52 Responses to “Conference exclusive: Measuring the business value of social impact”

1. Suzanne Fallender Says:
   March 31st, 2009 at 10:39 am

   I thought it was a useful framework and there was good discussion during the session. This is probably one of the hardest pieces of reporting and tracking performance – measuring impact and outcomes is much more difficult than measuring activities or “outputs.” Agree with your comment that the system doesn’t make it easy – it just gives you a starting point about how to begin the discussion internally about how better to measure performance rather than just tracking what is easy to count. Two good questions that were raised: (1) because these are all “indirect” measures, will you be able to get internal agreement on whether there is a strong enough connection with the activities? and (2) will practitioners be able to move to this new approach if it is more costly to measure in this way (through additional surveys, etc.) in this tough economy? Not sure what the answers are – but definitely will continue to look at whether we can get closer to measuring and tracking real impact.

2. chaux cedric Says:
   April 1st, 2009 at 6:51 pm

   So instead of measuring the fact, you measure the real and practical impact CSR has on the environment. Having studying CSR for one year, I feel the topic is too broad and too diversified. The amount of data generated are huge and difficult to compare to each other. Nobody can afford to read all these CSR report for each companies.

   However, having such performance measurements could be beneficial. I imagine a future where CSR report will be very similar to financial report. There would be graphic and CSR stock exchange market that would be updated and followed by many shareholders. They would have trends and many magazine will talk about it (like finance).

3. chaux cedric Says:
   April 1st, 2009 at 6:58 pm

   And of course these data will target only business internal stakholder , shareholder and so on. I see it as alternative data that does not fit a one size fit all report. ( however it s unclear if it does concern reporting )/

4. Rene Carapinha Says:
   April 2nd, 2009 at 11:55 am

   Measurement can only be effective and efficient if it is done in a systematic way. Saul provides a very easy framework towards systemizing measurement. This welcome framework helps many to organize a disordered process. I appreciate Soul’s approach for one other reason – he encourages measurement gurus not to reinvent the wheel! The logic and theory is out there. Your responsibility is to link the dots in 3 easy steps (“don’t over think it”)
   1) identify the objectives in order to achieve the goal,
   2) identify the measurable indicators of those objectives, and
   3) link the CSR strategy to these “indicators”.

   If you are worried about the validity of your logic…add some theory.

   Although Saul’s approach is systematic it does not encourage systemic thinking or measurement. For me CSR is about achieving integrated goals – policy and actions that achieve integrated social, environmental and economic goals (maybe not all 3 at once but at least 2). If the measures are integrated then the management of practice will become integrated. If we continue to measure disconnected goals we will struggle with the legitimization problem of adding business value…or any value.

   Similarly, I am concerned with the overemphasis on estimating business benefits before social impact has been established. For me this represents a hollowed out fruit with the promise that it will provide you with all the necessary nutrients and vitamins. It is a false promise. All perceived good deeds must be measured, even if it is assumed to be small. At least you, the employees contributing, and the company overall will know with confidence that they are a corporate citizen or not. Only then can we start talking about business benefit.

   One last comment about cost. Good intentions are not automatically good deeds. A CSR program can also do harm (i.e. ask all the overwhelmed NGOs that have to incorporate corporate volunteers who all want to do well). Measurement is the only tool that will bring this to fore. No CSR program should go without measurement!

5. How to Measure the Business Value of Social Impact « The New CSR Says:
   April 7th, 2009 at 4:53 pm

   [...] BCCCC blog post highlights Saul’s message of using business outcomes as a lense to identify metrics.  Join [...]

6. Farron Levy Says:
   April 16th, 2009 at 1:30 pm

   Jason’s focus on outcomes is exactly right. And the best time to follow this advice is during a program’s planning stage: when you can design systems that collect exactly the information you want, often during program implementation (trying to design systems or re-create impact data after the fact is almost always less precise, and far more expensive).

   One approach for assisting with this kind of evaluation: try assessing how your program is likely to affect each of your company’s stakeholders, and how these impacts can in turn affect your company’s bottom-line interests (i.e., increasing revenues, decreasing costs, and/or promoting your social objectives). This simple process helps flesh out all of the likely ripple effects of your program — the inputs, outputs, and outcomes — from which you can then select the most useful and practical performance indicators.

   Farron Levy
   http://www.true-impact.com

7. Lionel Charmetant Says:
   May 21st, 2009 at 5:12 pm

   Completely agree with the theoretical need to measure outcomes rather than activities as a “holy grail”, however most desirable outcomes are practically very difficult to assess and as a result this approach if applied to rigidly has the potential for skewing CSR policies towards “high-visibility” areas, and not “high-impact” ones. Assuming that desirable business outcomes can be categorized into:

   • Risk mitigation
   • Cost reduction
   • Reputation improvement
   • Increased revenue

   At least two of these outcome types –risk mitigation and reputation improvement – are extremely hard to assess practically, even outside the realm of CSR (ask Moody’s about the reliability of their risk assessment of CDOs and MBS…). As a textile company for example, if you have never been found guilty of child labor, how do you measure the risk of one of your suppliers opting to not respect your policies and being found guilty of this by the media and taking your company down with it? In this case and in many other risk areas (e.g. security of supply, license to operate, likelihood of carbon price, etc.), process-based measurements seem to be the only reasonable option for years to come: how many audits have been conducted, % of compliance to child labor policy, etc.
   As far as reputation is concerned, even ignoring the very rough metrics used to measure it at a high level (Interbrand rankings, surveys, etc.), it is very hard to single out one or several CSR initiatives as explanatory variables, given the multiple other factors influencing a brand/reputation for most companies. Admittedly the only exception could be a case where the whole company makes a gigantic investment/bet in CSR (GE, Wal Mart), but for less ambitious CSR strategies, even a positive impact could be cancelled out by other initiatives, or reinforced by say a successful product launch.

   For both risk mitigation and reputation improvement, outcome-based metrics will be hard to find. If as a company you opt to only focus on outcome-based metrics, then you risk focusing on the “easily” observable “cost reduction” and “revenue increase” categories, disregarding two areas in which your CSR strategy could have a hugely beneficial impact.

8. Maria Steingoltz Says:
   May 24th, 2009 at 8:04 am

   I think that while the framework for measuring the business value of social impact (Step 1- Set the outcomes you want to achieve, Step 2- Work backwards to identify measurements, Step 3 – Identify strategies that will move those measurements in a positive direction) is useful, it is missing a critical initial step. Before companies embark upon a process of designing and implementing CSR initiatives, they must accurately assess their current state. How does the public view them? What is their reputation for sustainability and responsible business practices? What are their biggest gaps? Though third party organizations create “best of” lists that address these issues, many firms fail to do this internally. Without knowing where one is, it is impossible to create programs that deliver business value, let alone measure their impact. Unfortunately, while this may seem self-evident, many companies fail in this Step 0, thus rendering subsequent conversations about measurement meaningless.

9. Jenny Rowland Says:
   May 24th, 2009 at 9:11 am

   There is a clearly a fine line between social and business impact and objectives when it comes to corporate social responsibility. In an earlier post, Rene Carapinha raised the question of authenticity in a firm’s CSR efforts, comparing a strategy with an overemphasis on business value to a “hollowed out fruit” and “false promise”. I agree that any company’s CSR efforts must be authentic and sincere, but a program without true business grounding will not survive in today’s competitive market. Going beyond charity and firm sanctioned volunteering, to have a sustainable social impact, the strategy must be aligned with the firm’s larger business objectives.

