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CSR Frameworks & Systems Measuring CSR. MBA 292C-1 Professor McElhaney 2.07.07. Class Agenda. Lloyd Kurtz next week (?) Key Learnings on CSR Reporting Current Events Project Learnings from your GSI CSR Challenge & Solution CSR Frameworks CSR Metrics. Current Events.
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CSR Frameworks & SystemsMeasuring CSR MBA 292C-1 Professor McElhaney 2.07.07
Class Agenda • Lloyd Kurtz next week (?) • Key Learnings on CSR Reporting • Current Events • Project Learnings from your GSI • CSR Challenge & Solution • CSR Frameworks • CSR Metrics
Current Events • The Oprah Winfrey Show is looking for families that are changing their lifestyles to reduce their global warming impact. That can mean saving energy in various ways, recycling, using public transportation, or xeriscape landscaping. They're looking for families to share their stories and creative ideas on television.
Cool Job • Energy & Climate Change Position • Job Responsibilities • 2/6/07 • Position Summary: • This position will drive Yahoo!’s overall environmental strategy for our global facility operations with a specific focus on decreasing impacts on climate change. Will specialize in decreasing energy use and climate impacts of the offices and datacenters worldwide. Responsibilities will include analysis of energy choices and technologies, green power selection, carbon offsets, and utilization of clean technologies. • Reports To: • This position will report into corporate development but will work closely with the Yahoo! for Good team (Yahoo!’s social responsibility department). • Duties and Responsibilities: • Oversee the climate change strategy to ensure Yahoo! is making the best choices given our environmental and business objectives • Evaluate options for decreasing climate impacts, make recommendations, and implement programs • Manage Yahoo!’s carbon offset portfolio, interfacing with vendors, consultants, and offset project developers • Work closely with the facilities, real estate, and operations staff in our datacenters and offices • Update our greenhouse gas inventory on a quarterly basis • Set energy efficiency goals that position Yahoo! as a leader and oversee tactics to reach those goals • Gain recognition for leadership practices • Evaluate and respond to suggestions made by employees on how to improve office and datacenter environmental performance • Represent Yahoo! at industry-wide consortiums focused on energy and climate change • Skills, Characteristics, and Experience Preferred: • Requires BS in Engineering, science, or other technical field. Master’s degree a plus • 7-10 years experience in energy efficiency and clean technology as it relates to facilities • Technical experience in power generation, renewable power, and energy sources • Experience with private corporate investment in voluntary offsets. Extensive knowledge of carbon offsets and other mechanisms for reducing greenhouse gas emissions • Thorough understanding of programs such as Energy Star, LEED certification, and other standards for leadership • Experience managing datacenters a plus • Strategic thinker as well as detail oriented, organized, and able to manage multiple tasks simultaneously • Self-motivated. Makes decisions independently and involves higher management when appropriate • Thrives in a fast-paced and unstructured environment • Innovative, entrepreneurial, and thinks creatively • Resourceful, excellent written and verbal communication, and strong interpersonal skills
The CSR Dilemma • The Student Club • The Company • The Conference • http://berc.berkeley.edu/index.html • The Bill (Fall 2004) • The ASUC calls upon the Chancellor, the University, and the Deans of Schools and Colleges who receive funding from Dow Chemical, urging the University to reject all donations from Dow or its directly associated foundations in excess of that which the corporation spends to clean up the Bhopal site on an annual basis, until such time as the site has been cleaned to United States Superfund standards. • http://www.asuc.org/documentation/view.php?type=bills&id=366 • The Solution • What would you do if you were the student leadership team? • Come back with your solutions
The Landscape of the Business Case for CSR Changing the Game Competitive Advantage & Market Positioning Employee Relations Investor Relations Improved Business Performance Value Creation Risk Mitigation Reputation “Insurance” Mitigate long term business risks Build Stakeholder Trust
