A Model of Long-Term Value Creation

Abstract

Companies need to rethink the way they create value and grow their business to thrive in tomorrow’s volatile and uncertain business environment. Companies in virtually every industry are being impacted by new disruptive and complex societal trends, such as climate change, energy transition and social inequality. At the same time, companies are increasingly evaluated on their non-financial performance and they ever more compete on speed and sustainability.

Still, only a few companies have begun to invent new strategic directions, pioneering strategies focused on creating long-term value, not just for shareholders but for all stakeholders. A playbook on how to create long-term value is currently lacking, making it difficult for companies to capture the opportunities and mitigate the risks created by these societal trends.

This paper develops a model of long-term value creation that supports companies in creating long-term value and setting their strategies accordingly. Financial institutions can draw on the model to assess how future proof their investment and/or lending portfolios are.

Keywords: corporate strategy, sustainability, transition, financial capital, human capital, social capital, natural capital

JEL Classification: G31, G34, L11, L21