Through the looking glass: tying performance and materiality to corporate purpose

Abstract

By making use of the purpose definition set out by the British Academy�s Future of the Corporation programme we argue that performance relates to purpose in two dimensions. Firstly, purpose sets the frame of long-term success and defines materiality for an organisation both from a single and from a double materiality perspective. Secondly, performance in relation to purpose needs to measure profitability net of negative externalities. We review and discuss the current landscape of non-financial reporting and measurement frameworks on how they lend themselves to the determination of materiality on the one hand and to the accounting of externalities on the other hand, in order to achieve an approximation of performance in relation to purpose. We conclude by discussing how materiality and measurement viewed through a purpose-lens could help an advanced understanding of performance in practice for sustainable finance, corporate governance and management decision-making.

Findings of the Future of the Corporation �Purpose Labs�

“…One suggestion was for an interim requirement on boards of firms above a certain size to choose and adopt a comprehensive impact reporting and assessment system such as GRI, SASB, B Impact Assessment, ratified by the shareholders, which sits alongside current accounting and reporting requirements. More details on measurement systems can be found in Stroehle et al (2022).…”

“…The second phase of the programme started with this definition and set out to elaborate on its meaning. The process involved four evidence generation and synthesis components: convening of a Deliberation Group; commissioning of evidence syntheses (Palombo 2022;Pitt-Watson & Mann 2022;Stroehle et al 2022); generating new ideas and insights through a series of deliberative roundtables; and a final analysis to generate the principles supported by review and consultation with participants in the process. The final output of this was a generalised description of the nature of purposeful business through eight general principles that promote it.…”