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20140527 measuring social impact as a need for csr

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Measuring Business Value does not include social and environmental aspects . …

Measuring Business Value does not include social and environmental aspects .
Current measures of value are INCOMPLETE : Financial Accounting reflects ONLY Economic and Financial Value .
New measures are necessary to describe ALL VALUE creating a company.
It is MANDATORY to consider the Stakeholders with whom the company interacts .
The TOOLS available today are incredibly diverse and it's necessary to identify the most suitable tools within a complex landscape of socio-economic impact measurement framework.
I focus exclusively on socio-economic impact. Tools for measuring environmental impact are already relatively well-established.

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  • 1. Measuring Social Impact as a need for CSR Gonzalo Sales Genovés Madrid, MAYO 2014 Autor: Gonzalo Sales Genovés 1
  • 2. Autor: Gonzalo Sales Genovés 2 NOTICE: This document was produced by Gonzalo Sales Genoves to be used by those who want to advance in the task of making a fairer world. Please, respect the sources of information and the author reference, not to protect any copyright, but to respect the essence and meaning of the document content. Thank you very much in advance
  • 3. Environmental & Social Footprints: Two Sides IN the Same Coin “The true cost of climate change will not be measured in dollars, but in lives and human potential. That price is being paid already” Diana Liverman, Professor at Oxford University, Former Director of the Environmental Change Institute People stood among the ruins of houses destroyed by Typhoon Haiyan in Tacloban, Philippines, a city of about 220,000. NYT Citarum River - West Java - Indonesia
  • 4. • “CSR is the voluntary integration by companies of social and environmental concerns in their business operations and their interaction with their stakeholders". EC Green Paper 2001. In redefining European Commission introduced the concept "Shared Value". • “CSR is a voluntary commitment by a company to contribute to sustainable economic development by working with employees, their families, the local community and society in order to improve the quality of life." World Business Council for Sustainable Development (WBCSD) What CSR is • Philanthropy • Sustainability • Ethics • Community Engagement • Cause Related Marketing • Reputation • Expenses • Establishing a foundation What it is not • Voluntariness: Beyond law enforcement. • Triple balance: Economic, social & environmental. • Stakeholders engagement: Accountability and transparency in information. • Strategic approach: CSR should become an issue that cuts across all areas. Key elements • Good Governance o Business ethics, anti-corruption and transparency. • Human Capital o Working environment, work & family balance, health and safety, diversity management & Human Rights. • Environment o Fight against climate change, energy efficiency & responsible use of natural resources. • Society o Health and consumer safety, product quality, supply chain & community investment. Related Areas Autor: Gonzalo Sales Genovés 4
  • 5. • Related to the company's relationship with: o its employees (eradication of forced labor and child labor, non-discrimination, freedom of association, health and safety, decent salary and working hours). o its suppliers, ensuring that their supply chain follow the same principles promoted by the company responsible. o the community in which it operates. SOCIAL • Based on good corporate governance and information transparency. • SRI (Socially Responsible Investment). • Sustainable indexes: DJSI, FTSE4Good, Ethibel, ASPI Eurozone. FINANCIAL ENVIRONMENTAL • Environmental Management System (EMS) allows the organization to know the degree of damage to the environment caused by its activities, and introduce corrective mechanisms for continuous improvement. • Related Aspects : o Efficient use of natural resources. o Reduction of greenhouse gas emissions & waste generated. o Waste management. o Contribution to the Conservation of Biodiversity. o Prevention of accidents and spills. o Respect the landscape. Triple bottom line (CSR Management) Autor: Gonzalo Sales Genovés 5
