The “Non-Financial” performance management imperative. Are you ready?

Every company in the world, no matter its size, location or industry, monitors, measures, tracks, and to some extent reports on key Financial metrics…not just because it might be required by law or regulators but because it makes business sense. If a company didn’t keep an eye on its finances and actively manage it, it would go south quickly.

 Financial performance management has been done, honed and standardised on global basis over the past millennia. The terms, method and the approach to measure and report on financial performance of companies are generally similar around the world.

 “Non-Financial” performance management on the other hand is still in its infancy. There is no global rule book, standard or method to manage your “non-financial” performance.

 While Financial performance remains critical, Non-Financial performance is quickly rising to taking an equal role next to Financial aspects.

“Today, Financial management is the baseline.

Your stakeholders expect much more, they expect you to manage all Non-Financial aspects as well as your Financial ones.”

Each of the topics can impact the value of a company, regardless of its size, location, market. Whether it is publicly listed or not.

 ESG (Environmental, Social and Governance) management is a very effective “Non-Financial” management framework as it covers all aspects of running a company:

  • your impact on the Environment (and all companies have one); how you treat your employees, contractors, suppliers, customers; how much tax you pay, your capacity to innovate, how you manage your data, how you respond to crisis and much more (the “inside out” view)
  • as well as the impact of all these factors on your company (the “outside in” view).

This double-materiality (how the company affects its stakeholders and outside world and how it stakeholders and outside world impact the company) adds a valuable Risk mitigation dimension.

 The challenge lays in the breadth, depth and fluidity of “Non-Financial” management, especially in a world full of VUCA (Volatility, Uncertainty, Complexity, Ambiguity):

  • What do I measure?
  • How do I measure it?
  • What do I report on?

That is a genuine challenge for most, if not all, companies.

Our approach is to leverage technology to help resolve that challenge. We are building the next generation of “non-financial performance analysis” solution. We are able to generate a picture of a company’s non-financial performance in a way that is complete, detailed, accurate and rooted in data. Because we use technology, it can also be done in minutes, on on-going basis and at scale.

With minimum effort in their part, we are able to provide our customers, the management team of the company, with an X-ray of their operations from head to toes. We highlight what the company does well and what it should improve on.

Are you ready to X-Ray your business?

   

ESG: 21st century operational management tool

ESG is often linked to the Financial sphere, typically with reference to ESG ratings which are used to drive investment decisions.

We are strong proponent of ESG as a modern, practical, operational tool to measure the overall performance of a company.

Due to the breadth and depth of elements covered, (multiple topics within each main domain) ESG is a modern, “real world” management tool, it reflects real world concerns and realities.

When we measure the ESG performance of a company, we explore up to 360 indicators across 17 topics.

” That analysis give us a complete X-Ray of a company and is a great proxy for overall healthiness of an organisation. ”

Ascentys ESG sub-domain scoring across ESG

Great companies

Companies that perform well across all three domains of E, S and G are the ones best positioned to continue prospering in a way that is aligned with climate goals and societal dynamics. They have business models suited for these changes and are able to adapt. They are able to invest time and energy across each aspect. Great companies are healthy across the board, they are genuinely sustainable in the broadest, strategic sense: net zero environmental impact, positive societal impact, adaptable business model, flexible market offering and production capabilities, genuine connections with customers, supportive communities (local or virtual), limited reliance on certain types of debts etc.

Good companies

Companies that do well on most aspects of ESG are generally healthy but their progress might be limited to some extent. Their long-term success is conditioned on maintaining their commitment to understanding and improving their positive impact on the Environment and Society, while maintaining a sound business model.

Weak companies 

Finally, companies that generally do not perform well on most topics or those that perform truly badly in one of the domains are doomed to fail. They might already be failing but kept in motion by market inertia.

Their social license to operate is eroding fast. At a macro level they are not in sync with market dynamics, often exploiting a temporary, weak market or excessively strong market position (stifling competition, leadership with no innovation or participation in “at risk” industry such as oil & gas).

 In the 21st century only companies that perform “great” across E, S and G will thrive.

Companies that have “good” ESG performance will endure, though with fragility and at risk of changes in market dynamic.

Companies with “weak” ESG are effectively stranded assets and unlikely to survive in the mid-term unless they take considerable measures to reshape themselves.

 In the long term, only companies with great ESG survive.