The Return on Purpose: Before and During a Crisis
The Harvard Law School Forum on Corporate Governance publishes a whitepaper highlighting how effective investment in corporate purpose can deliver value to both stakeholders and shareholders-
The document analyzes how corporate purpose relates to a company's financial performance, market valuation, and shareholder value creation.
Key findings:
Companies that scored high on corporate purpose metrics outperformed their low-scoring counterparts on common measures of financial performance, market valuation and shareholder value creation.
The COVID crisis provided another important insight: the valuation and value creation advantage for companies scoring high on corporate purpose widened, sometimes materially, as the crisis developed and progressed.
We find that the average EBITDA valuation multiple earned by High Purpose brands is over 4 turns higher than that of Low Purpose brands. If sustained over time, this means High Purpose brands would double their market value over 4x faster than Low Purpose brands.
Source: https://corpgov.law.harvard.edu/2020/11/09/the-return-on-purpose-before-and-during-a-crisis/