  • 6. • Independent Foundation to the company whose programs are not related to the business core. Corporate Foundation • 62% of companies integrate sustainability into core business functions. • 46% of companies have CSR policies and procedures. • CSR is propelled by the Board of Directors (45%) and CEO (60%). • CSR is into Communication Department in 74% of cases. • 39% of companies measure ROI of their CSR efforts. Integrated Model Future Trends in CSR • Acknowledgement of social profile for the Corporate Sector. • Social outcomes will be the measure for business. • Sustainability reporting will be essential. • Employees will be key to the Community Engagement Programs. • Corporate philanthropy will remain important. • CSR just "be" if it add value to the company. • Public Private Partnerships will be a common pattern. • CSR will mainly focus on supplier relationships. • Healthcare will be a star for ICT subject. • CFOs involvement will be key to the survival of CSR. • Reports on Greenhouse emissions and water consumption will be outstanding. • Increasing awareness about natural resource scarcity. • Rankings and ratings will remain important for companies. • “5 CSR Executive Trends” , Raz Godelnik, 2012” . • “6 Tendencias crecientes en sustentabildad corporativa”, Ernst & Young y GreenBiz Group • “Is CSR as We Know It Obsolete?” Paul Klein, 2012 • “State of Sustainable Business Survey 2013“. BSR & Globescan CSR Organisation & Trends Autor: Gonzalo Sales Genovés 6
  • 7. Accountability A narrow mapping: 1. Employees 2. Communities 3. Shareholders 4. Creditors 5. Investors 6. Government 7. Customers A broader mapping: 1. Suppliers 2. Labor unions 3. Government regulatory agencies 4. Government legislative bodies 5. Government tax-collecting agencies 6. Industry trade groups 7. Professional associations 8. NGOs and other advocacy groups 9. Prospective employees 10. Prospective customers 11. Local communities 12. National communities 13. Public at Large (Global Community) 14. Competitors 15. Schools 16. Future generations 17. Analysts and Media 18. Alumni (Ex-employees) 19. Research centers 20. … Corporate Stakeholders Engagement Autor: Gonzalo Sales Genovés 7
  • 8. CSR Key Benefits for Corporations • Increased confidence of customers and investors / shareholders. • Competitive advantage for the business as it has a positive influence on the community. • Employee satisfaction and attracting talent. • Loyalty of customers, partners and investors / shareholders and improved reputation. • Innovation and adaptation to changes in management systems to increase competitiveness. • Corporate Culture • Participation and Satisfaction • Reduce Rotation • Increase Motivation • Employer Reputation • Image / Reputation • Corporate Communication • External Relations • Corporate Marketing Key Benefits Internal External Autor: Gonzalo Sales Genovés 8
  • 9. From Corporate Social Responsibility to Blended/ VALUE / Shared Autor: Gonzalo Sales Genovés 9
  • 10. (*) Source: The Big Idea: Creating Shared Value: How to reinvent capitalism – and unleash a wave of innovation and growth. By Michael E. Porter and Mark R. Kramer Shared Value: Policies and practices that enhance the competitiveness of a company while improving social and economic conditions of the communities in which it operates Corporate Social Responsibility Value: “Doing Good“ • Good Citizenship, Philanthropy, Sustainability. • Discretionary. • Separate from profit maximization. • Agenda externally determined. • Impact is limited by the corporate impact and CSR Budget. Corporate Shared Value Value: Economic & Social benefits related to cost • Joint company and community value creation. • Integral to competing. • Essential to profit maximization. • Agenda is business specific. • Mobilizes the entire company budget. In both cases, compliance with laws and ethical standards and reducing harm for corporate activities are assumed CREATING SHARED VALUE: Redefining capitalism and the role of the corporation in society * Autor: Gonzalo Sales Genovés 10
  • 11. Source: Fundación Empresa y Sociedad. *IMMIGRATION *ELDERLY *LOCAL DEVELOPMENT *DISABILITY Products & Services Human Capital Employment Networking Financing Key Social Challenges Awareness Education Employment Services Changemaker SOCIAL WELFARE IMPROVEMENT SOCIAL VALUE BUSINESSVALUE Best Corporate Resources New Products & Services Human Capital Improvement Risk reduction & new opportunities Achievements Resources Optimized Best Result in Company Best Result in Society BUSINESSIMPROVEMENT Creating Value = Business Perspective + Social Perspective Autor: Gonzalo Sales Genovés 11
