CSR Frameworks


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  • 1) Source: Kramer, Mark & John Kania, “Changing the Game”. Stanford Social Innovation Review , Spring 2006.
  • Two key moments in history of _valuation_. A couple hundred years in the makiing, in the fourteen hundreds double entry bookkeeping written down in textbook form for the first time, in Venice. During the 20th century (1960s) the first social and environmental valuation frameworks began with benefit cost analysis…. to systematically consider the macroeconomic impacts of a given investment decision.
  • What got counted first got counted because it was easier. Easier to count. Easier to see. Easier to feel. Easier to store. Capital markets have depended on quantifiability, but a lot is being left out. GREEN IS WHAT SHOWS IN FINANCIAL ACCOUNTING SYSTEMS. BLUE IS WHAT RELATES TO SOCIAL IMPACT. Type IV are things which would not be quantified because either too difficult to measure or too contentious. But they can be discussed in other terms-- with other TYPES of information.
  • The key point is to get at “what VALUE” is being created.
  • CSR Frameworks

    1. 1. CSR Frameworks & Systems Measuring CSR MBA 292C-1 Professor McElhaney 2.07.07
    2. 2. Class Agenda <ul><li>Lloyd Kurtz next week (?) </li></ul><ul><li>Key Learnings on CSR Reporting </li></ul><ul><li>Current Events </li></ul><ul><li>Project Learnings from your GSI </li></ul><ul><li>CSR Challenge & Solution </li></ul><ul><li>CSR Frameworks </li></ul><ul><li>CSR Metrics </li></ul>
    3. 3. Current Events <ul><li>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. </li></ul>
    4. 4. Cool Job <ul><li>Energy & Climate Change Position </li></ul><ul><li>Job Responsibilities </li></ul><ul><li>2/6/07 </li></ul><ul><li>Position Summary: </li></ul><ul><li>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. </li></ul><ul><li>Reports To: </li></ul><ul><li>This position will report into corporate development but will work closely with the Yahoo! for Good team (Yahoo!’s social responsibility department). </li></ul><ul><li>Duties and Responsibilities: </li></ul><ul><li>Oversee the climate change strategy to ensure Yahoo! is making the best choices given our environmental and business objectives </li></ul><ul><li>Evaluate options for decreasing climate impacts, make recommendations, and implement programs </li></ul><ul><li>Manage Yahoo!’s carbon offset portfolio, interfacing with vendors, consultants, and offset project developers </li></ul><ul><li>Work closely with the facilities, real estate, and operations staff in our datacenters and offices </li></ul><ul><li>Update our greenhouse gas inventory on a quarterly basis </li></ul><ul><li>Set energy efficiency goals that position Yahoo! as a leader and oversee tactics to reach those goals </li></ul><ul><li>Gain recognition for leadership practices </li></ul><ul><li>Evaluate and respond to suggestions made by employees on how to improve office and datacenter environmental performance </li></ul><ul><li>Represent Yahoo! at industry-wide consortiums focused on energy and climate change </li></ul><ul><li>Skills, Characteristics, and Experience Preferred: </li></ul><ul><li>Requires BS in Engineering, science, or other technical field. Master’s degree a plus </li></ul><ul><li>7-10 years experience in energy efficiency and clean technology as it relates to facilities </li></ul><ul><li>Technical experience in power generation, renewable power, and energy sources </li></ul><ul><li>Experience with private corporate investment in voluntary offsets. Extensive knowledge of carbon offsets and other mechanisms for reducing greenhouse gas emissions </li></ul><ul><li>Thorough understanding of programs such as Energy Star, LEED certification, and other standards for leadership </li></ul><ul><li>Experience managing datacenters a plus </li></ul><ul><li>Strategic thinker as well as detail oriented, organized, and able to manage multiple tasks simultaneously </li></ul><ul><li>Self-motivated. Makes decisions independently and involves higher management when appropriate </li></ul><ul><li>Thrives in a fast-paced and unstructured environment </li></ul><ul><li>Innovative, entrepreneurial, and thinks creatively </li></ul><ul><li>Resourceful, excellent written and verbal communication, and strong interpersonal skills </li></ul>
