Monday, June 01, 2009

How Do I Love Thee, CSR? Let Me Count the Ways…

Corporate social responsibility’s (CSR) rapid growth over the last few years has been driven by the numerous benefits organizations are realizing from it.

But many continue to ask “what are these benefits, how do you measure them, and how do you maximize them?” These have remained the burning questions for CSR since the beginning, even as CSR has skyrocketed to the top quartile of many global corporations’ agendas.

CSR’s Benefits

There is a growing acceptance that CSR can now help deliver improved financial performance, as well as improved stakeholder performance, risk management, investor relations and access to new markets.

Both statistical and case studies have shown that CSR can generate top-line revenues for a company. It can inspire innovation, support new product development, open new markets, acquire customers, and enhance reputation and brand perceptions. At the other end, it can reduce costs by improving employee recruitment, productivity and retention; reducing commercial risks; and cutting energy use or waste.

Just as with an annual financial report, or a business or marketing plan, one of the primary benefits of a CSR report, specifically, is that it allows an organization to see where it is and where it needs to go on matters not immediately and directly related to finance, at the same time as informing its audience of its performance on such matters.

A report published by NGO Business in the Community (BITC) last October revealed that FTSE companies that actively managed and measured corporate responsibility issues outperformed the FTSE 350 on total shareholder return by between 3.3 and 7.7 per cent throughout the period 2002-2007. Similarly, the Dow Jones Sustainability Index 2008 report affirmed a positive, strategically significant correlation between corporate sustainability and financial performance.

In February, A.T. Kearney reported that, “in 16 of the 18 industries studied, companies committed to sustainability outperformed industry averages by 15 percent over the six months from May through November 2008.” The value created by CSR is clearly holding strong above other business practices in this economy.

Moreover, it is increasingly understood that financial statements capture only a fraction of corporate risks and value-creation potential, with the large majority deriving from less tangible factors such as human capital and resource efficiency. Environmental, social and governance data is relevant, material information that investors should have – and increasingly want –as a means to better gauge longer-term performance.

Measuring CSR

For years, we assumed that measuring CSR’s return in general was something we should attempt to do in traditional ways. We learned the hard way, first from Enron and WorldCom, and more recently from the financial sector as a whole, that there is no such thing as an exact science when it comes to measuring the return on important CSR strategies like transparency.

Among the difficulties with measuring CSR’s ROI is that there are many different forms of such ROI that can be found in each company, and it can also differ greatly among companies depending on industry, geography, type of program(s) involved, and many other variables. This makes best practices nearly impossible to identify and each company is left to “reinvent the wheel” of CSR measurement out of necessity for its own activities and purposes.

Moreover, the more CSR becomes an integral part of daily business, the more difficult it is to differentiate costs as well as benefits that relate only to the CSR aspects of a company’s actions.

Yet, some individual components of broader CSR efforts are more measurable than others. Sustainability processes that focus on minimizing waste and resource use, for example, relate directly to the bottom line and are relatively easy to quantify. There are also several benefits of implementing a diversity policy in the workplace, such as reduced turnover of employees, that are more easily quantifiable in terms of opportunity costs for training and developing people.

For those CSR efforts that are less measurable, or even impossible to measure, it’s important to remember that many things of value that businesses do or have done routinely also are equally difficult to measure. These include traditional forms of advertising, training and development, and branding. The relationship to these business strategies and business success is correlative, just as it is with CSR.

There is an understanding by many that CSR is about creating longer-term value than quarterly earnings estimates. Ultimately, the most effective measure of CSR may be a company’s share price or valuation over a longer period, with the only question then remaining of how long the time horizon should be.

Maximizing CSR

Companies that don’t try to measure their CSR outcomes may still be enjoying positive social and/or business ROI – but are probably not maximizing those benefits, simply because they will not know which CSR activities are performing well and which aren’t. Without that knowledge, there’s no way to promote continuous improvement.

Instead of giving up on measurement altogether, or “focusing on the no-win question of finding the exact ROI of CSR,” UC Berkeley’s Kellie McElhaney recommends that businesses “measure fewer things better.” “Focus on measuring a few specific things that are relevant to your CSR strategy, such as brand reputation, energy efficiency and dollars saved, employee loyalty, and positive changes in leadership skills among employees. Then add a few more metrics.”

“I have seen countless companies that have used a story around one or two solid metrics from a CSR strategy to elevate its reputation, and I have seen countless other companies whose CSR programs have been cut because the team was so bogged down executing a complicated metrics plan,” McElhaney wrote in a recent BSR newsletter article.

Think about and try to measure what your CSR strategy did to support your overall corporate strategy. Then communicate CSR’s value using both facts and real examples of impact, since people often remember stories more easily than bare facts.

Labels: corporate social responsibility, CSR, roi

Posted by Perry Goldschein
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Friday, May 29, 2009

CSR Strategy - quick 50,000 foot view

A quick, 50,000 foot overview of one of the biggest problems for businesses trying to engage in CSR:

Labels: corporate social responsibility, CSR, video

Posted by Perry Goldschein
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Wednesday, May 27, 2009

Will We See a Federal Eco-Label Program Soon?

As green marketing has proliferated the last few years, so has the number of "eco-labels" competing to be the environmental or socially-responsible equivalent of a Good Housekeeping seal of approval. There are literally hundreds of labels with only a handful known by more than tiny percentage of consumers. And more are coming all the time.

This proliferation has lead to significant amounts of confusion, not only by consumers, but even those in the industries being certified.