Shifting From Defensive to Offensive CSR BP: “Beyond Petroleum” Citigroup: Commits $100m to microfinance Gap: PRODUCT (RED)Interface: “Mission Zero”Stonyfield Farm: “Bid With Your Lid” Timberland: Partnership with City Year “Offensive CSR can distinguish a company’s reputation but cannot protect it; defensive CSR can protect a reputation but cannot distinguish it. Both are necessary to succeed in today’s business climate.”1- Mark Kramer & John Kania, Changing the Game
Stages of CSR • Defensive • Company faced with pain, criticism, reacts defensively • Compliance • Cost of doing business, do just as much as need to • Managerial • Moves CSR to core business managers & functions • Strategic • Realigns strategy to use CSR as competitive advantage • Civil • Need to involve all in sector, collective action
Stages of CSR Sweet Spot
Implementing CSR • Make business case (relevance) • Engage stakeholders (internal & external) • Map potential vulnerabilities/ risks • Develop CSR strategy • Align with organizational culture/ change • Monitor, measure, report • Communicate to ALL stakeholder groups
Designing a CSR Structure: Big Picture • Build Senior Vision & Support • Examine Current CSR Systems & Activities • Design a CSR Structure • Implement CSR Management Systems
Designing a CSR Structure: Nine Steps • Understand Drivers (internal & external) • Identify Key CSR Issues • Identify & Evaluate Stakeholders • Identify Current Functions Supporting CSR • Analyze Current CSR Systems, Culture • Design CSR Structure • Develop Effective Staffing Plan • Create Cross-Functional System • Match Budget to Best Framework
A CSR Continuum Philanthropic Transactional Integrative Growth stage: Adapted from The Collaboration Challenge, James E. Austin
Build Stakeholder Trust “an early awareness of the concerns of NGOs and stakeholders enables companies to join and shape the debate before it turns against them – or at least to prepare themselves for turbulence ahead.” – McKinsey Quarterly1
Prioritizing CSR Actions: Corporate Expectations as Industry Reputation Drivers 2005
Campaign for Real Beauty • Repositioned its brand around self-esteem issues • Created CampaignForRealBeauty.com to allow women to • Vote on provocative images • Join discussion groups on various beauty stereotypes • Participate in the Dove Self-Esteem Fund • Uses un-retouched images of women rather than models on Dove.com • The Uniquely Me! Girl Scouts of America self-esteem program • Donate money, Unilever employees donate time to mentor girls as part of the program. • Program uses activity books and simple exercises to help build self-confidence in girls • Supports BodyTalk, an educational program for schools created by the Eating Disorders Association. "This campaign is addressing key issues and connecting with women in ways that people have not connected in a long time." - Retail analyst Marshall Cohen of the NPD Group.
U.S. sales rose 6% in one year to $500 million • Dollar sales jumped 2% in the month the campaign started. • Heightened brand awareness. Ads received considerable press, more than 1 million women have visited dove.com and voted on images. • Created buzz with the "water cooler effect"
CSR Metrics Must Link to Global Citizenship Priorities • Energy • Improving energy efficiency and innovation in our operations and products. • Product take back and recycling • Reducing product environmental impacts through leading-edge reuse and recycling solutions. • Responsible supply chain • Raising standards in HP’s global supply chain and ensuring responsible manufacturing for all products. • Education
Types of Evaluation INTUITION STORIES SYSTEMS
Goals of Measurement • Align investment with value • Assess actual value created • Inform management decisions • Help you maintain the integrity of your work • Contribute to reporting, communication, and branding
Ease of Measuring EASY HARD TYPE I TYPE II TYPE III TYPE IV • Sales revenue • Capital assets • Investment • returns • Dividends • Etc. • Goodwill • Insurance • Depreciation • Liability • Projected revenues • Emission credits • Income changes • Education access • Earnings potential • Technology benefits • Etc. • Health • Safety • Biodiversity • Clean air • Safe water • Education results • Political stability • Cultural Advancement • Etc. • Life • Freedom • Dignity • Happiness • Etc.