   In a challenging economic environment, with budgets under heightened scrutiny, now more than ever, the need for frameworks to help measure and validate a firm’s CSR efforts are critical to long-term sustainability and long-term adoption and business growth. Companies need to change the way they think and deal with CSR–moving from a static, ancillary, feel-good approach to an integrated, metric-driven approach (no different than any other business unit). Metrics must quantify the business and financial impact of initiatives or, like any other “unsuccessful” corporate initiative, they will get canned. Thinking more strategically about CSR does not have to mean “selling out” and does not necessarily imply inauthenticity. On the contrary, a more strategic and holistic approach can ensure a longer term commitment, strong leadership support, and the ability to affect real change. Do companies even benefit from stand-alone CSR departments or would they be better served integrating the “function” within existing business units to foster more creative business driven solutions?

10. Robert Albright Says:
    May 24th, 2009 at 9:23 am

    I wanted to follow-up on the earlier comment about accurately assessing the firm’s current state. Taking an external view of the landscape is necessary, but I would argue that it’s even more important to know your company’s internal capabilities and internal business goals when developing a meaningful social innovation strategy. While it’s necessary to know how the public views your company, I would not drive a company’s social innovation strategy based solely on reputation management. If you anchor your efforts on the obligation of being a good corporate citizenship, you might fail to miss the opportunities that exist to deliver social value while simultaneously achieving business value. I worry about the role that CSR/sustainability rankings play in pushing companies to focus their CSR strategies on reputation management. If companies follow this external viewpoint, they will meet baseline CSR expectations but they may miss the opportunity to proactively address social issues using their business assets. Clearly there needs to be a third-party validation system to hold companies accountable, but these external rankings should not be the primary driver when a company links business value to social impact. If companies can articulate clear outcomes (rather than activities) of their CSR work, they can bridge this gap in how internal and external stakeholders view CSR activities delivering meaningful social value.

11. Prateek Says:
    May 24th, 2009 at 7:31 pm

    Echoeing in on the comments above, the repetitive question is whether there is a tradeoff between philanthrophy/doing good and accountability and I would argue there is not: I can explain best with the Education sector as an example. If you looked back 25+ years at the Nation@Risk report and the recent McKinsey report on achievement gap, you will notice that not much has changed vis-a-vis the huge dollar amounts that have gone into education, both from the govt and not-for-profit institutions.(one of the highest in the world on a per capita basis). If there had been more accountability in the system with dollars channeled specifically towards programs that had successful outcomes (better performing children in this case), I bet the results in the recent McKinsey report would have looked a lot different. I am therefore an advocate of the outcomes-based measurement approach. Moreover, to add to Jenny’s post above, I believe that having an inherent business case is critical to have lasting incentives for driving the desired outcomes without which one of two things will happen 1. the programs will wane out before achieving the outcome as soon as incentives end 2. the incentives will lead to misguided results – again explaining best with an example, an airline whose objective was faster delivery of baggage to the terminal on plane arrival created financial incentives for airport ground staff based on the first bag reaching the terminal. It soon had employees “gaming” the system by having the first trolley carry just one bag with the other trolleys to get the remaining bags – the same effect likely happens with giving employees brownie points for volunteer hours. Therefore a business case is critical to create embedded incentives that will result in sustainable programs and intended outcomes!

12. Sophia Adkison Says:
    May 24th, 2009 at 9:22 pm

    The belief that we should be measuring outcomes you want to achieve, not the activities that will achieve them makes a lot of sense of sense to me. Rather than looking at CSR in terms of compliance, firms are increasingly starting to look at CSR as means for having a social impact and at the same time realizing a business benefit. To do this, an organization needs to align its CSR strategy with its overall strategy. To do this, CSR needs to be working closely with and have the support of the high level executives in an organization. In many organizations, executives want to hear the business case for why any proposed strategy or project makes sense to engage in. They do not want take actions that are not in the shareholder’s best interest, and engage in a project just because it is “the right thing to do.” Therefore, the CSR group needs to be able to speak their language, and communicate a CSR strategy in terms of generating business value. Being able to measure outcomes, as Saul states, is the right language to be using with executives. This is a win win for everyone, positvely impacting the organization by positively impacting the the community, environment, etc?

13. Emily K Says:
    May 25th, 2009 at 9:40 am

    I’m interested in the debate that’s starting to take shape on this blog over reputation management as a goal of CSR activities. While maintaining a good corporate reputation is recognized as a primary way that CSR programs add value, it makes sense that this is an area of ambiguity because it is qualitative, up to individual discretion and difficult to measure. I would challenge that in most cases reputation management is a defensive goal and not offensive. Furthermore, if it remains the primary objective of CSR professionals, there is a real risk of missing out on growth opportunities that can enhance the bottom line of a business and go beyond simply shaping community perceptions.

    Another area that I find interesting when thinking about how to measure the business value of CSR activities is the extent to which it is integrated as a functioning business unit versus part of a corporate philosophy. CSR has become a regular section of corporate websites and talking points, yet in many cases I think it remains as a statement of principles or mission rather than a fundamental activity. I think as companies move beyond simply stating their commitments to CSR and instead focus on activities and outcomes, the benefits of CSR will become easier to measure.

14. Christina Ciafone Says:
    May 25th, 2009 at 12:03 pm

    I believe the first step (Identify the Objectives in Order to Achieve the Goal)is often overlooked by companies. The “Objective” is often downplayed as companies don’t take full advantage of what CSR can mean to the company in the long term. I believe the majority of companies see CSR as risk mitigation and/or an opportunity to improve its reputation. However, I think these two objectives are unsustainable themselves. There is only so much one can do with risk mitigation and combating negative perceptions. To make CSR truly sustainable for companies to engage in, they must understand current business objectives and choose a CSR strategy that will further these objectives. If CSR programs and business objectives are closely aligned, then it becomes much easier to track, measure and communicate the value of these programs. In a struggling economy where businesses are looking to cut back on initiatives that do not create value for the company, CSR programs will continue to be challenged if their role in value creation is not clearly defined and communicated. It all goes back to understanding the business objectives and creating a CSR strategy around those objectives. If this occurs, it is much easier to argue the case for CSR to senior management.

15. Sarah Buhayar Says:
    May 25th, 2009 at 12:06 pm

    In addition to helping to drive CSR strategy, clear and meaningful metrics can help a company communicate the value it is creating with its CSR programs. The recent McKinsey/Boston College report indicated that more than half of CSR professionals don’t know how much value their strategies and activities are generating for the business. Having concrete metrics in place will help these professionals communicate the value they are creating.

    This communication is important both internally and externally. Internally, most CFOs see the value of CSR in terms of compliance rather than generating additional value. If CSR professionals are able to connect their work with drivers of business value, internal stakeholders are likely to value the CSR work more. Externally, firms need to communicate the value of their CSR activities to the markets and investors; clear metrics will make this easier.

16. Tonya Fenske Says:
    May 25th, 2009 at 12:40 pm

    The above discussion brings up many interesting points regarding assessing a company’s internal capabilities and developing appropriate measurements to understand the underlying business value of social impact. I thought Farron Levy’s response, in particular, brought up a critical piece regarding the need to understand the impact of a planned CSR initiative on all key stakeholders and how these various stakeholder benefits affect the bottom line. By following the suggested process of first identifying outcomes and then identifying measurements, it seems that there would be one or two primary stakeholders addressed through a specific CSR program (such as primarily affecting consumers through a program designed to improve brand loyalty, or primarily impacting investors through a program designed to increase revenues). I believe that even though all stakeholders may not be directly impacted by a particular initiative, it is important to understand how they may react to the planned outcome, and whether their reaction will have a positive or negative impact on the bottom line.

    For example, employees may not be directly impacted by a program in which a company aims to decrease costs by implementing energy-saving practices. However, there may be an indirect benefit where employees become proud to work at this company interested in sustainable practices, which could in turn improve loyalty to the company or increase employee engagement. In this example, even though employees were not the primary benefactor of the social program, their reaction to the program’s outcomes may positively impact the company’s bottom line. Similarly, indirect stakeholders could be negatively impacted by a specific CSR initiative that is not aimed at them, so this potential backlash and negative consequence should also be evaluated prior to implementing a social program. Therefore, when measuring CSR initiatives, it is important to take a holistic approach to weighing the benefits and costs to various stakeholders. A company should not only identify indicators and measurements related to the primary stakeholder affected by the program, but also should understand the indirect stakeholder effects which may subsequently positively or negatively impact the bottom line.

