Measurement of a Value

Measurement of a Value

In 1987, when the theme sustainability was first introduced by World Commission on Environment and Development (WCED), consumer demanded sustainable products and their expectations included companies’ sustainable activities. Companies started responding to this demand. According to Peter Bakker, a company engaging in social initiatives benefit from the returns such as “building of social capital”, creating of valuable relationships, and driving operational performance (2013). However, there is no global policy or standard as a guideline for reporting sustainability. Corporate reporting of an organization’s value should recognize the scarce resources and social benefits relating to sustainability (Bakker, 2013, p. 3). Consequently, establishing an accounting for sustainability reporting will capture the real value of a company.

On the other hand, authors Robert S. Kaplan and David Norton of “The Balanced Scorecard” claimed that a “balance scorecard keeps companies move forward” (1992). The balance scorecard measures the financial, internal process, customer, and learning and growth perspectives in order to support the organization’s strategy and vision (1992).  Using traditional measuring tools results management bias to control behaviours and are inadequate to value an organization’s growth and profitability. Companies need to improve their business performance by achieving goals for each perspective.

Lastly, Korten argues that modern advancement gave way to “delinking money from things of real value.” (2001, p.178) Precious stones and minerals had their own intrinsic value before paper money was issued. In accounting, an asset is either capitalized through debt or equity securities. However, they both do not create value instead they are claims of the creditors and investors. According to Korten, assets and debts are not associated with any real value so a company’s market value measured by those does not reflect its actual value.