Corporate responsibility is moving prominently into the mainstream of business and can now be measured and tied to ROI, or return-on-investment. Attendees at the Corporate Responsibility Association’s COMMIT!Forum on October 21, 2015 were treated to a Project ROI report presentation, which was spearheaded by IO Sustainability, a research and advisory services firm, and the Lewis Institute for Social Innovation at Babson College. They make the case for the ROI of corporate responsibility (CR), both anecdotally and quantitatively.
The Project ROI report is a true partnership between these entities and its sponsors, Verizon and the Campbell Soup Company. Each sponsor is also included in the analysis.
The authors gathered the data and demonstrated a framework about what it really means for a business to be “responsible” while delivering both “value” and relevancy by integrating a connection between CR (also called corporate social responsibility and sustainability) and ROI.
From 20th to 21st Century: Expansion of CR
The last century’s view of business was permeated by a belief and standard that companies should only exist to produce profit. In particular, the late, 1976-Nobel-Prizewinning economist, Milton Freedman, won fame and influence by purporting monetarism and free markets. He paved the way to acceptance of the idea that business should be solely focused on profit. The 20th-century focus was on profit-making without direct and integrated management of its external affects such as pollution and The cost to society and the environment.
Today, we are in a business migration, company-by-company (CR), towards something greater called the circular economy. Here, CR broadens the focus of business from economic performance to also include environmental and social accountability – a change from the previous century. In turn, this requires new ways of measuring performance and tying-in to ROI.
Many companies have a degree of CR, but setting integrated goals, implementing these initiatives, and having transparency and materiality can be difficult at the start. Add the challenge of further assessing your business’s impacts to communities while ensuring environmental equilibrium within business decision-making, and well, it can be a struggle. In turn, this leads us to a joined bottom line of contribution and measurement. This century’s focus is on the complexity of making a profit without sacrificing support of the environment or society. It leads to greater resiliency and innovation as well as enduring profit.
The question is how far to push corporate responsibility.
The Project ROI report shows us companies operating within market mechanisms and not political mechanisms that achieve ROI for a ‘triple bottom-line.’ The report includes ESG. This deeper degree of management results can even lead to running a business more profitably and with an added purpose to society.
Cheryl Yaffe Kiser, executive director of the Lewis Institute for Social Innovation at Babson College says: “It’s fun to have people react to CR as a business value and competitive advantage because, doing so leads us to innovation, creation, and relevancy.”
Stephen Jordan, co-founder and co-CEO of IO Sustainability adds: “Up until our study, most people were asking if there a business case for CR. What we did was not to question if there is a business case for CR, but, to locate the companies that are doing a good job at developing and proving the business case for CR.”
He goes on to say, ”Just like any other business department, CR has to justify its budgets on outcomes and ROI. The report strives to establish a baseline for measuring ROI based on current corporate best practices and also for us to evolve future research.”
The Project ROI report comes 18 years after the creation Of the Global Reporting Initiative (GRI), an international standards organization and framework adopted by over half of the Fortune 500 companies, and a total of 7,500 organizations to date. Companies use it to track and report out on their social and environmental initiatives, in conjunction with report-style, financial results.
The consequence is that, separate from individual company CR reports, independent researchers can now mine the data and in turn, uncover insights and relate concepts and metrics for goal-setting, continuous improvements, and benchmarking in CR application and integration.
Project ROI Key Findings
The Project ROI report draws on a research review of 300 academic and peer sources, which are supplemented by interviews with CR practitioners and executives primarily from large, publicly traded companies.
Pre-empting any CR naysayers, a key finding of the report is that CR can help to increase sales revenue up to 20 percent1. The report also finds that CR can affect variations in customer satisfaction by 10 percent or more1.
These findings underscore the fact that CR, when managed as an integral to the business, helps companies to achieve stronger results. There is an increased trickle-down effect from industry that impacts communities, supply chains, and the environment. Deeper and wider integration of CR in business operations can help build competitive advantage and value while remaining connected with ROI and having exponential social and economic impact.
Cheryl Yaffe Kiser adds, “For most of my career, we were pushing the ball up the hill to define CR and sustainability and feeling that people were skeptical. Now, as Project ROI demonstrates, you can go beyond to focus on the cutting edge of business and society while making a profit. You’ve just got to be as rigorous with CR as you are with any business function.”
The next consideration then, noting there is no substitute for sound business strategy and operational management, is translating CR into specific areas of operations and focus.