  • 12. Return on capital New markets Growth Innovation & new products Composition of business portfolio CSR VALUE FAMEWORK Growth Return On Investment Risk Management Reputational Risk Regulatory Risk Operational Risk Operational efficiency Optimized Supply Chain Human Capital Development Access to New Markets Innovation & New Products Social Positioning Overview of CSR Value Framework ©“rsc2”. Fundación Seres-McKinsey Autor: Gonzalo Sales Genovés 12
  • 13. Social Impact Autor: Gonzalo Sales Genovés 13
  • 14. o Impact is how we manage to decrease the incidence of a problem thanks to our intervention. o The main objective of impact assessment is to determine whether a particular program or action has had an impact, and quantify the extent of that impact. WHAT o Thank to the rise of CSR, there is a growing involvement of the company in social issues. o The company not only creates economic and financial value , it also creates social value. o Measuring socio-economic impact is necessary to maintain companies license to operate, improving business, enabling environment, strengthening their value chains, and fueling product and service innovation. o On the contrary , most NGOs have not worried about measuring their impact until recently. Within NGO’s Annual Reports you can find figures about investment but not the end result of that investment. o The economic and financial value reflected in the balance sheet and the income statement , but the social value is not reflected in any state of the company. o If we want to describe all the value created by the company , it is necessary to have a method that allows us to measure and reflect the social value. WHY HOW o Impact assessment estimates the effectiveness of the program by comparing the results obtained by those who participated in the program against those who did not. (“Pharma Test”). Social Impact Autor: Gonzalo Sales Genovés 14
  • 15. Measuring Social Impact Autor: Gonzalo Sales Genovés 15
  • 16. Measuring Social Impact MEASURING BUSINESS VALUE : o Traditional Conception: Business Value = Value Enterprise Financial Officer. o Problem with this conception :  the company is not isolated but interacts with Stakeholders  The definition does not include social and environmental aspects . o Current measures of value are INCOMPLETE : Financial Accounting reflects ONLY Economic and Financial Value . o New measures are necessary to describe ALL VALUE creating a company. o It is MANDATORY to consider the Stakeholders with whom the company interacts . The TOOLS available today are incredibly diverse: o It is necessary to identify the most suitable tools within a complex landscape of socio-economic impact measurement framework. o I focus exclusively on socio-economic impact. Tools for measuring environmental impact are already relatively well- established. Autor: Gonzalo Sales Genovés 16
  • 17. Business Benefits Of Measuring Social Impact BUSINESS IS A MAJOR DRIVER OF SOCIO-ECONOMIC IMPACT . SOCIOECONOMIC IMPACT IS A MAJOR PREDICTOR OF BUSINESS SUCCESS o By creating jobs, training workers, building physical infrastructure, procuring raw materials, transferring technology, paying taxes, and expanding access to products and services ranging from food and healthcare to energy and information technology, companies affect people’s assets, capabilities, opportunities, and standards of living. o By measuring their socio-economic impact, companies can reduce cost and risk and create new business opportunities (social license to operate). BUSINESS IMPROVES SOCIETY o Measuring socio-economic impact can help companies show communities, policymakers, government authorities, and other stakeholders that their activities create net benefits for the economies and societies in which they operate. STRENGTHENING VALUE CHAINS o Measuring socio-economic impact can help companies predict the loyalty, performance, stability, and capacity for growth of suppliers, distributors, and retail partners – identifying vulnerabilities and opportunities to address them. FUELING PRODUCT AND SERVICE INNOVATION o Measuring socio-economic impact can help companies understand the needs, aspirations, resources, and incentives of their customers – enabling them to develop winning new products and services and improve existing offerings Autor: Gonzalo Sales Genovés 17
  • 18. Different Methodologies to Measure Social Impact Autor: Gonzalo Sales Genovés 18
