Ernst Ligteringen, Chief Executive of the Global Reporting Initiative, argues that having common global standards for reporting companies’ nonfinancial performance is going to be an essential part for economic recovery. He believes that reporting environmental and social performance is not less important than reporting financial profit and loss. Ligteringen has run the GRI since it was established as an independent organization in 2002, including having overall responsibility for secretariat operations and the coordination of a global network of stakeholders. A Dutch national, Ligteringen previously worked for a number of international organizations, including the International Federation of Red Cross and Red Crescent Societies, Oxfam, and Terres de Hommes in Africa, the Caribbean, Latin America, Asia, the Middle East, and Europe.
As markets and regulation are redefined over the coming decade, transparency and accountability are going to the buzzwords. As we seek to rebuild the global financial system following a collapse that was, at least in part, brought about by opaque financial dealings, markets and regulators will be looking to clear the glass.
Intangibles have been accorded growing importance in financial analysis for some time—and their greater inclusion in valuations is likely to have a significant impact on the future of investment analysis. Research indicates that in the late 1970s intangibles accounted for just 5% of the total market valuations of companies in the FTSE 350 index. Today this has risen to nearer 80%, and the figure is even higher in the case of certain major global brands.
As the first decade of the 21st century draws to a close, enormous changes are underway in terms of global demographics and lifestyles. The United Nations (UN) estimates the world’s population will grow by up to 50% over the next 30 years to reach nine billion people. More and more people around the world are now, quite understandably, expecting to have or, indeed, already have lifestyles which until recently were the preserve of people in Western countries. These changes are fueled by, and dependent, on the availability of resources and the ability to use the environment as a dumping ground, both of which have clearly defined limits. The resulting changes—in global ecosystems and economic disparities within and between countries—will alter the world, so that “business as usual” is no longer going to work in terms of providing the world with sustainable prosperity. And there is a growing awareness of this, by consumers, regulators, and others.
One key intangible that is going to require in-depth analysis in the years to come is how well-positioned companies are to handle these changes. Transparency on how a company addresses a range of economic, environmental and social concerns is going to become paramount in gauging how it is positioned to maintain a strong reputation and brand, and its ability to offer products and services that meet the new needs arising from a changing world.
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