17. Tracy Schwartz Says:
    May 25th, 2009 at 1:45 pm

    I agree with Robert Albright that social innovation efforts need to be focused and aligned with internal goals. However, I believe companies must go a level deeper and structure their organizations for success in meeting these goals. Individuals with line responsibilities in a company have specific knowledge about what social strategies make the most sense for the business; however, they don’t always have to right incentives to pursue these outcomes. Social innovation initiatives can and should be win-win in the long-term, but as with any innovation, there can be an investment period before results become evident. During this period, the financial impact is often negative even if some reputational benefits begin accruing. Furthermore, as Lionel Charmetant indicated, reputational metrics are murky at best, whereas financial payoffs are clearer cut.

    This fact, combined with incentive schemes for product managers that are often based on short-term business unit profits, can hurt incentives to invest in social impact strategies. While this can be partially remedied with better incentives for employees (perhaps based on the outcome metrics the company is seeking to achieve), long-term returns are notoriously difficult to incent properly. Centralized social innovation groups are therefore be very valuable; however, we must find ways to get line people to actively contribute ideas and information that will make social innovation strategies more effective.

18. Andrew Murray Says:
    May 25th, 2009 at 2:49 pm

    Measurement of impact is critical to evaluation and allocation of resources. As mentioned above, there will be hightened scrutiny on resource allocation; to compete for those resources, social innovations will likely need to adopt measurement tools similar to those in other business functions. Taken to its logical conclusion though, requires a realization that perhaps many companies cannot and should not allocate resources towards social innovation. Sure, a company like GE which has a dedicated, world-class healthcare business can launch healthymagination as a value-added social innovation, but not all business have: 1) an inherently social-benefit business focus such as healthcare, 2) market leading capabilities to effectively and profitably deliver results in a socially innovative way, and 3) resources available to develop, launch, and measure a social innovation today. Insofar as we accept that the focus must be on high-level business outcomes and value, we then must also accept that for some objectives, value is better delivered in more traditional, non-socially innovative ways. Hightened media and public scrutiny may mean businesses have table-stake levels of socially responsibility (insofar as value is lost from failure to do so) but this does not necessarily imply that companies should go beyond this level.

    I also want to quickly highlight the opportunity at hand when managers set the original desired outcomes. What we seem to be talking about are companies with their primary objective as maximizing profits and trying to figure out how the secondary purpose of delivering a baseline social benefit can be used to achieve that aim; this is great for many companies. Suppose some managers invert this hierarchy: the company’s primary objective is to maximize social impact while doing so in accordance with some minimum financial target (break-even, 4% annual returns, etc). Measurement still remains critical to success in this corporate system as increased efforts by NGOs to measure their impact illustrates, but there is no universal reason why financial outcomes must always predominate. Clearly communicating this to stakeholders may be increasingly accepted as the number of socially aware investors rises.

19. Catherine Theberge Says:
    May 25th, 2009 at 2:51 pm

    I certainly agree that for CSR or ESG (Environment, Social and Governance) activities it’s important to start with a “tight focus on the outcomes you want to achieve, not the activities you think will achieve them.” I additionally agree with Christina Ciafone in that “the first step (Identify the Objectives in Order to Achieve the Goal) is often overlooked by companies.” However I believe the larger challenge lies in quantifying the return on ESG activities. So many of these projects with genuine strategic goals— e.g., developing products suited to ‘the bottom of the pyramid,’ community involvement projects to engage employees, reducing energy waste in manufacturing or managing regulatory risks— are tightly woven to specific business functions, e.g., product design, human resources, manufacturing, legal, etc… In the new era of strategic ESG, when we are no longer doing philanthropy for philanthropy’s sake, but rather looking to making strategic investments delivering tangible value for stakeholders, is there still a place for ESG professionals? I propose that in an organization where the CEO truly believes that ESG initiatives can deliver value, budgets and accountability for such initiatives should reside within specific business functions, not in an ESG office somewhere out in the ether.

20. Nikky C Says:
    May 25th, 2009 at 3:53 pm

    I completely agree with Catherine that in an ideal world, or in a company that is ESG focused, there should be no need for a CSR/ESG department. If companies truly align their strategic goals with their ESG goals, the collaboration of the two should be seamless, and not require separate employees to continue to push for these initiatives. That is not to say that CSR/ESG professionals today are not doing incredible work. But I do believe that the true future of this field is in a complete integration at the company-wide level.

    In order to get to this place, however, I think that measurement and communication of these measures/impacts are crucial. The steps that Saul lays out are a great start, but I do not think it should be overlooked how challenging it can be to collect the data or quantify these results. Having worked in the homeless service arena, I understand the incredible difficulties of quantify the impact our programs had on a human life. Our funders wanted to know exactly the financial impact their dollars were having, and we constantly struggled with how to put a price tag on a job, a renewed relationship with a client’s family, or even dignity. Similarly, investors of public companies want to know how ESG programs are showing measurable double-bottom line results. These quantifications can be just as challenging – but measures need to be developed that can track such qualitative impacts, or the dollars simply are not going to continue to flow.

21. Shaina Morphew Says:
    May 25th, 2009 at 4:08 pm

    Andrew raises a good point that not all businesses have an inherently good core function or product. However, many business do and are not taking advantage of the opportunity. As Tracy mentioned, there is little incentive for line managers and executives to pursue strategies with a social goal, especially if it draws out the time in which they will see the return on the investment. I would argue additionally that most line managers are unaware of the intricacies of the social issues out there, and have not been trained to see them as opportunities for their business. Someone in line at GE Healthcare had the insight to recognize that the lack of accessable, affordable, available healthcare products (a social ill) could be be a profitbable business opportunity. The concept of social innovation through product design, HR, bottom of the pyramid strategies, etc. is relatively new and not engrained in the corporate cultures of many companies. CSR is still seen as a peripheral activity and not an opportunity to innovate new business strategies. Catherine is right that these efforts need to reside in the line business functions, not as a separate function.

22. Melissa Renny Says:
    May 25th, 2009 at 4:16 pm

    I would suggest that Lionel Charmetant should add one additional bullet to his desired business outcomes – growth. Emerging and untapped markets are the future for many companies, and often the best way to enter these markets is through social enterprise – either by building relationships with governments through philanthropy and corporate citizenship, or by developing products and for new and underserved markets that can change the way people interact with the world. One great example of this from the recent McKinsey/Boston College report is Verizon’s “Coupe” for disabled and senior users. By partnering with their corporate responsibility group, Verizon developed a phone that both helped solve a social problem (access) and opened a new market for the company.

    In this way, I believe that CSR groups within companies can have real value. Some of the discussion on this blog focuses on how CSR can integrate with the business, and whether CSR groups will become obsolete if social enterprise is incorporated into business strategy. However, I believe that CSR groups have a vital role to play in terms of identifying social issues that are relevant to a company’s business strategy, and helping business teams to understand these markets and deliver value.

23. Mary Beth Murphy Says:
    May 25th, 2009 at 5:01 pm

    Overall, I agree with the idea of starting with a corporate social responsibility goal and then developing ways through which to achieve it. In order to truly make CSR a part of the core of a company, the CSR team must engage senior executives in this goal setting stage and make sure that the senior executives see value in the goals the CSR team is establishing. Unfortunately, I think that setting the goals is the easiest step. The real challenge for the CSR team is to figure out how to measure these goals in a way that is feasible, but also meaningful. It is difficult to measure how much “good will” was created by a project and how much brand loyalty has increased as a result of this good will. However, if the CSR team wants to keep all of the stakeholders excited about CSR and really become an integral part of the company, they must come up with ways to measure their progress. All other divisions of a company are responsible for measuring their work, and CSR should not be any different. Hopefully, as CSR projects become more closely linked to the bottom line and to core company objectives this will become an easier hurdle to overcome.