Types of Information about Value Five basic ways of articulating value: • Financial (accounting: cash in, cash/work out) • Monetizable (translating non-financial value into monetary equivalent) • Quantitative (numbers: size, magnitude or degree) • Qualitative (description: kind, type, or direction) • Narrative (storytelling)
Value Chain of Metrics Inputs Activities Outputs Outcomes Goal Alignment Changes to social systems Activity and goal adjustment What is put into the venture Venture’s primary activities Results that can be measured
Impact Metrics= differential change Inputs Activities Outputs Outcomes Goal Alignment Changes to social systems Activity and goal adjustment What is put into the venture Venture’s primary activities Results that can be measured What would have happened anyway - Essential = IMPACT
Evaluation Roles Outputs Outcomes Changes to social systems Results that can be measured in operations • Periodic • Need data from • researchers and • other stakeholders • Tracked regularly • NGO, Investor, • Funder
CR Metrics Broad metric categories Environment Community Workplace Marketplace • Business Travel • Byproducts • Emissions to Air • Emissions to Water • Energy Consumption - Electricity • Energy Consumption - Fuel • Environmental Projects • Large-Scale Environmental Impact • Waste • Waste - Paper • Waste - Water • Charitable Giving • Community Education • Community Lending & Investment • Employee Volunteerism • Employee Diversity • Employee Engagement • Employee Satisfaction & Retention • Health & Safety • Health & Safety - Illness • Health & Safety - Injury • CSR Spending • Customer Satisfaction & Retention • Operation control • Supply Chain Metric sub-categories
Standard and most frequent metrics in each category area: Environment Community Workplace Marketplace • Byproducts produced through the manufacturing process • Emissions to air and water through manufacturing, operations, or logistics • Energy consumption by type or total energy used • Waste produced – paper, water, hazardous, non-hazardous, other • Expenses or personnel involved • Customer satisfaction measures – surveys, complaint tracking, customers served, external rankings • Supply chain measures – supplier satisfaction, trainings, audits, total spend on targeted supplier groups, certifications • Customer reach in socially disadvantaged groups or areas • Charitable corporate giving – direct, through foundation, through employee match • Community investment – project spend, local taxes paid • Employee activities – volunteer hours • Customer diversity and inclusion • Unique projects and engagements • Employee diversity – race, age, gender • Health and safety – injury and accident rates, works day loss rates, absenteeism, workers comp claims • Turnover rate • Employee satisfaction (typically from surveys) • Training for employees– spend, time, or number or trainings
Sample Indicators of Socio-Economic Returns to Individuals or Investees
Example: Ciudad Saludable • Description: social enterprise that develops community-based, integrated waste management microenterprises in Peru • Goals: in business to create more than financial value-- wants to restore the environment, improve peoples’ health and cultivate community-based economic development
What’s the value proposition? • Financial value proposition is easy to count • $$$$ revenue • $$ Costs • Non-financial value…? • Outputs/measurable indicators: • #s of customers served with waste collection • tons of garbage recycled • # jobs created • # people trained, etc…. • Outcomes/results: • Less disease, fewer deaths, healthier people, less domestic violence, sense of pride and dignity • Cleaner water, restored fish populations & biodiversity • Fewer lost work days due to illness, lower health expenses, greater incomes and economic security
Ex: Ciudad Saludable SROI Analysis Outputs Outcomes - Base case Monetization CS already counted the number of jobs created, the revenues from customer fees, and the amount of garbage collected.
Ex: Ciudad Saludable SROI Analysis Outputs Outcomes - Base case Monetization • Ciudad Saludable collected information from: • staff • microentrepreneurs • local health authorities • SVT analyst researched “proxy studies” on: • disease and death caused by exposure to garbage in similar regions • costs of waste management if provided by the government in similar regions.
Ex: Cuidad Saludable SROI Analysis Outputs Outcomes - Base case Monetization • CS assumed “what would have happened otherwise”- if it did not exist • what microentrepreneurs & CS staff would have earned • what the incidence of childrens’ deaths from diarrhea in the region would be • what it would cost for the government to collect the garbage instead of CS • where the garbage would be if not collected by CS
Ex: Ciudad Saludable SROI Analysis Outputs Outcomes - Base case Monetization • SVT monetized a subset of CS’s impacts using the dollar value of: • The increase in microentrepreneurs’ earnings • The relative savings to taxpayers of having CS do the waste management rather than the municipal government • These values were calculated relative to the investment that was required to create them.
Results: Value Captured with theFull Range of Types of Information monetized value financial value narrative value quantified value qualitative value
Metrics & Evaluation Take-Aways • Simplify • Set clear goals & establish baseline at the outset (start where you are) • Measure a few things well as opposed to everything poorly • Concentrate on measuring a few signature programs, with a few signature measurements • Stories trump facts 10 times out of 10 • Move towards impact metrics, but blend in some evaluative metrics