Many company leaders aspire to help the world in meaningful ways—while also maintaining long-term financial health for their investors. Adopting purpose statements to codify their strategies for designing products or services that can deliver specific social and environmental impact is one approach. Another is joining forces with other businesses to support initiatives that promote the well-being of people and the planet. Regardless of how those goals are defined, companies need to establish purpose-driven performance measurements. 

These metrics can validate companies’ efforts and increase transparency with stakeholders. Whether the goal is reducing their carbon footprint or boosting contributions to LGBTQ+ organizations and customers, companies can’t afford to exaggerate (or underestimate) the impact they have on such initiatives. So how can companies ensure their efforts measure up?

After working with clients to define purpose and measurement approaches in ways that are authentic to their ethos and meaningful to their stakeholders, we have identified three complementary strategies that companies can use to meet long- and short-term objectives and successfully integrate them.

Purpose-Driven Reporting Strategies

Best practices and processes for quantifying purpose-driven performance are evolving, so measurement can be difficult and costly. By assessing their purpose-driven objectives and motivations for achieving them, companies can choose a strategy (or strategies) that best aligns with their goals and culture.

Here’s a breakdown of strategies that focus on compliance, cause, and action.

Compliance-focused strategy. ESG reporting is increasingly becoming the expected way to describe contributions to environmental, social, and governance goals. Two organizations are playing major roles in developing reporting standards:

• The Global Reporting Initiative (GRI) centers on how companies impact the environment and helps them ensure they’re aligned with the United Nations (U.N.) Sustainable Development Goals (SDGs).
• The International Sustainability Standards Board (ISSB) develops the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards. These standards incorporated ESG reporting expertise from the Sustainability Accounting Standards Board (SASB) in 2022, as part of a consolidation with the Value Reporting Foundation. Application of the first two IFRS sustainability standards began in January 2024. One provides an overall framework for sustainability disclosures, and the other defines requirements for climate-related disclosures.

Both organizations engage international, industry-focused communities to develop guidance for reporting reliable, nonfinancial performance metrics. Their approaches have been widely adopted: GRI membership includes more than 500 organizations, while the SASB received 2,301 company submissions in 2022. In March 2024, the U.S. Securities & Exchange Commission (SEC) adopted climate-related rules, so additional companies will likely be following these ESG standards, and additional standards may be developed in the United States.

Although these standards are evolving independently, some elements are supported by consistent input from leading organizations. For example, IFRS, GRI, and the SEC all recognize Greenhouse Gas Protocol’s practices for measuring emissions. This includes recognizing Scope 1 (created by the reporting company), Scope 2 (through energy the company uses), and Scope 3 (external to the company, throughout a product’s supply chain).

As standards emerge, the advantages of the compliance-focused strategy are becoming clearer:

• Both IFRS and GRI focus on reporting requirements on items deemed most material to each industry.
• Organizations may reduce start-up costs by adopting existing requirements, rather than developing their own reports.
• Should regulations be adopted in ESG reporting, companies with experience will likely have less difficulty adopting new regulations.

Cause-focused strategy. Companies committed to purpose often join organizations with similar goals and strategies to support common causes. The U.N. Global Compact (UNGC) is one example. It’s designed to support company reporting progress toward the 17 Sustainable Development Goals and adhere to the UNGC’s 10 principles on human rights, labor, environment, and anti-corruption.

Industry-led initiatives focused on environmental and social factors crucial to the industry are also emerging, such as:

• Architecture 2030 focuses on reducing greenhouse gas emissions from building construction and operations—with a goal to achieve zero emissions from new construction. The standard requires energy efficient buildings to be powered entirely by renewable energy by 2030.
• Sustainable Agriculture Initiative Platform supports the growth of high-quality and sustainable agriculture products that benefit farmers, their employees, and the environment. As part of the effort, more than 170 member companies are collaborating to develop a regenerative agriculture program with tools to assess risks and improve soil, biodiversity, water, and the climate.

With a cause-focused approach, companies have:

• Effective and efficient ways to measure impact.
• Access to shared data so they can compare their efforts against the goals and strategies of other organizations.
• An opportunity to establish a context for progress within industry efforts.
• Potential to be recognized as industry thought leaders and build credibility by contributing to the success of coordinated efforts.

Action-focused strategy. Taking this approach is designed to build employee commitment and spur action. It provides motivating insights into individual roles in company success, while also demonstrating that many actions are needed to meet long- and short-term company goals.

Establishing measurable progress targets begins with defining the company’s purpose and then creating a concept map to identify the major activities needed to stimulate and sustain progress toward purpose. Working with clients, we call these maps the company’s “Path to Purpose.” Scorecards from these maps identify one or two metrics with targets for each component, outlining the data required to track progress.

The benefits for action-focused companies are both long-term (overall purpose target) and short-term (key components):

• Leaders, organizational teams, and individual employees gain insights into what the company is working toward.
• Leadership can then use these results to guide strategic planning, assess risk, identify near-term course fluctuations, and take corrective actions when needed.
• Internal discussions can build shared commitment to the purpose and goals, as well as shared processes for tracking and achieving progress.

The Power of Purpose-Driven Reporting

Implementing the right purpose-driven reporting strategy is at the heart of making strong decisions and progress toward goals. Recognizing the differences between strategies (see Table 2) can support plans for reporting initiatives that balance the needs of potential audiences, costs and benefits from joining leading organizations and adopting measures and programs already in place, and the magnitude of customization required for documenting unique purpose-driven programs. And each company’s choices will be driven by different factors. Publicly traded companies might begin their journey with a compliance-focused approach. Newer companies might benefit by first demonstrating their commitment to their cause. And small companies that face reporting constraints might focus their reporting efforts on actions that provide the most important information to stakeholders.

Table 2: Key Characteristics of Approaches to Purpose-Driven Performance Measurement

As stakeholders place a greater emphasis on a company’s environmental and social impact, organizations need to demonstrate leadership by broadening reporting efforts to include meaningful, nonfinancial metrics. Based on our experiences, clients find these activities inspiring yet often more difficult to execute. Like any strategic objective, tracking progress for purpose-focused outcomes requires an investment—not just to identify metrics and create reports, but to establish a framework that sustains efforts and shared commitments.

Beyond committing to a purposeful reporting approach, company leaders must also be ready to:

• Build a shared commitment to the company’s long-term purpose. Our clients have audacious goals, yet at times team members can be hesitant to commit, knowing it won’t be fast or easy. Leaders need to remind everyone of their shared responsibilities: how each individual’s role contributes to the company’s purpose-driven success—now and into the future.
• Report data that falls short of targets. Projects are often launched because the organization isn’t yet achieving its goals—and initial data will reflect that. While sharing data from the start can expose an area of weakness—more importantly, transparency can reveal an opportunity to grow. Joining an industry community can help by setting a context for your goals and commitment to making progress toward them.

Company leaders know that sharing data builds transparency, which is critical for companies to show the true impact of their efforts—and their desire to make a difference. When they measure their purpose-driven performance, companies can do good while also doing good business. The benefits can be many: It helps them attract and retain customers and talent; helps develop employee commitment and more informed stakeholders and partners; drives more efficient operations; and can lead to healthier communities and a more sustainable world.