24. Jonathan Saxon Says:
    May 25th, 2009 at 5:05 pm

    Following up on Tracy’s point, one of the roadblocks to justifying ESG’s business value is shareholders’ short-term view of value creation; most ESG activities are viewed by companies and shareholders as providing only longer-term returns. In fact, in the recent McKinsey/BC report, one director of Investor Relations bluntly stated, “ESG activities do not have short-term value.” While I’m not convinced that this is entirely the case, what matters most is how you quantify and measure the value created. Hence, I contend that the primary obstacle to gaining traction with shareholders is a lack of data. With Jason’s framework in place, companies can better communicate said value. For example, when General Mills wanted to reduce employee turnover among minority groups, one of its ESG activities included a program entitled, “Celebrating Communities of Color” that provides grants to organizations serving communities of color. It also engages employees by constantly communicating the initiative’s impact and encouraging them to volunteer. Through this and other initiatives, General Mills was able to measure the reduction in turnover among minority employees and communicate the program’s impact to its stakeholders.

25. Ellie Antrim Says:
    May 25th, 2009 at 5:09 pm

    In this day and age, it is interesting to consider what a ‘CSR’ department actually means. I would argue that many companies who contribute the most socially don’t have a formalized ‘CSR’ group or even a process. However, for a large, well developed company, having some channel for delivering community benefit is both required and expected. To that extent, I agree with much of what has been said about aligning the business “outcomes” with the ‘CSR’ strategy.

    Next comes the question of measurement. While, yes it is important to measure in terms of ‘outcomes’ that make sense for the company, there is a very intricate and involved process in making sure you measure the individual processes that lead to those outcomes. To this point, I agree with the last statement Andrew Murray made about stakeholders not being solely focused on financial outcomes. The question I have is will firms continue to take on the cost of measuring their ’social’ impact when their ‘social’ giving becomes more of a commodity?

26. Lauren Passero Says:
    May 25th, 2009 at 5:39 pm

    I agree with both Catherine and Nikky that ideally companies don’t require a specific department or position for CSR/ESG. One hopes that all employees will think about social innovation the same way they think about new ways to create value for their companies. Having a dedicated person or department will then no longer be necessary. But for that to happen, many companies will have to undergo a major cultural shift and have a new way of thinking permeate their workforce. When you look at a company like Seventh Generation or Whole Foods that built itself around a socially responsible business model, the culture is also shaped by that mantra and new and old employees alike understand its meaning for the company. But what about a company where social responsibility wasn’t part of its original core values and culture? How do these companies shift the focus and change the way of thinking for their employees? Even with leadership at the highest levels supporting the initiatives, other employees may not feel the same passion or take the initiative to change their approach. How do senior leaders inspire workers to think beyond the scope of the current business culture and embrace change? This shift can be a critical piece to success that executives will face in execution and implementation.

    In my mind, setting the objective, the measurements and the strategies to achieve the desired outcome, makese sense as a basic approach to CSR/ESG initiatives. Companies should work backwards instead of haphazardly coming up with a CSR initiative, executing and then not knowing whether it has any impact on its value at all. This approach forces companies to think carefully and strategically about CSR efforts to align strategies with their core business goals and objectives. But it does not account for the difficulty of implementation in a company where the corporate culture does not embrace social innovation. As Andrew Murray points out, a company like GE with business units in energy and healthcare can more easily offer a social innovation and align its work force. But companies that lack this business focus may also lack the market leadership position and resources that Murray points our are critical to GE’s success with its social innovations and campaigns. In my view, the issue goes beyond measurement and objective/outcome setting for companies where social innovation isn’t part of their culture; for these companies the real challenge is motivating and inspiring their workers to get excited and start to apply socially responsible thinking to creating value for the business.

27. Justin S Says:
    May 25th, 2009 at 5:53 pm

    I agree with earlier comments pointing out the importance of a company being well-informed of the current state before tackling CSR. One area I have not seen a lot of discussion around is the evaluation of whether a company’s set of values and the culture are well-suited for CSR initiatives. This seems like an important step to me – I imagine some firms (in the same industry) are far better positioned than others to produce business value from effective CSR, simply based on the cultural mindset of the company as a whole. In other words, perhaps some firms may need to first address the value set of their organization before crafting a CSR strategy.

    I looked up a few companies’ mission statements (I had never visited these web sites before). For example, on the Unilever website – “Our corporate purpose states that to succeed requires the highest standards of corporate behaviour towards everyone we work with, the communities we touch, and the environment on which we have an impact.”

    This is followed by their core values, which the first one listed is “Always working with integrity – Conducting our operations with integrity and with respect for the many people, organisations and environments our business touches has always been at the heart of our corporate responsibility.”

    Kraft’s vision statement is more simple. It says, “Make today delicious. That’s our higher purpose. At Kraft Foods, delicious is our difference.”

    I assume that Unilever would have an easier time delivering an effective CSR strategy simply based on how their company values are defined. Meanwhile, I wonder if Kraft would have a more difficult time creating business value from a CSR initiative – would they want to first adjust their core values and the company mindset? Perhaps the larger question is, can corporate citizenship be imbued in a company despite it not being an explicit part of the company’s mission statement and values?

28. Reid Phillips Says:
    May 25th, 2009 at 9:24 pm

    I would like to respond to comments made by Rene Carapinha on April 2nd, 2009.

    “If you are worried about the validity of your logic…add some theory.”
    Not only is Ms. Carapinha’s misuse of theory to selectively support one’s point or the value of a CSR program troubling but it misses the fundamental point that when CSR initiatives are designed through backwards planning from the desired end results and key indicators of success, there is no need to use theory to support spurious correlations because the program’s activities are well aligned with the end goals and the outcomes/metrics are easily observed.

    “Although Saul’s approach is systematic it does not encourage systemic thinking or measurement.”
    Ms. Carapinha’s point is that CSR initiatives should focus on hitting at least two of the three primary social ills: environmental, social, and economic. But is it necessarily better to adopt a broad approach to CSR that tries to achieve multiple objectives that may have differing scopes and/or required resources/capabilities? For example, it is better for a CSR initiative to have the dual goals of fighting discrimination in society and fixing our nation’s urban education system, or is it more impactful to adopt a focused approach that tackles a specific problem related to fixing the urban education system? The two problems with really broad CSR policies is that 1) it is extremely difficult to come up with metrics that reflect the impact of an individual program in relation to a larger society problem, and 2) because it is difficult to ascertain the effectiveness through metrics the program instead focuses on “feel good” takeaways and inputs (i.e., how many volunteers, etc.)

    “Similarly, I am concerned with the overemphasis on estimating business benefits before social impact has been established.”
    Once again, I disagree with Ms. Carapinha’s argument because if you truly believe that your CSR programs benefit society, then your goal should be to secure as many resources as possible to put into the program. The best way to secure additional resources – in good times and bad – is to do exactly what Ms. Carapinha argues against, focusing on the benefits to the business of pursuing socially worthwhile programs. The fact of the matter is that managers need to justify their actions to shareholders and be able to explain why programs add value to the bottom line, so focusing on economic arguments is key to ensuring continued funding for these projects. That said, I do agree with Ms. Carapinha’s point that social impact needs to be established and clear. A CSR-branded initiative that only serves corporate interests and does not benefit society is surely not what any advocates of CSR desire.

