An increasing number of institutional investors document environmental, social and corporate governance metrics and use this data to assess company competitiveness, overall value and future performance potential.

Profitability can be undermined if a company does not meet stakeholders' demands for corporate governance. Recent history has proved that a lack of ethics and poor corporate governance may cause corporate failure.

Profitability can also be directly undermined by negative reactions from the local community, the workforce, the marketplace, environmental bodies, or indeed by governments. In fact weak management of extra-financial issues is clearly linked with poor financial performance across a range of companies.

Corporate failure
Recent corporate history holds up many examples of instances where failures in corporate governance, weak human capital management or inadequate environmental control has threatened corporate success, undermined corporate profitability or destroyed shareholder value.

This shows that prevention is better than cure; that the implementation of safeguards is more effective than limiting damage; and that taking responsibility seriously in the new risk reality by developing a strong risk management strategy gives a significant competitive advantage and has a direct impact on financial results.

No cover ups
It is no longer possible to paper over the cracks of a faulty corporate responsibility system and simply hope they will not re-emerge.

Outsourcing corporate responsibility strategy and management is not an option either, as you are held directly responsible for your actions, from the ethical behaviour of your supply chain to your impact on the community at home and at large. In the meantime, mandatory reporting of issues under your responsibility is spreading.

The number of extra-financial reports requested by investors and regulatory bodies is growing, and global initiatives such as the UN Global Compact, the Global Reporting Initiative and the WBCSD are relentlessly driving corporate responsibility issues ahead and reflecting stakeholder demands.

Real corporate value
The result is that as a company today you have everything to gain from embracing these responsibilities. But to do so, you need to integrate corporate responsibility into your core business, transform your goals and plans into actions, measure your performance and finally to produce relevant and reliable reports.

In doing so, you will re-assert your licence to operate, strengthen your brand image and enjoy greater control over tangible and intangible assets: a truly effective way to gain real corporate value.