  • 19. Social Impact Evaluation • A growing number of tools are available to help companies measure their socio-economic impact. • It Is difficult for companies to compare and choose among all of them. # Name of the tool Value to business 1 Base of the Pyramid Impact Assessment Framework Understand and measure how your business influences different dimensions of poverty on your customers, local distributors and surrounding communities 2 GEMI Metrics Navigator Identify environmental and social performance indicators to measure and prioritize issues for management response 3 Impact Measurement Framework Identify relevant socio-economic indicators to measure impact in four specific sectors 4 Impact Reporting and Investment Standards Select standard indicators to use within your overarching impact measurement framework 5 MDG Scan Estimate the number of people your company is affecting in ways related to the Millennium Development Goals 6 Measuring Impact Framework Define the scope of your assessment, identify socio-economic impact indicators for measurement, assess the results, and prioritize issues for management response 7 Poverty Footprint Understand your company’s impact on poverty, working in collaboration with a development NGO 8 Progress out of Poverty Index Calculate the percentage of customers, suppliers, and other populations of interest that live below the poverty line 9 Socio-Economic Assessment Toolbox Measure and manage the local impacts of site level operations 10 Input-Output Modeling Calculate the total number of jobs supported and economic value added by your company and its supply chain on a particular national economy Autor: Gonzalo Sales Genovés 19
  • 20. Social Impact Evaluation Autor: Gonzalo Sales Genovés 20
  • 21. How Corporates are (trying to) Measuring Social Impact Autor: Gonzalo Sales Genovés 21
  • 22. London Benchmarking Group (LBG) Autor: Gonzalo Sales Genovés 22
  • 23. London Benchmarking Group (LBG) • CONTRIBUTIONS COULD BE MANDATORY OR VOLUNTARY: o Mandatory contributions are those donations or social cultural projects required by law or contract. o A contribution is voluntary when:  There is no legal or contractual obligation for the company.  The contribution funds non profit activities. • BENEFITS: o Multiplier effect or leverage: An additional resource attracted to a project as a direct result of the initiative or participation of the company. o Benefit to the community: Describe specific achievements made with the project. o Benefit to the company: Improvement of reputation and image, pride and motivation, relations with certain stakeholders. * The charitable donations are not considered as a benefit for the company. • PROJECTS CLASSIFICATION: o Location o Company o Subject focus:  Education and young people  Health  Economic Development  Environment • TYPE OF CONTRIBUTION: o Cash: total cash amount donated. o Time: paid staff time spent in community activities. o In-kind: products, equipment, facilities and other company resources. • MOTIVATION FOR CONTRIBUTION: o Charitable donations (welfare assistance). o Commercial initiatives (to promote company business). o Community investment (sustained involvement in community issues).  Art and culture  Social Welfare  Emergency Relief  Others Today, It is a model to classify and manage corporate community projects as a group Autor: Gonzalo Sales Genovés 23
  • 24. LBG: Beyond Classification Tomorrow, It should be a model to measure the impact of corporate community investment Today InProgress Tomorrow Autor: Gonzalo Sales Genovés 24
  • 25. LBG Today: Classification & Quantification ABOUT PROJECT/PROGRAM Contribution/ Activity number 1. Activity name/description 2. Name of partner/ beneficiary organisation 2a. Number of partner / beneficiary organisation 3. Date from 4. Date to 5. Business unit/ department responsible 6. Geographic location 7. Motivation for contribution • Charitable donations • Commercial initiatives • Community investment 8. Subject Focus of contribution-LBG categories. What did the company invest in the project? Input data entered? What has the project achieved for the company and the community Information on results? ABOUT INPUTS Cash 9. Value of cash contributions Time 10. Number of staff involved in company time 11. Total hours volunteered in company time 12. Value of staff time contributed - enter full amount In-kind 13. Detail of in-kind contributions 14. Value of in-kind contributions - enter full amount 15. Total value of contributions - this will calculate automatically - do not delete from this column Autor: Gonzalo Sales Genovés 25