29. Alexandra Jones Says:
    May 25th, 2009 at 9:51 pm

    I agree with Saul’s model of measuring the value of corporate citizenship by first determining the outcomes desired and working backwards from there. However, I wonder why this hasn’t been thought about until now. This model seems to be in-line with the basic ways that companies do business and determine their core business strategies. All companies decide what they want to achieve whether it’s to increase revenue or to decrease costs and then they work backwards to figure out how to do this. For example, Samsung doesn’t start with a circuit board and then decide to make a television but rather does research on what consumers want and then designs backwards. Therefore this type of model should not be new to corporations as they have been doing it for years with every other one of their business strategies. So, why is it difficult for companies to model CSR initiatives in the same way? It seems this is because in the past CSR initiatives have simply been thought of as “the right thing to do” and not as initiatives that could yield valuable outcomes. However, once corporations truly adopt this proposed model then perhaps CSR activities will eventually become part of mainstream business activities as C-suite executives begin to link these activities with the outcomes they had desired.

30. Chris Yeo Says:
    May 25th, 2009 at 10:01 pm

    Using outcomes as a starting point to measure social impact certainly is a very logical approach, as echoed by majority of previous comments. It does beg the question though of why hasn’t such an approach been more widely adopted? I believe one reason for this is that there is large chasm between Step 1: the Outcome (business value driver) and Step 2: the intermediate operational metric/ social impact metric. Thus many organizations happily report Step 2 metrics and find tremendous difficulty in linking that with the Outcome. For traditional CSR/philanthropy initiatives, the reason for this failure to link action to outcome is understandable and might never be achievable (perhaps even forgiveable). For newer CSR initiatives, certainly the linkage must be clearer and stronger.

    Going back to an earlier point brought up by Rene Carapinha on the overemphasis on business benefits – I think this is a very pertinent point. Linking CSR with traditional, financially driven business value drivers is all well and good, but how about ‘business value drivers 2.0′ where the Outcome might just be social impact – i.e. a double/triple bottom line approach, where social/environmental value is equally as important to financial value? Is society ready to reward and incent such organizations though?

31. Anna-Lisa Baksmaty Says:
    May 25th, 2009 at 10:06 pm

    I think for many companies, even ones that have a culture of social impact, the outcome they are looking for in doing CSR is not necessarily a business-focused one and many do not view CSR as a “department” which can have business impact in the first place. In using Jason’s recommended framework, the company must first have the mindset that CSR can drive business value and then they can figure out the business outcomes they want and work backwards as Jason suggested.

    For me, the selling point of this framework is that because you are working backwards, you will be forced to question whether the activities being proposed will actually have the desired outcome. The company will then only choose activities that make sense given the outcome instead of just randomly starting initiatives and then trying to convince stakeholders that these activities somehow provide business value.

    If you start from business outcomes and work backwards, you could realize that a CSR initiative is not the best way to achieve that particular outcome – what happens then? Obviously if a CSR department is driving this exercise, then they will probably be focused on using some CSR initiative (probably the best one given the desired outcome)whether or CSR initiative is the best option.

    Another question I have is should the CSR department be driving this at all or will opportunistic functional groups figure it out if business value is the goal? For instance, companies like Unilever, Reckitt Benckiser and Nestle have been making affordable products for the worlds poor for decades (nutritional products for babies, antibacterial products to clean water, soap etc), some of which I would argue have changed peoples lives for the better – where they driven by business objective? Probably. Did they necessarily make these products with the intention of having a social impact? I am not so sure and yet I would argue that they do have a social impact.Did GE’s CSR department come up with ecomagination and healthymagination? Did they decide that the business outcome they wanted was revenue growth and determine that there was opportunity in both of these areas and then realize that there was a social impact component that they could leverage or using a social impact activity/initiative the determined means of achieving business value to begin with?

32. Jessica Schoen Says:
    May 25th, 2009 at 10:25 pm

    I agree with the above comments that it can be challenging for some companies to have CSR/ESG business objectives given either past public scrutiny on their business values or their inherent line of business. However, companies can overcome this challenge. Walmart is an example of a company that has overcome public scrutiny about health benefits, worker’s wages, etc. with their renewed focus on everyday low prices and business strategies with CSR such as $4 prescriptions. This example also speaks to Justin’s comment above about whether company’s can have CSR/ESG in their DNA without it being in their mission statement. Walmart’s mission is to help customers save money so they can live better. This does not inherently lend itself to a CSR/ESG strategy but they have made two of their three core business strategies CSR/ESG initiatives – health & wellness and sustainability. These are long-term strategies that have come to transcend the company, they have measurable outcomes, and provide cost savings to Walmart and their consumers. For example, Walmart gives priority to suppliers that reduce packaging in products, which in turn contributes to environmental sustainability, and then passes the cost savings onto the consumer. The suppliers have to quantitatively prove how the reduction in packaging helps the environment.

    Walmart has been successful because all of the employees live by the core business strategies from the CEO down and it will take more companies to solve business problems with CSR solutions to really make an impact on society.

33. Sarah L Says:
    May 25th, 2009 at 10:33 pm

    Lauren and Justin both bring up interesting points about how the internal culture and public mission of a company impact its ability to successfully carry out CSR initiatives (let alone put in place an effective, systematic way of measuring their success). Indeed, without a culture that embraces social responsibility and expects it as a given in day-to-day business, companies fail to harness the power of their resources in solving the world’s problems and contributing to the greater good. Similarly, if social responsibility isn’t part of the company’s mission, it is likely that employees – from senior executives on down to the workers on the factory floor – won’t prioritize citizenship or think of it in the context of adding business value.

    Beyond the culture and mission (both internally focused), some of the most successful companies at CSR have found a way not only to mobilize internal stakeholders, but also to enlist the entire value chain. Suppliers and customers are brought on-board in the development and execution. There is no better example of this than Walmart, who has required suppliers to green their products or face decreased shelf-space and has brought green practices to the mainstream (reusable shopping bags, concentrated detergent, fluorescent bulbs). SC Johnson has achieved similar coordination of its supply chain through its Greenlist program, in which suppliers have helped it improve the environmental friendliness of its products while maintaining or increasing efficacy. In both cases, these companies have leveraged the power of the value chain to achieve both short and long-term CSR goals. The questions that Lauren and Justin began to ask may have just scraped the surface. The question is not whether a company must have a culture or mission that embraces CSR but whether a company and its value chain share CSR as a common goal. Once the whole value chain is bought-in, companies may also find they have a greater ability to measure a CSR program’s success – and to measure more accurately.

34. Julia Tao Says:
    May 25th, 2009 at 10:38 pm

    Like many others, I agree with the main point of focusing on the desired outcome, and working backwards to inputs and metrics. However, I wonder whether this framework is more likely to segregate or integrate CSR within a company? Perhaps it makes it easier for people to consider a CSR strategy in relative isolation from the company’s core business concerns, rather than integrate CSR into daily business decisions. While there can be benefits to stand-alone CSR initiatives (e.g., improving brand loyalty based on environmental commitments), a company might have a greater social impact over the long term if CSR goals are considered within decisions of all parts of the business.

    Similarly, in response to Justin’s point above, I’ll be the devil’s advocate and wonder if a company like Unilever that has such a nice sounding mission statement, would actually find it easier to have a greater social impact than does a company like Kraft? Although the mission statement expresses admirable sentiments, I wonder how Unilever is able to translate those statements into meaningful decisions and social impact outcomes that go further than compliance with standards, codes of ethics, etc.? Kraft’s mission statement is much more focused and specifically related to the company’s core business, which could better facilitate finding CSR opportunities that create both sustainable business value and social impact.

35. Aleksandra Peters Says:
    May 25th, 2009 at 10:43 pm

    I strongly agree that focusing on the outcomes first in setting a CSR strategy is critical. As CSR is becoming commoditized, it makes more sense for firms to focus their CSR activities on outcomes that the firm wants to achieve and then measure the results in similar ways as other firm activities are measured. However, as Lionel Charmetant states above, this leads to focusing on activities that are easy to measure and to tie to the bottom line, namely those that either cut costs or increase revenues. As a result, we’ve seen many corporations have integrated CSR into individual businesses and set metrics around the performance of CSR activities (many focusing on sustainability). As Catherine Theberge mentions, this is significantly more successful. However, this assignment is not resolving the issue. Most corporations still keep their philanthropic departments separate and allocate certain budget to them each year. Those departments can spend the money on any issue they find important and ideally somehow tied to the business. Nevertheless, they are not being held accountable for any type of business results, other than making a difference in the community. While this is also critically important, it is not a core goal of any corporation. Although we could say philanthropic giving has an impact on firm reputation or employee pride, it is almost impossible to tie it to the bottom line results, which we all agree are becoming critical in evaluating CSR programs.