    5. 5. The CSR Dilemma <ul><li>The Student Club </li></ul><ul><li>The Company </li></ul><ul><li>The Conference </li></ul><ul><ul><li>http://berc.berkeley.edu/index.html </li></ul></ul><ul><li>T he Bill (Fall 2004) </li></ul><ul><ul><li>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. </li></ul></ul><ul><ul><li>http:// www.asuc.org/documentation/view.php?type = bills&id =366 </li></ul></ul><ul><li>The Solution </li></ul><ul><ul><li>What would you do if you were the student leadership team? </li></ul></ul><ul><ul><li>Come back with your solutions </li></ul></ul>
    6. 6. CSR Frameworks
    7. 7. Changing the Game Risk Mitigation Value Creation Mitigate long term business risks Improved Business Performance Employee Relations Competitive Advantage & Market Positioning Build Stakeholder Trust Reputation “Insurance” Investor Relations The Landscape of the Business Case for CSR
    8. 8. Changing the Game
    9. 9. <ul><li>Shifting From Defensive to Offensive CSR </li></ul>“ 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 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
    10. 10. Stages of CSR <ul><li>Defensive </li></ul><ul><ul><li>Company faced with pain, criticism, reacts defensively </li></ul></ul><ul><li>Compliance </li></ul><ul><ul><li>Cost of doing business, do just as much as need to </li></ul></ul><ul><li>Managerial </li></ul><ul><ul><li>Moves CSR to core business managers & functions </li></ul></ul><ul><li>Strategic </li></ul><ul><ul><li>Realigns strategy to use CSR as competitive advantage </li></ul></ul><ul><li>Civil </li></ul><ul><ul><li>Need to involve all in sector, collective action </li></ul></ul>
    11. 11. Stages of CSR Sweet Spot Civil Strategic Managerial Compliance Defensive Current Trend Historical Focus Risk Mitigation Value Creation
    12. 12. Implementing CSR <ul><li>Make business case (relevance) </li></ul><ul><li>Engage stakeholders (internal & external) </li></ul><ul><li>Map potential vulnerabilities/ risks </li></ul><ul><li>Develop CSR strategy </li></ul><ul><li>Align with organizational culture/ change </li></ul><ul><li>Monitor, measure, report </li></ul><ul><li>Communicate to ALL stakeholder groups </li></ul>
    13. 13. Designing a CSR Structure: Big Picture <ul><li>Build Senior Vision & Support </li></ul><ul><li>Examine Current CSR Systems & Activities </li></ul><ul><li>Design a CSR Structure </li></ul><ul><li>Implement CSR Management Systems </li></ul>
    14. 14. Designing a CSR Structure: Nine Steps <ul><li>Understand Drivers (internal & external) </li></ul><ul><li>Identify Key CSR Issues </li></ul><ul><li>Identify & Evaluate Stakeholders </li></ul><ul><li>Identify Current Functions Supporting CSR </li></ul><ul><li>Analyze Current CSR Systems, Culture </li></ul><ul><li>Design CSR Structure </li></ul><ul><li>Develop Effective Staffing Plan </li></ul><ul><li>Create Cross-Functional System </li></ul><ul><li>Match Budget to Best Framework </li></ul>
    15. 15. A CSR Continuum Philanthropic Transactional Integrative Growth stage: Adapted from The Collaboration Challenge, James E. Austin EXAMPLES ACTIONS: Strategic value Managerial complexity Interaction level Scope of activities Magnitude of resources Importance to mission Level of engagement Big Small Broad Narrow Intensive Simple Complex Infrequent Major Modest <ul><li>Joint-advocacy </li></ul><ul><li>Joint-action </li></ul><ul><li>Deep partnerships </li></ul><ul><li>Financing principles </li></ul><ul><li>Event sponsorship </li></ul><ul><li>Cause-related marketing </li></ul><ul><li>Employee volunteerism </li></ul><ul><li>Donation </li></ul><ul><li>Grants </li></ul>Strategic Peripheral High Low
    16. 16. CSR Landscape: Plot Goal Take responsibility for our full impact (social, environmental, economic). Take responsibility for adjacent industries. Take responsibility for global conditions (climate change, global inter-dependence, etc.). COMPANY COMPANY COMMUNITY INDUSTRY WORLD WORLD INDUSTRY COMMUNITY Provide access to tools/ product. Disaster relief. Run a good business. Support local communities (corporate philan., direct programs, employee matching & volunt’ring.) Reduce waste, consumption and emissions. Give something back. Innovate and demonstrate restorative business practices. Influence the industry indirectly, by example. Be a good neighbor. Develop codes of conduct for the industry. Build strong coalitions to effect and enforce them. Be a beacon to others. Transform an industry. Transform multiple industries.
    17. 17. 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 Quarterly 1
    18. 18. Prioritizing CSR Actions: Corporate Expectations as Industry Reputation Drivers 2005
    19. 19. Measuring CSR
    20. 20. What Metrics Could Whirlpool Use?
    21. 21. What Metrics Could Whirlpool Use?