  • 26. 16. Have you measured any results of this project? If 'YES' please detail them on this sheet If 'No' then click to return ▼ LBG In Progress: Social Outputs & Impacts SOCIAL OUTPUTS AND IMPACTS 17. Leverage 17a. Employees - payroll giving 17b. Employees - other contributions 17c. Customers 17d. Other external partners 17e. Other sources 18. Beneficiaries 18a. Number of direct beneficiaries 18b.Beneficiary Group (if applicable) Of the total beneficiaries, how many… 18c. Experienced a positive change in their behaviour or attitude as a result of your support 18d.Developed new skills or an increase in their personal effectiveness 18e. Experienced a direct positive impact on their quality of life as a result of your support 18f. Please describe the specific benefits people have experienced What benefit has the beneficiary organisation been able to report? 19b. were able to provide new services / products 19c. improved their management systems (e.g. IT, HR, finance) 19d. were able to spend more time with clients 19e. could employ more staff / take on more volunteers 19f. could train their staff / volunteers 19g. benefited from cash savings 19h. were able to lobby for legislative change 19i. increased their profileAutor: Gonzalo Sales Genovés 26
  • 27. ENVIRONMENTAL OUTPUTS AND IMPACTS 20a. Did the project return any environmental impacts? 20b. helped to protect and/or replant tree stocks 20c. protected endangered species 20d. improved or conserved seas/ rivers/ fisheries 20e. helped conserve land/ protected sites 20f. decreased waste to landfill 20g. reduced greenhouse gas emissions 20h. Did the project engage people on environmental issues/activity 20i. increased levels of recycling 20j. improved people's energy efficiency 20k. reduced people's water usage 20l. Number of trees planted 20m. Amount of land protected/ conserved (ha) 20n. Number of people engaged in environmental activity LBG In Progress: Environmental Outputs & Impacts Autor: Gonzalo Sales Genovés 27
  • 28. BUSINESS OUTPUTS AND IMPACTS 21. How many employees… Number of employees taking part. Data copied from inputs sheet 21a. Improved their job-related skills 21b. Improve their personal effectiveness (e.g. more confident) 21c. Make a positive change in behaviour / attitude 22. Other business benefits. Has the activity … 22a. Increased employee satisfaction 22b. Improved retention 22c. Generated positive press coverage 22d. Improved the company's relationship with government / regulators or other bodies 22e. Raised the profile of the company and/or a particular brand? 22f. Raised customer awareness 23. Any other outputs and/or impacts acheived LBG In Progress: Business Outputs & Impacts Autor: Gonzalo Sales Genovés 28
  • 29. Social Return On Investment (SROI) Autor: Gonzalo Sales Genovés 29
  • 30. Social Return On Investment (SROI) WHAT IS SOCIAL RETURN ON INVESTMENT (SROI)? • It is a framework for measuring and accounting for this much broader concept of value; o it seeks to reduce inequality and environmental degradation and improve wellbeing by incorporating social, environmental and economic costs and benefits. • SROI measures change (impact) in ways that are relevant to the people or organizations that experience or contribute to it. • This enables a ratio of benefits to costs to be calculated (for example, a ratio of 3:1 indicates that an investment of £1 delivers £3 of social value). • SROI is about value, rather than money. Money is simply a common unit and as such is a useful and widely accepted way of conveying value. • It is much more than just a number. It is a story about change, on which to base decisions, that includes case studies and qualitative, quantitative and financial information. • An SROI analysis can take many different forms: o It can encompass the social value generated by an entire organization, or focus on just one specific aspect of the organization's work. o It can be carried out largely as an in-house exercise or, alternatively, can be led by an external researcher. TYPES: • Evaluative, which is conducted retrospectively and based on actual outcomes that have already taken place. • Forecast, which predicts how much social value will be created if the activities meet their intended outcomes. Autor: Gonzalo Sales Genovés 30
  • 31. SROI: Principles & Stages PRINCIPLES 1. Involve stakeholders. 2. Understand what changes. 3. Value the things that matter. 4. Only include what is material. 5. Do not over-claim. 6. Be transparent. 7. Verify the result. STAGES 1. Establishing scope and identifying key stakeholders. o Knowing what your SROI analysis will cover, who will be involved and how. 2. Mapping outcomes. o Engaging your stakeholders is the way to develop an impact map, which shows the relationship between inputs, outputs and outcomes. 3. Evidencing outcomes and giving them a value. o Finding data show whether outcomes have happened and then valuing them. 4. Establishing Real impact. o Having collected evidence on outcomes and monetized them, you can identify aspects that would have happened anyway or are a result of other factors. 5. Calculating the SROI. o This stage involves adding up all the benefits, subtracting any negatives and comparing the result to the investment. This is also where the sensitivity of the results can be tested. 6. Reporting, using and embedding. o It’s vital to involve stakeholders and sharing findings and embedding good outcomes processes and verification of the report. Autor: Gonzalo Sales Genovés 31