    Now that the trend of tying certain CSR (or often sustainability) activities to the business and firm objectives is becoming prevalent, I would like to raise a question: how do we adjust societal expectations and encourage corporations to link their philanthropic giving to the desired outcomes of the business? For example, a firm can set an outcome of cutting costs and then measure the impact of using recycled containers for their products, which is fairly easy. On the other hand, measuring the business outcome of feeding the poor in the community is significantly more complex and often avoided. One solution is, like Nikky suggests, to eliminate ESG/CSR departments altogether. However, as Lauren Passero states, that would require a significant cultural shift. Therefore, since philanthropic giving still holds an important place, our next question would be: how can we ensure that ALL CSR activities are focused on outcomes first, and every CSR dollar spent by organizations is held to similar standards?

36. Stephen Feinberg Says:
    May 25th, 2009 at 10:47 pm

    To follow up with Justin’s comment regarding mission statements and core values, I can’t help but wonder if societal shifts, not changes in company culture will ultimately drive businesses towards more CSR related solutions – particularly in companies with rather weak social impact mindsets. In today’s world, if there is quantifiable business value associated with a project, businesses will pursue it – regardless of whether it’s CSR related or not. If a company is presented with two opportunities with equal business value and one has a social impact and one does not, then I think we would all agree that all things being equal, the business would go with the social impact option. However, what if the social impact option has slightly less business value or comes at greater cost? At what magic number would a company sacrifice the social good for the financial one? Without an environment driving all business decision to be made under the social impact lens, I worry that in the long run, business by its very nature will continue to steer towards an exclusively profit driven model and this may come at the expense of social change. Saul’s CSR model still fundamentally depends on employees and/or consumers seeing value in CSR efforts, an assumption that may or may not always hold true.

37. Robert L Says:
    May 26th, 2009 at 12:43 am

    I agree with the overall idea of focusing “on the outcomes you want to achieve, not the activities you think will achieve them.” However, with the continual push towards the integration of CSR and business strategy, the measurement of these outcomes will become more and more difficult. The impact of any one program or CSR initiative will be influenced by a number of different factors.

    For example, when CPG companies try to measure the impact of a specific advertising campaign (how many more X are sold when a certain commercial is run), other factors such as price promotions, increase in in-store displays and distribution, etc all play a role in influencing the impact. Similarly, singling out the outcome of a specific CSR initiative will be difficult. Therefore, as pointed out by several individuals above, in an ideal world where there is no separate CSR department, there would also be no separate specific CSR reports. These “CSR” type measurements would be baked in to financial reports as another line item or footnote disclosure. The specific measurements from a “CSR initiative” would not be able to be separated from other strategies employed by the business. Will control groups and test markets need to be created in order to measure the impact of initiatives? Rolling out initiatives in segments/regions (in order to measure impact) may be an effective way for some companies to slowly implement change and measure its impact. Perhaps separate measurement would not be necessary.

    The next question is who will be responsible to keeping tabs of this measurement? Will it become the responsibility of the financial reporting department, the department which championed the initiative, the (in the ideal world unmanned) CSR department? What if the cost of understanding/measuring this impact outweighs the benefits of the initiative? This may mean that the “strategic initiative” was not strategic enough!

38. Nancy Nanka-Bruce Says:
    May 26th, 2009 at 2:46 am

    As someone with no CSR experience before business school and who will likely not specifically go into CSR, I find Jason’s frameworks and measurement tips to be extremely helpful. We all know that people are increasingly interested in CSR as they evaluate, join and rise through the ranks of various firms, but most are not specifically focused on CSR. However, you do not need to be so in order to feel some level of responsibility. Jason’s measurement framework allows for people from all areas of a business to contribute by deciding their outcomes and working backwards. The better the measurement, the better a chance you have of convincing your firm to support a CSR initiative.

    At the end of the day, most employees are there to help their companies turn a profit, so we really can’t stray too far from providing measurable results. Rene Carapinha is concerned “with the overemphasis on estimating business benefits before social impact has been established,” but to me that’s the difference between working in non-profit and working in a for-profit corporation. Businesses have to think about the bottom line and are not there simply to do good in the world. I believe Jason’s business case framework allows for a more practical approach to CSR, and ultimately I think it’s one that corporations can understand and justify. It may not be a radical enough sentiment, but I think providing measurable results will result in programs with a wider impact. Coca Cola’s recycling operation provides a cheaper source of aluminum for them while also perpetuating environmentally responsible behavior. Which came first for Coke, the cost-savings or the environment? I’m not certain, but would they have proceeded in the latter without the former? I don’t think so. But to me it shouldn’t matter. Coke wanted to cut costs and found a business case for doing so while promoting socially responsible behavior. And the measurable results are likely to be what got the idea off the ground in the first place.

39. Hetal D Says:
    May 26th, 2009 at 6:36 am

    I agree with the theory of measuring outcomes versus the activities because it forces companies to think about the social benefit of their business activities. While this is a good method for measurement, there are still limitations which make it difficult for firms to align incentives and truly understand the impact of their CSR work. For some stakeholders, it is difficult to understand the relationship between CSR activities and the impact on the bottom line. In addition, as both Mary Beth and Nikky C mentioned, the measurement metrics are difficult to quantify (e.g. how much has brand loyalty increased, impact on sales/profit due to goodwill activities, etc.), making it difficult for stakeholders to understand the feasibility and direct relevance of measurement metrics. However, companies do need to figure out a method to continue to measure the impact of their CSR activities, in order to ensure a steady flow of funding. In order to do this, I believe that creating a business case for CSR activities (e.g. similar to the business cases made for a new product, new department, etc.) and aligning incentives given a company’s mission and values. In addition, stakeholder expectations should be managed to understand thatt there are qualitative and quantitative benefits, of which many of the effects will only be seen in the long term.

40. Claire Meunier Says:
    May 26th, 2009 at 9:13 am

    In all of these discussions, I keep getting back to the human capital that is required for firms to be well equipped to take CSR to the next level. Do companies have the right people on the bus to innovate, integrate, execute and measure success in this arena? And, even if they do have the right people aboard, are they in the right seats? In my experience, the people leading CSR at the biggest corporations are seasoned corporate philanthropy officers, who have been in their roles for an extended period of time. In this new era, I am not sure that the skill set they have developed over the course of their careers is consistent with the new frontier of competency that CSR 3.0 requires.

    Coupled with this, I also want to question how organizations are structuring themselves for this new CSR-integrated business model. We see organizations with these small support units called CSR where the team is spending a lot of time with one another, but less time in the business. I think it is time for organizations to truly integrate CSR by beginning with their team structures and org chart. If CSR is an integral business strategy, why should it be a separate unit? Why not have a CSR expert in sales, marketing, operations, etc. Every aspect of the business should have a member of the cross functional CSR team sitting in their area. I believe that the only ways these strategies are continually integrated into the conversation of the organization are to have CSR people dispersed throughout.

