Reports > Management

'Real Value' Management: the Genuine Value of Companies in the ESG Era

2023.09.06 Se-Joo Min, Yong-Sam Park, Jeoung-Heon Woo

Se-Joo Min

Yong-Sam Park

Jeoung-Heon Woo

#Hashtag

#carbon neutral #ESG #Real Value #sustainability
In recent times, stakeholder capitalism has come to the forefront, with an emphasis on ESG (Environmental, Social, Governance) considerations, leading to a shift in perspectives on the value created by corporations. Beyond the economic value for shareholders, there is a growing recognition of non-financial values, such as environmental and social impact, catering to a diverse range of stakeholders. Real value management provides a framework and practical methodology for integrating ESG elements into corporate management.
Table of Contents

  • 1. Reflection on the Purpose and Role of Corporations

  • 2. Paradigm Shift in Perceiving 'Value'

  • 3. Real Value: The Intrinsic Value of Corporations

  • 4. Characteristics and Framework of Real Value Management

  • 5. Three Stages for Practicing Real Value Management

  • 6. Expected Effects of Real Value Management

Executive Summary

  • As capitalism evolves, the value pursued and created by companies must now equally consider both economic and non-economic values for stakeholders.

    • The recent surge in ESG practices reflects a convergence of demands, not only from shareholders but also from various stakeholders, emphasizing the need for responsible corporate management in the aspects of Environment, Society, and Governance.

  • Real Value refers to the genuine (Real) value created by a company, encompassing the total sum of tangible and intangible values generated through its business activities.

    • Companies that go beyond profit-seeking to fulfill societal needs and create value for stakeholders are socially accepted, securing a kind of 'License to Operate.'

  • Real Value Management seeks 'authentic' values aligned with the spirit of the times, leveraging the accumulated tangible and intangible assets of a company to create greater value.

    • Environmental and social aspects are now integral components of the objective function that companies must maximize, becoming both a source of competitive advantage and a driver for value creation.

    • Expanding the perspective on assets and reinterpreting their significance is essential. Strengthening, combining, and rediscovering are three approaches presented for leveraging held assets.

  • The Real Value Canvas (RVCC) is proposed as a framework for formulating Real Value strategies.

  • The process of implementing Real Value Management can be likened to a skilled chef preparing a feast for guests, involving three main stages.

    • In the first stage, analyzing tangible and intangible assets is akin to selecting high-quality ingredients.

    • The second stage involves deriving Triple Bottom Line (TBL) value creation methods, akin to cooking delicious food.

    • The third stage is storytelling the value creation process, where quantifying challenging values is difficult, emphasizing narrative storytelling over data.

  • Real Value Management propels a genuine transformation of companies in the ESG era, enhancing resilience and ensuring sustainability through practical methodologies.

    • Reflecting the perspective of Double Materiality emphasized in recent ESG discussions, it goes beyond simple information disclosure and establishes and strengthens the circular links between Value to Business (V2B) and Value to Society (V2S).

    • The 'intrinsic value' pursued by Real Value Management becomes the organizational focal point, rallying employees to overcome crises and forming the foundation of unwavering hope.

    • Overcoming crises through the creation of shared values with stakeholders and reinforcing trust, Real Value Management positions companies for sustained growth as enduring enterprises.

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