We found one humorous example of this confusion. A label calling themselves “Tested Green Certification” states that they are, “endorsed by the National Green Business Association and the National Association of Government Contractors to provide green certification to federal and state contractors as well as other green small businesses.” This claim was then apparently taken out of context and was reclaimed by a supply chain services company who is one of their clients. On its website, the client asserted that it “has been certified by the TESTED GREEN Federal Government certification program” [italics added for emphasis].

While the federal government has organic standards, it has no others related to environmental claims of products or services. There isn’t even any specific regulation on green product claims generally, let alone eco labels other than “organic.”

Instead, there are just unenforceable Federal Trade Commission guidelines (more than 10 years old and in the process of being updated) and false advertising laws that cover broad areas and often put the burden on those they’re meant to protect to prove claims are misleading.

The confusion the numerous eco-labels bring makes it difficult for consumers to intelligently compare the differences in businesses’ numerous environmental or social claims. As a result there is some skepticism and distrust of such green claims and eco-labels.

Green businesses and their marketers, now realizing the problems of greenwashing, are looking for the most credible eco-labels. As Kevin Owsley, owner of Cleanpro USA LLC, of Scottsdale, Ariz., joked with the Wall Street Journal, "If you want green certification bad enough, you can get it... I could buy some of these companies a case of beer, and they'd give us a certification."

In response to the confusion and misleading claims, Diane Feinstein, chairwoman of the Senate Rules and Administration Committee, had circulated late last year a draft bill that could eventually become a de facto federal mandate for eco-labeling. While she has distributed draft language to other Senate offices, only a leaked copy has provided any clues to the details. They include:

• An Environmental Protection Agency (EPA) voluntary program to award environmental impact approvals to consumer products.
• Accurate, science-based criteria for green labels.
• A 13-member decision-making board, chaired by an EPA official and with members from manufacturing, environmental, consumer, scientific and labor groups.
• "Product certification centers" that would establish eco-label criteria for specific product categories and award green label status to products on the basis of their "potential to reduce negative environmental impacts.
• Eligible products would be those that present "a significant potential to effect environmental improvements through consumer choice."
  

Feinstein’s program is intended to recognize consumer products that are environmentally preferable over others throughout their life cycle. While the senate has been publicly quiet on their efforts, some believe the bill may be introduced this year.

Thanks to my intern, Tiffany Fox, for her research efforts on this piece. We’ll soon be putting out a white paper on eco labels to help guide businesses. Stay tuned!

Labels: eco labels, green certifications

Posted by Perry Goldschein
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Monday, May 11, 2009

Clinton Global Initiative energizes CSR crowd

I was fortunate to attend a relatively intimate gathering this morning of less than 200 people in NYC of the Clinton Global Initiative titled "Global Challenges, Corporate Solutions: Creating Value for Business and Society."

It was an energizing, corporate social responsibility (CSR)-related event based around the efforts, experience and results of this Clinton Foundation initiative and its partners. The plenary session included President Clinton, John Podesta and Judith Rodin, President of The Rockefeller Foundation. Four discussion groups followed this session on "Harnessing Innovation for Development," "Strengthening Infrastructure," "Developing Human Capital," and "Financing a Sustainable Future."

The focus was on how to create value for both business and society in solving our most pressing problems. The specific emphasis was on how to do this, as President Clinton said in his opening remarks -- "how to spend on CSR to generate maximum positive changes." "We're in the how business -- let someone else worry about how much..." he added.

President Clinton, John Podesta and Judith Rodin all mentioned various aspects of the Internet, social media, crowd sourcing and user-generated ideas in helping the various sectors and partners to work successfully together. This was especially encouraging to me as I steer SRB's primary areas of focus with colleagues on similar topics to help engage stakeholders, track & measure successes, and communicate client CSR efforts in more authentic, engaging and accessible ways than just annual reports or trite "green" campaigns.

I attended the discussion group "Harnessing Innovation..." facilitated by Vijay Vaitheeswaran, a correspondent for The Economist magazine, with a brief testimonial by Carlos Dominguez, a senior executive with Cisco. Attendees brought up many challenges, from how to engage employees and the "bottom billion" in helping to solve global problems to how best to implement ideas. The facilitator mentioned the courage to fail as an important principal that GE's CEO, Jeffrey Immelt, has brought up in the past.

The ideas of communications in CSR and metrics were also important to the people I spoke with at the event, including executives from Phillips-Van Heusen Corporation, Caterpillar and The Moody's Foundation.

Labels: Clinton Global Initiative, corporate social responsibility, CSR, President Clinton

Posted by Perry Goldschein
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Friday, May 01, 2009

Sustainable Groceries: 54% of Grocery Shoppers Favor Greener Brands

Even as shoppers continue to hold back on spending, the evidence that they're thinking greener than ever continues to pile up. The latest is a study, summarzied in a Media Post article, from the Grocery Manufacturers Association and Deloitte, which reports that 54% of grocery shoppers say they "actively consider" a brand's sustainability characteristics before tossing them in the basket.

The Media Post article states that ". . . doesn't necessarily translate into buying green, and only 22% of the more than 6,400 shoppers interviewed as they left the store that day actually bought a green product on this particular shopping trip."

"Only 22%"! The fact that less than half of those saying they actively consider green traits of brands actually bought them that day is no surprise -- this is consistent with many prior studies and surveys showing a disconnect between what consumers say and what they do when it comes to sustainability in their purchasing habits. What is amazing is that almost a quarter of the shoppers interviewed actually made more sustainable purchases that day (or at least purchases perceived to be more sustainable -- see Wikipedia citing the American Marketing Association for an ironic definition of green marketing).

Labels: green brands, green shopping, sustainable brands

Posted by Perry Goldschein
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