Imperative 03
Account for stakeholders
What gets measured gets managed. Measuring the value a company creates for everyone it touches.
Every company already accounts for one stakeholder with great precision: its shareholders. Revenue, cost, profit and return on capital are audited, comparable across firms and tied to how executives are paid. Everyone else, from workers to the communities downstream of a plant, is measured loosely or not at all. The third Imperative is the least glamorous and the most consequential: measure the rest with the same seriousness.
Why measurement is the lever
Statements of purpose are cheap. A number that is reported every year, audited, compared with competitors and linked to pay is not. When a company has to publish its emissions, its injury rate, its gender pay gap or its supplier payment terms, three things happen: managers start managing the number, investors start pricing it, and claims made in advertising can be checked against it.
What to measure
Workers
Pay distribution including the lowest-paid decile, contract security, injury and illness rates, training hours, turnover, union recognition.
Customers and users
Safety incidents, complaints and resolution, data handling, the share of revenue from products with known harms.
Suppliers
Payment terms and late payment, audits of labour conditions, concentration of purchasing in low-wage regions.
Communities and nature
Emissions across the value chain, water and land use, local tax paid, lobbying spend and positions taken.
The standards that exist
Two families of standards now matter. The International Sustainability Standards Board publishes disclosure standards aimed at investors, focused on how sustainability issues affect the company's value. The European Union's sustainability reporting rules go further, requiring companies to report how they affect people and the environment, not only how those issues affect them. Both are being phased in, both are contested, and both are a large improvement on the voluntary reports they replace.
Linking it to pay
Most large listed companies now include at least one non-financial metric in executive incentive plans. The quality varies: a target that is always met is a bonus, not an incentive. Good practice is a small number of material, measurable targets, with the methodology disclosed and the result audited.
The objections
"It is a reporting burden." True, especially for mid-sized companies, which is why the standards are phased and proportionate. The burden of not measuring is simply borne by someone else.
"Managers accountable to everyone are accountable to no one." This is the serious objection, and measurement is the answer to it. Accountability to several parties works when each can see the numbers and act on them; it fails when "stakeholders" stays an abstraction.
"Markets already price this in." Only what is disclosed can be priced. That is the point.
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