  • 32. How SROI can Help Corporates HELPING CSR MANAGERS • as a tool for strategic planning and improving; • for communicating impact and attracting investment from “Big Fishes”; • for making investment decisions; • as a help guide that managers can use to decide when/where they should spend time and money. HELPING OUR IMPROVE SERVICES BY: • helping us understand and maximize the social value an activity creates; • helping us target appropriate resources at managing unexpected outcomes, both positive and negative; • identifying common ground between what we want to achieve and what ours stakeholders want to achieve; • creating a formal dialogue with stakeholders that enables them be involved in service design. Autor: Gonzalo Sales Genovés 32
  • 33. Proposal for SROI measurement • FEASIBLE APPLICATION OF METHOD SROI IN CORPORATES: o Defining the scope of the study to social projects. o Ability to apply the method in other areas of the company. o Preparation of analysis using impact creation chain. Inputs Activities Outcomes Goal setting Modify the objective to achieve the desired impact Mesurable products from Ferrovial activities Developed by Ferrovial Resources provided to the project by Ferrovial Changes Changes in social systems IMPACTS SROI allows us to have a BUSINESS VALUE CONCEPT BROADER AND COMPREHENSIVE, incorporating social value to the decision making process of the company. SROI ANALYSIS OF CORPORATE ACTIVITY = MEASURE ITS SOCIAL ACTIVITY. • Social Impact: o for every € 1 you spend on the project, € 2.15 creates social value:  tax increase for the town/city  lower health care costs  quality of workers' life increased ..., • CORPORATE combines financial sustainability for their projects, and social value (in a ratio of 1: 2,15). Autor: Gonzalo Sales Genovés 33
  • 34. • nef (the new economics foundation) has conducted a re-evaluation of the case for a 3rd runway at Heathrow airport based in a SROI analysis. • This study finds that the costs of the Runway 3 proposal outweigh the benefits by at least £5 billion. • In light of its analysis and in view of the formidable targets for reducing greenhouse gas emissions its conclusion is that expanding Heathrow cannot be justified. “Heathrow: three options for the third runway” By Jorge Gil (15/10/2013) https://blog.ferrovial.com/es/2013/10/he athrow-tres-opciones-tercera-pista/ Why Social Return On Investment (SROI) is the most suitable tool to measure Social Impact? (I) Autor: Gonzalo Sales Genovés 34
  • 35. Public Services (Social Value) Act 2012. CHAPTER 3 An Act to require public authorities to have regard to economic, social and environmental well-being in connection with public services contracts; and for connected purposes. [8th March 2012] What is the Act? • The Act, for the first time, places a duty on public bodies to consider social value ahead of a procurement. • The Act applies to the provision of services, or the provision of services together with the purchase or hire of goods or the carrying out of works. • The wording of the Act states that... o The authority must consider— (a)how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area, and (b)how, in conducting the process of procurement, it might act with a view to securing that improvement. • It also opens the door for consultation with stakeholders to better understand social value and improve service specifications, the Act states... What does social value mean under the Act? • The wording of the act states.. “the authority must consider.. only matters that are relevant to what is proposed to be procured and, in doing so, must consider the extent to which it is proportionate in all the circumstances to take those matters into account.” Why Social Return On Investment (SROI) is the most suitable tool to measure Social Impact? (II) Autor: Gonzalo Sales Genovés 35
  • 36. Why Social Return On Investment (SROI) is the most suitable tool to measure Social Impact? (III) Autor: Gonzalo Sales Genovés 36
  • 37. Useful? gonzalosales1@gmail.com Autor: Gonzalo Sales Genovés 37