How to reconcile ethics and shareholder logic Premium

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The idea no longer holds that shareholders only look at short-term value. Many studies show that they now base their investment decisions on long-term business strategies. In fact, shareholders could become key players in the promotion of stronger business ethics, as long as leaders are committed to convincing them of its strategic value.

Make shareholders aware that the value of conscious business revolves, first and foremost, around the holistic integration of CSR initiatives into strategy. The four following actions should be adopted:

1. Identify the impact of the value chain on the company and its communities, stakeholders, and the environment, analyzing both the positive and negative influences that the company may suffer or benefit from.

2. Define the initiatives best support the competitive advantages leaders want to create, or that best protect the business model. This should lead to the selection of a small number of initiatives that may be different from one business unit to another, depending on strategic considerations and location.

3. Measure contribution to performance: For this purpose, performance measures cannot be generic. “The desire to standardize or normalize these measures is understandable but not effective for this type of approach,” explains Rérolle.

4. Adopt integrated reporting in order to be able to communicate more clearly with all stakeholders

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How to reconcile ethics and shareholder logic

Based on an interview with Jean-Florent Rérolle, head of valuation and strategic finance at KPMG Corporate Finance, February 2013.
Business Digest nº 234, March 2013.

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