What’s your company worth?
50 years ago a Balance Sheet consisted of plant, machinery, raw materials, Finished Goods and land. These are the tangible assets of any company.
However, there has been a big change. Within the last 25 years, intellectual capital has emerged as the leading asset class. Up from 17% in 1975 to 84% in 2015. The term “intellectual capital” refers generally to intangible assets?—?patents, trademarks and copyrights. Also, as more companies are outsourcing their manufacturing, those old smokestack assets are now also intangibles: such as supply chain, logistics acumen, designs, blueprints and licences.
But there’s more, brand value is also an important component of Intangible Asset Market Value (IAMV). Comparing the 39 companies appearing on both the S&P 500 and the Interbrand list suggests brand value may represent as high as one quarter of the total market cap of a prominently branded company.
So who is the Steward of the Brand?
Everywhere you look, business is under scrutiny. Whether for environmental practices, labor conditions, tax, or paying suppliers on time, individual citizens increasingly are expecting companies to behave in a socially responsible manner.
This is not a fad. A pivot. Something that will blow over. It’s a generational change.
Increasingly leaders are look to protect their brand by looking at the external perception of the company by investors, partners, communities, and public entities. This is loosely called being purpose-focused and can cover social, environmental, and sustainability practices.
39% of consumers are likely not to buy a company’s products or services if they believe they are not “responsible”. 25% will actively advise friends and family to avoid the company.
There’s a wide perception that these programs cost money and drive down margins. Wrong. Research suggests that companies that execute these types of programs can significantly outperform their rivals over a 10-year period.
Modern-day procurement leaders are starting to use the phenomenal buying power of their organizations to address some of these big social challenges. At the upcoming Carlyle Global Partner Summit event in Monaco, Tifenn Dano Kwan, SAP Ariba CMO will share the worldwide movement building around social procurement.
Can you, or your brand, afford to sit this one out?
By James Marland
Keywords: Sustainability, Supply Chain, Procurement