid­er account­ing cru­cial in “secur­ing” a firm’s Pub­lic Val­ue. It is cheap talk to pre­dict a grow­ing impor­tance of this soci­etal dimen­sion. But doing inno­v­a­tive Pub­lic Val­ue report­ing should be a safe bet in times of grow­ing mis­trust in firms as a nation’s wealth-cre­at­ing engi­nes. Incor­po­rat­ing Pub­lic Val­ue dimen­sions into the account­ing and report­ing frame­work of a com­pa­ny also is a solid tool to pre­vent accu­sa­tions of val­ue wash­ing.

Pub­lic Val­ue report­ing is a busi­ness imper­a­tive in a world full of uncer­tain­ties and dynam­ic change. It is just a log­i­cal next step for com­pa­nies engaged in stake­hold­er dia­logues and prepar­ing a mate­ri­al­i­ty matrix. Or, as Nestlé puts it: “To be suc­cess­ful, a com­pa­ny can­not afford to ignore what the world thinks about it.”