Unilever CR Case
One company at the helm of translating CR in this way is Unilever, under the direction of CEO Paul Polman. Unilever has sustainable and equitable growth at the center of its business goals. In 2010, Unilever set its goals via a formalized plan labeled the ‘Sustainable Living Plan.’
In fact, in 2011, Unilever combined its marketing, corporate responsibility, and communications teams into one department in which social good forms the backbone of marketing efforts. Four years after the plan was instituted, the company experienced sales growth in the double digits. Many of Unilever’s brands that have led the way on sustainable living, such as Dove, Lifebuoy, Ben & Jerry’s and Comfort, have achieved astoundingly high single and double-digit sales over the past three years.
CEO Polman is on record as saying, “In a volatile world of growing social inequality, rising population, development challenges, and climate change, the need for businesses to adapt is clear, as are the benefits and opportunities. This calls for a transformational approach across the whole value chain if we are to continue to grow. Consumers are recognizing this too, increasingly demanding responsible business and responsible brands. Our experience is that brands whose purpose and products respond to that demand – ‘sustainable living brands’ – are delivering stronger and faster growth. These brands accounted for half the company’s growth in 2014 and grew at twice the rate of the rest of the business.”
This is a great victory that demonstrates how CR is expansive, rather than limiting, for business. The Unilever case adds to the growing evidence that integrating sustainability and CR into business can drive growth, cost efficiency, and resilience via more integrated ESG management.
Is a Sustainability Living Plan what every business needs?
IBM CR Case
Similarly, IBM, created the IBM Corporate Service Corps program, an international employee volunteerism service corps and engagement program, which was launched in 2008 and remains active today.
IBM’s program helps communities in growing and emerging markets such as, but not limited to Cambodia, China, Columbia, Ethiopia, India, Kazakhstan, Mexico, the Philippines, Romania, and Thailand, aimed at tackling critical problems ranging from public safety to urban agriculture while providing employees with leadership and business development opportunities.
The employees get training, deployment, and exposure to new markets, as well as increased cultural awareness. They contribute skills in areas such as project management, strategic planning, marketing, and engineering, to an entrepreneurial company based in the program’s regions. IBM’s Corporate Service Corps program promotes interlinked values and outcomes for social, business, and economic development while cultivating effective global managers and combined outcomes and business development.
Additionally, a private sector company like IBM is contributing to the international sustainable development goals (SDG) that seek out collective Responsibility to reduce poverty with the aide of business as partners.
So far, IBM has sent over 2,500 participants, on over 250 teams, to more than 30 countries around the world. The company states that the program produces a $600 million return on a $200 million investment. While the regular staff turnover rate is reported around 12 percent per year, the rate for employees in the IBM Corporate Service Corps is less than 1 percent.
Business Alignment and CR Goal Statements
Next, we return to the Project ROI report section on aligning CR to the heart of business and goal setting. It helps companies understand where to begin integrating CR: into goal planning.
The report provides a short list of specific, business-value- creating goal statement examples. Any type or size business can use these examples to identify, align, and integrate business goals that could relate with creation of measureable ROI.
1 Source: Project ROI report
Business owners, brand managers, CR officers and others responsible for strategic business planning can take the above CR goals statements and remake them. They can then adapt them to their strategic plans, tools, scorecards, and benchmarking.
Generating Value and Profit from CR
The question to ask next is how companies can better formalize the role of CR within business operations to create profit while enhancing environmental Management and societal outcomes? What new jobs can, and are, being created for CR functions and departments? How do we continue to evolve metrics and measurements?
Forward-looking leaders, whether they come from companies, consultancies, or NGOs, are stepping up to embrace and integrate CR into their business model. CR done well is extremely cross-cutting. Companies that develop and evaluate performance on an integrated bottom line for ESG recognize the interdependence and interconnectedness of each. They can also take steps via CR for opportunistic innovation. CEOs almost universally care about their organizations’ innovation and sustainability. CR can be fertile ground for entrepreneurship.
The lesson of the Project ROI report: Interlinking CR into business planning goals can lead to creating measurable ROI.
1 Source: Project ROI Report
Susan Nickbarg is a marketing and CR and sustainability management consultant along with being a forerunner in CR and sustainability. She helps companies to pinpoint their higher purpose and turn it into integrated alignment between business practice, culture, program management, strategy, innovation, capacity building, briefings, branding narrative and communications. Susan has held management positions in product and brand management in global, Fortune 250 companies and startups. She writes and educates about the intersection of business, marketing, and CR. Connect with Susan on twitter at @svnickbarg or by email to email@example.com.