    I would love to see CSR being led by the business unit person who has proven themselves as the greatest champion for CSR and innovation. And the team should be the most virtual of all- spanning the globe, touching every operation and function the organization performs. Only when the right people are in these roles and these ideas are part of the conversation for all business decisions do I think firms even have a chance of realizing true CSR 3.0

41. Nell Hurley Says:
    May 26th, 2009 at 9:31 am

    When I read this post about Jason Saul’s model for measuring the value of corporate citizenship, I immediately thought of the work that Joel Klein, the Chancellor of the New York City schools, has done over the past eight years. Klein set out to turnaround the New York City schools, and one of the most effective tactics he has used is to center the entire system around student outcomes and student achievement – one of the key points Saul makes in his presentation. It’s no longer about how many hours the teachers teach, how big the classroom is, how many forms a principal needs to complete…now the question always comes back to the impact on student achievement. From that common goal, everyone in the massive NYC system can now rally around effective measures and strategies for getting to that goal. Of course, the system is not perfect, but it is, in my opinion, moving in the right direction because of the work that Klein has done.

    I’d argue that setting clear outcomes and aligning measures and strategies to those outcomes is not simply a way to measure the business value of social impact, but rather it is a larger sign of strong leadership. I believe this is the way every organization should be thinking, and while I agree that it can be difficult to measure some of the elements of social impact, I’d suggest that the business or organization choose a measure(s) thoughtfully and strategically, try it out, and tweak it along the way. This, in my mind, is far better than not measuring the impact at all because you cannot decide what to measure.

42. Mariana Benavides P. Says:
    May 26th, 2009 at 9:35 am

    Following up on Justin’s and Stephen’s points, an aligned mission/vision of the company with the CSR objectives is a clear evidence of an integrated CSR strategy where top level executives are actively involved.

    Having been a CSR manager myself for a MNC, the question “SO WHAT?” is frequently brought up by someone at the C-Suite level; by using Jason’s approach of measuring outcomes rather than activities, and by engaging senior managers in the process, I’m positive that our internal stakeholders will have a better understanding of where the CSR department is headed and they will tend to ask “WHAT’s NEXT!” Instead of “SO WHAT?”

    When aligning the outcomes measurement with the company’s goals , another important point that Saul frequently insists on, is to keep it real. Over stretching the impact of a social initiative/program might result in loss of credibility which could be very harmful both internally and externally for any CSR department.

43. Margot Marsh Says:
    May 26th, 2009 at 11:22 am

    It’s such a simple concept—one of the first lessons many of us learned growing up—and yet this study illustrates how even the largest corporations excel when they live by the guiding principal: “Giving is receiving”. Reading about the ESG initiatives of Coca Cola, DOW, Novo Nordisk, IBM, Verizon and other companies, what struck me was the open-mindedness behind the creation of each of them. Instead of having tunnel vision towards generating growth, return on capital, risk management and workforce efficiency, the creators and supporters of these programs stepped back and thought about how the company’s core competencies could positively address societal, environmental or governance issues. Low-and-behold, it turns out that the Golden Rule benefits not only the cause itself, but also shareholders!

    While measurement is key for ensuring effective corporate strategies at large, Jason Saul’s emphasis on how ‘measuring how much brand loyalty has increased’ seems a far more reliable determinant of how much an ESG program contributes to growth, innovation, employee attraction and retention, and most importantly overall brand equity.

    “For many companies, ESG and philanthropy activities are a scattered group of unrelated activities—though most companies would never run any other part of their business in such an unfocused manner.” Rather than being an afterthought, the ESG initiatives described in this study show how companies maximize the effectiveness and value of ESG strategies when strong leadership, support and structure are at the foundations of the programs. It seems the best way to continuously create effective ESG programs—those which add significant overall value to a company—is to make CSR/ESG a recognized and integral part of the overall company business model.

44. Leslie Meyer Says:
    May 26th, 2009 at 11:32 am

    Nikky’s point on the challenges of collecting the data necessary to monitor the impact of CSR initiatives is a common issue amongst many non- and for-profit organizations. However, Saul’s message of measuring impact not activities may help to direct firms’ focus on a few impact-metrics, opposed to numerous activity-metrics, which could lead to hours of wasted time. Focused impact-metrics does not alleviate the challenge Nikky (& others) mentioned of collecting and assessing the data, but it does free up resources to work on greater value-add analysis.

    Having the right impact-metrics is only half the battle. The metrics need to be reviewed on a regular basis (e.g. monthly, quarterly) at the appropriate level within the firm. As I discovered while working with Alexian Brothers Transitional AIDS Housing non-profit, countless hours are spent collecting metrics, but without a system in place to review them, the metrics contribute little to program development. A reoccurring management review meeting needs to be established that includes analysis of CSR metrics and review of performance against the goal metric. These metric reviews help to provide additional worth to the program and enable better management decisions.

45. Julie Feldmeier Says:
    May 26th, 2009 at 11:43 am

    “Set the outcomes you want to achieve first, then work backwards to identify measurements, then identify strategies that will move those measurements in a positive direction.”

    Warning: I’m a former reporter, inherent cynicism and skepticism still intact. Thus, the above quotation seems akin to, say, a journalist deciding on a thesis, and then mining for facts and quotes to support said thesis. A method of manipulation known as — surprise! — bias.

    Now, I agree with many of the arguments in the above posts: In the case of CSR, a clear statement of goals — and a comprehensible, backwards-mapped plan for achieving and measuring such outcomes — probably IS the best way to maximize and measure impact. Nevertheless, I think we need to acknowledge the temptation to manipulate. This raises the issue of accountability, which Julia Tao loosely touched upon in her discussion of whether CSR should be woven throughout all units of a company or whether it should exist as a stand-alone entity. Undoubtedly, the more a company injects CSR into its DNA, the greater the likelihood of joint success for the company & society. But as CSR evolves within a firm, executives should consider the importance of keeping a CSR governing body — much like an ombudsman to a newspaper, or the GAO to the U.S. legislative branch — to help ensure that CSR goals remain purposeful, and that measurement methods are not conveniently rewritten and manipulated.

46. Andrea Hanson Says:
    May 26th, 2009 at 11:46 am

    While I echo a lot of the sentiments expressed above, I have three areas in particular that I would like to focus on. 1) Can all companies successfully implement social innovation strategies? 2)Aren’t market forces starting to set the standards to what the minimum cost of business is with respect to social programs, and 3) What will the role of the government play in this space going forward.
    1) Can all companies successfully implement social innovation strategies? I agree with Andrew Murray above that not all companies are poised to end up like GE. Using Saul’s approach which is to first focus on desired outcomes, and then organizing a business around achieving those outcomes – there may not be a single social innovation required to contribute to the outcomes. This may be true when you look closely at the core competency of an an organization, the added costs of a new program, the challenges and risks involved in change management exercises, and the opportunity costs relative to other potential projects or investments.
    2) Aren’t market forces starting to set the standards to what the minimum cost of business is with respect to social programs? Consumers and employees are becoming more vocal about their expectations for company social innovations and philanthropic efforts in such a way that it is becoming table stakes in some industries. If you don’t visibly ‘care’ about certain social causes, then you will be squeezed out of a particular industry. In some cases, the ability to measure with effective metrics is secondary, because there may be no consumers if you don’t play in a given space. CSR or ESG strategies cannot be thought of as standalone approaches, as was mentioned earlier in the blog, because consumer demand is trending in a certain direction and companies cannot ignore market and customer dynamics. The strategies that are emerging today are not just CSR/ESG strategies, they are comprehensive business strategies that happen to focus on social issues. The boundary lines have been blended, and business schools should think about integrating social innovations across all curriculum instead of only having standalone courses as well. All facets of business cannot afford to ignore these trends, and the financial metrics would support this claim.
    3) What will the role of the government play in this space going forward? Like companies, governments are facing increasing stakeholder/voter pressure to ‘appropriately’ address social issues within the policy realm. This alters the measurement approach, because companies focus more on risk and compliance, which is the objective within policy, but this may also impact the company’s overall attitudes towards social innovation outside the policy realm going forward. If everyone is expected to do it, and rules exist requiring it, then is it really innovation, what about companies put at a substantial financial disadvantage, and how can it serve as a differentiator? Or, does it matter, since everyone may be better off? This sphere would dramatically change the question of how to measure efforts going forward.

