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How can you create long-term value with a short-term focus?

EY’s 2021 Global Alumni Survey reveals the imperative to prioritize sustainable value creation. But how, with competing short-term demands?

Three questions to ask

  • What are the current priorities for senior leadership?
  • Do these leadership priorities align with that of employees?
  • Which risk factors or opportunities are being missed?

The pandemic has presented us with a chance as much as a challenge: a chance to move from a growth economy to a value-based economy, marked by prioritizing long-term value and the needs of multiple stakeholders over short-term growth. This was revealed in EY’s Global Alumni Survey of over 12,000 alumni, which included 1,800 C-Suite and board members, who unanimously say that leaders need to have a view on how to achieve long-term value above all else.

EY Alumni Survey 2021
of our alumni feel it is important to commit to delivering long-term value

They cite long-term value as their key priority, yet also rank more immediate challenges like operational efficiency, talent concerns, and adopting new technologies among the top five biggest issues. Conversely, leaders are underweighting issues relating to political risk management, supply chain resilience and diversified offerings - a decision which may prove detrimental to their sustained success.

Beware of the blind spots

The fact that leaders are focused on long-term value rather than operating in survival mode shows a remarkable resilience during what has been a difficult year and a clear determination to move forward. Yet, it is important that the risks that seem out of leaders' control are not underestimated. One example is political risk. In our Geostrategy in Practice 2021 report, there are five key recommendations to help CEOs make political risk management a strategic priority.

One further area that may require more attention from CEOs is cybersecurity. CIOs and CTOs overwhelmingly rate it (89%) as the most relevant service required by businesses at the moment. This compares to 44% of CEOs. This discrepancy may cause leaders to rethink whether they are paying due diligence to this area. 

The will to transform

As business leaders emerge from the pandemic, they are seizing the opportunity to transform and leap ahead, or risk being left behind. Across the board, the survey demonstrates that technology and transformation services are seen as the most relevant to today’s business environment, including technology transformation, data and analytics and business transformation.

A willingness to transform and innovate chimes with the findings of our CEO Imperative Study, which found that a majority of CEOs (68%) are planning a major investment in data and technology over the next year. Furthermore, 63% revealed that accelerating technology and digital innovation is having the greatest impact on their company.

How EY can Help

  • Long-term value creation metrics

    EY Long-term value teams can help you shape your strategy, drive transformation and measure progress in providing sustainable value through use of the WEF-IBC’s common metrics. EY leading role in developing the metrics means we’re uniquely placed to advise on their adoption and impact.

    Read more

Align with your employees

Another encouraging sign is that ESG (environment, social and corporate governance) is gaining traction, although it remains below traditional business issues in ranking. A third of leaders (except CIOs and CTOs) across roles rank it in their top five services. However, CIOs and CTOs deviated from the whole in valuing ESG and people issues far lower than their peers, an area that could pose a risk.

 

There is also a discrepancy between leadership and employees, with the full sample of alumni respondents ranking ESG higher than the C-suite group. Therefore, leadership needs to ensure they are in tune with the priorities and purpose of their employees. According to EY’s Future Consumer Index, 68% of consumers agree that companies need to drive positive social and environmental outcomes and ensure their suppliers meet high environmental and social standards. 

 

In fact, according to EY’s work on The Embankment Project for Inclusive Capitalism, it is not uncommon that as little as 20% of a company’s value is captured on its balance sheet – a staggering decline from about 83% in 1975. This can result in differences in perspective between businesses and investors.

 

In order to highlight a commitment to ESG, companies will need to move beyond mere financial reporting and demonstrate how they are performing in terms of their employees, society and the environment and how they are fulfilling their consumers’ needs.

 

ESG is an area of growth for EY and a huge opportunity. We are making important strides in our understanding and commitment to sustainability and ensuring it is embedded both in our own organization and that of our clients.

 

To achieve long-term value, leadership needs to help ensure there are no blind spots and address the expectations of a broader range of stakeholders. In this environment, understanding stakeholders’ demands as well as delivering value for employees, customers, shareholders and the broader society will ultimately position your company to better adapt to changing market dynamics and drive greater financial value.

 

Summary

EY’s 2021 Global Alumni Survey highlights the imperative for businesses to take a holistic view. While traditional business issues are still a priority this must be alongside, not at the expense of, social and environmental considerations. In doing so leaders will meet the call to deliver true long-term value.

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Falco Weidemeyer + 1

    EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.