The Embankment Project for Inclusive Capitalism
Changing the way value is measured to help companies focus on the long term
The Embankment Project for Inclusive Capitalism (EPIC) was founded on a simple idea: for societies and economies to thrive, business needs to focus on the long term. The Coalition for Inclusive Capitalism and EY brought together more than 30 global business leaders, including asset owners, managers, and companies representing almost $30 trillion of assets under management (AUM), to develop a standardized, material, and comparable set of metrics for the measurement of activities that create long-term value and that affect a broad range of stakeholders including customers, employees, suppliers, communities, and shareholders.
A series of workshops were held over 18 months to reach consensus on existing and new metrics to standardize the measurement of activities generating long-term value. The methodology focused on outcomes, measured the execution of a company’s strategy, and linked the metrics to long-term financial value for shareholders.
The result is an open-source framework and an initial set of metrics with principles, guidance, and tools for companies to better articulate their long-term performance. The full report, which attracted the attention of the Securities and Exchange Commission and the U.S. Congress, is available online at www.epic-value.com.
To guide business decisions, metrics for non-financial performance need to reflect what decision-makers and their businesses value. EPIC participants determined the following as core issues for long-term value creation.
TALENT
There is need for comparable metrics where a company’s actions could influence its long-term prospects: human capital deployment, organizational culture, and employee health
INNOVATION & CONSUMER TRENDS
Companies must measure areas that impact whether consumers and other stakeholders are likely to interact with a company.
SOCIETY & ENVIRONMENT
Businesses have difficulty quantifying the social value they create. EPIC participants recommended using the United Nations Sustainable Development Goals as a baseline.
CORPORATE GOVERNANCE
As boards become more involved in strategic planning, metrics are needed to gauge whether the board is equipped to help shape a company’s long-term strategy and value.
Coming out of this work, the Coalition for Inclusive Capitalism encouraged the following actions for participants:
Asset Owners
Set and communicate longer-term mandates for asset managers (see Pension Fund Coalition for Inclusive Capitalism).
Asset Managers
Engage more strategically with companies
Explore the link between intangibles and financial value
Companies
Select and develop metrics and a narrative appropriate to their business
Review and change current reporting practices