47. Jeremy Krebs Says:
    May 26th, 2009 at 12:28 pm

    I agree with Claire M.’s concern regarding human capital and CSR. I question whether most CSR professionals have the analytical skills necessary to measure and report the impact of their company’s CSR activities. Convincing skeptical executives could be very difficult. Epstein’s book “Making Sustainability Work”, clearly outlines methods by which CSR could be measured and communicated. However, many people cannot even define economic methodologies such as “Hedonic Pricing” and “Monte Carlo Simulation”, much less put them to work in an impact study.

    I believe it is unrealistic to assume that every company will be able to hire employees with the skills necessary to carry out these analyses. A couple of solutions come to mind. First, a “low cost, high impact” prioritization study should be conducted. Companies should figure out where they get the biggest quantifiable impact to business value, and then focus internal resources there. These strategies should be heralded as quick wins to develop support and get CSR buy-in. Next, companies should undertake large, more difficult, initiatives. Professional services firms should be employed to set up measurement procedures and studies.

    As impacts become more abstract and the complexity of analyses increases, skeptics will find it easier to find fault within impact studies. The robustness of impact analyses can be increased through the use of multiple techniques. For example, the results of a CSR initiative could be valued using the Hedonic Pricing and Damage Costing methodologies. The results could be presented side-by-side, showing a spectrum of impacts and lending credence to the range of values. By acknowledging the variation in results, analysts potentially fuel debate, but also show defendable research methods and ultimately gain credibility.

48. Laurel Anderson Says:
    May 26th, 2009 at 12:48 pm

    I agree with previous commenters that while measuring business results is absolutely critical, I fear that it will lead to only the low-hanging fruit of CSR initiatives. My background in nonprofit development probably leads me to be defensive of the critical stream of philanthropic dollars that companies contribute to our vibrant arts sector, important social services and other public goods.

    Although it is more difficult to measure, to be sure, I think philanthropy, too, can be used strategically. For example, Time Warner in New York City does excellent work focused on youth and media (which not only builds interest in the products they offer by creating lots of little “media junkies” but also leverages their employees’ core skills). Their programs also focus on the Hispanic / Latino community where Time Warner sees most of its revenue growth in the future. Rather than tossing philanthropy in a bucket of “have to do / nice to do / little strategic value,” I think this company is really investing in things that build its future consumer base in important markets.

49. Erin Rogalski Says:
    May 26th, 2009 at 1:37 pm

    Though the focus has been internal measurements of CSR success based on organizational goal setting, on the flip side, corporations cannot ignore how external parties are valuing these initiatives. As CSR goals are being set internally, it is important to consider how both consumers and the market evaluate CSR initiatives looking in from the outside and align measures of success accordingly. Understanding consumer perceptions of what a CSR success is and overall interest in CSR initiatives is vital to launching a publicly successful campaign and those planning CSR strategy need to manage both internal goals with external factors in order to find a CSR strategy that will resonate with consumers and the marketplace and produce successful results. According to a study in “Rethinking Corporate Social Responsibility” published by the National Consumers League and Fleishman-Hillard, 27% of consumers consider good CSR to be commitment to employees, followed by 23% stating it represented commitment to communities, 16% said the ability to provide quality products and 12% said environmental responsibility. Using information like this in internal CSR decision making, corporations can best determine what types of strategies will resonate with the consumer base when considering different ways to get to the end goal of the strategy. Additionally, various investment firms have creatively sought out ways to effectively value various CSR initiatives and determine what if any incremental enterprise value is delivered through increased social responsibility. Understanding how CSR is being measured in the marketplace is also a helpful tool for internal CSR decision making as it allows for a better anticipation and control of market reaction. For example, in late 2007, Goldman Sachs introduced GS Sustain focused on analyzing corporate performance utilizing a proprietary Environment, Government and Social (“ESG”) analysis framework. The ESG framework integrates environmental, social and governance issues with industrial analysis and valuation and is made up of a 25 quantifiable indicators for with a majority universal across all sectors. Internal CSR initiatives should pay attention to the increased awareness of investors and analysts with assessing strategy and impact of CSR decisions.

50. Ann Hsing Says:
    May 26th, 2009 at 1:39 pm

    Justin brings up a very interesting point of whether a company’s mission statement and culture is well-suited for CSR initiatives. In order to assure that CSR programs continue and are not cut in economically difficult times, CSR programs must prove that they align with the business’s overall strategic goals. Saul’s framework into developing effective CSR initatives addresses the need to establish data measurement of CSR programs. This is obviously easier said than done, as pointed out already in this discussion board. Different companies may value and accept different measurements. In an ideal world, there would be a standard of metrics for CSR programs that all managers and executive boards could look to. Then programs could be compared next to one another in order to increase effectiveness and identify programs that are having limited effects.

    A company, like Unilever, that has a mission statement with core values that align with a CSR program will more likely be those at the forefront of developing the proper measures. They most likely have more programs in place and can therefore try to develop more metrics. They will care more about the impact of their CSR programs. However, they may also potentially fall into a trap of not being as stringent with their measurements since they value the need for corporate responsibility. In this sense, a company like Kraft that does not state in their mission statement the importance of corporate responsbility will look closer at the effectiveness and “good” of a CSR initiative.

    Additionally, as CSR programs become more of the norm in corporate America, how much relevance with having a corporate responsible mission statement be to developing a proper CSR initiative? It seems to me that as the corporate landscape changes and companies are all developing CSR programs, it will become a standard. Companies will naturally develop CSR programs that align with their core strategic goals. CSR departments may eventually phase out at some point in the future.

51. Ashley Noah Says:
    May 26th, 2009 at 2:05 pm

    I have been a long-time advocate of outcomes-based measurements and third generation corporate responsibility. However, I’ll use this posting to play devil’s advocate. I believe that there needs to be some balance that allows corporations to engage in socially responsible activities beyond what increases revenues, improves brand image, or cuts costs. I worry that should companies focus solely on how their activities impact the bottom line, we will see a convergence of philanthropic activities into a few societal issues, such as environment and sustainability, which more readily relate to corporate activity. As a result, many important needs may be overlooked that corporations have the capacity to aid.

    Furthermore, as corporations merge their social strategy with their competitive strategy, we may see a blurring between activities that are truly socially responsible and those that are not. I feel that this could occur particularly because it is difficult to define what a socially responsible activity is. Could a company claim they are engaging in corporate responsibility because they are producing a product that just so happens to make people’s lives better? With an integrated CSR/competitive strategy, how can a corporation clearly define activities that are going beyond their basic business principles and pursuing a clearly defined plan for social impact?

    And finally, operations-based measurements in social responsibility can be a challenge to quantify. It is possible that companies will become so consumed with trying to measure their socially responsible activities that they forget to actually do the activity. In the end, this could limit the impact the corporation has on positively impacting our world.

    While all of these concerns are valid, I do believe that they are possible to overcome. I am excited to see how corporate social responsibility and innovation develops as new generations of social conscious business leaders enter the workforce.

52. Ryan Petersen Says:
    May 26th, 2009 at 2:57 pm

    Analyzing outcomes rather than activities is the right approach to creating and demonstrating a CSR program’s value. It is important to recognize though, that this “value” is not necessarily transparent in the bottom line seen by shareholders. I don’t see that as a problem. While shareholders focus on near-term returns, and CSR programs tend to have more long-term value, I think there are ways to demonstrate that short-term achievements in a more qualitative sense, will create long term value in a quantitative sense. As Jon Saxon points out above, General Mills created a program to improve retention of minority employees and effectively communicated the value in this achievement to its shareholders. Another potential form of qualitative measurement that can translate to quantitative results can be seen in the risk management arena (also discussed in the McKinsey report). As a result of forming relationships with regulators, a company can tabulate the number of new laws it had a hand in developing. By emphasizing short-term qualitative achievements, companies may be more effective in demonstrating that these programs will lead to long-term shareholder value.

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