    22. 22. <ul><li>Campaign for Real Beauty </li></ul><ul><ul><li>Repositioned its brand around self-esteem issues </li></ul></ul><ul><ul><li>Created CampaignForRealBeauty.com to allow women to </li></ul></ul><ul><ul><ul><li>Vote on provocative images </li></ul></ul></ul><ul><ul><ul><li>Join discussion groups on various beauty stereotypes </li></ul></ul></ul><ul><ul><ul><li>Participate in the Dove Self-Esteem Fund </li></ul></ul></ul><ul><ul><li>Uses un-retouched images of women rather than models on Dove.com </li></ul></ul><ul><li>The U niquely Me! Girl Scouts of America self-esteem program </li></ul><ul><ul><li>Donate money, Unilever employees donate time to mentor girls as part of the program. </li></ul></ul><ul><ul><li>Program uses activity books and simple exercises to help build self-confidence in girls </li></ul></ul><ul><li>Supports BodyTalk , an educational program for schools created by the Eating Disorders Association. </li></ul>&quot;This campaign is addressing key issues and connecting with women in ways that people have not connected in a long time.&quot; - Retail analyst Marshall Cohen of the NPD Group.
    23. 23. <ul><li>U.S. sales rose 6% in one year to $500 million </li></ul><ul><li>Dollar sales jumped 2% in the month the campaign started. </li></ul><ul><li>Heightened brand awareness. Ads received considerable press, more than 1 million women have visited dove.com and voted on images. </li></ul><ul><li>Created buzz with the &quot;water cooler effect&quot; </li></ul>
    24. 24. CSR Metrics Must Link to Corporate Strategy
    25. 25. CSR Metrics Must Link to Global Citizenship Priorities <ul><li>Energy </li></ul><ul><ul><li>Improving energy efficiency and innovation in our operations and products. </li></ul></ul><ul><li>Product take back and recycling </li></ul><ul><ul><li>Reducing product environmental impacts through leading-edge reuse and recycling solutions. </li></ul></ul><ul><li>Responsible supply chain </li></ul><ul><ul><li>Raising standards in HP’s global supply chain and ensuring responsible manufacturing for all products. </li></ul></ul><ul><li>Education </li></ul>
    26. 26. CSR Metrics Must Link to CSR Focus Needs
    27. 27. Types of Evaluation INTUITION SYSTEMS STORIES
    28. 28. Goals of Measurement <ul><li>Align investment with value </li></ul><ul><li>Assess actual value created </li></ul><ul><li>Inform management decisions </li></ul><ul><li>Help you maintain the integrity of your work </li></ul><ul><li>Contribute to reporting, communication, and branding </li></ul>
    29. 29. Ease of Measuring EASY HARD <ul><li>Sales revenue </li></ul><ul><li>Capital assets </li></ul><ul><li>Investment </li></ul><ul><li>returns </li></ul><ul><li>Dividends </li></ul><ul><li>Etc. </li></ul><ul><li>Life </li></ul><ul><li>Freedom </li></ul><ul><li>Dignity </li></ul><ul><li>Happiness </li></ul><ul><li>Etc. </li></ul><ul><li>Goodwill </li></ul><ul><li>Insurance </li></ul><ul><li>Depreciation </li></ul><ul><li>Liability </li></ul><ul><li>Projected revenues </li></ul><ul><li>Emission credits </li></ul><ul><li>Income changes </li></ul><ul><li>Education access </li></ul><ul><li>Earnings potential </li></ul><ul><li>Technology benefits </li></ul><ul><li>Etc. </li></ul><ul><li>Health </li></ul><ul><li>Safety </li></ul><ul><li>Biodiversity </li></ul><ul><li>Clean air </li></ul><ul><li>Safe water </li></ul><ul><li>Education results </li></ul><ul><li>Political stability </li></ul><ul><li>Cultural Advancement </li></ul><ul><li>Etc. </li></ul>TYPE I TYPE II TYPE III TYPE IV
    30. 30. Types of Information about Value <ul><li>Five basic ways of articulating value: </li></ul><ul><li>Financial (accounting: cash in, cash/work out) </li></ul><ul><li>Monetizable (translating non-financial value into monetary equivalent) </li></ul><ul><li>Quantitative (numbers: size, magnitude or degree) </li></ul><ul><li>Qualitative (description: kind, type, or direction) </li></ul><ul><li>Narrative ( storytelling) </li></ul>
    31. 31. Value Chain of Metrics Inputs Activities Outputs Outcomes What is put into the venture Venture’s primary activities Results that can be measured Changes to social systems Goal Alignment Activity and goal adjustment
    32. 32. Impact Metrics= differential change Inputs Activities Outputs Outcomes What is put into the venture Venture’s primary activities Results that can be measured Changes to social systems Goal Alignment Activity and goal adjustment What would have happened anyway Essential = IMPACT -
    33. 33. Evaluation Roles Outputs Outcomes Results that can be measured in operations Changes to social systems <ul><li>Tracked regularly </li></ul><ul><li>NGO, Investor, </li></ul><ul><li>Funder </li></ul><ul><li>Periodic </li></ul><ul><li>Need data from </li></ul><ul><li>researchers and </li></ul><ul><li>other stakeholders </li></ul>
    34. 34. CR Metrics Environment Community Workplace Marketplace Broad metric categories Metric sub-categories <ul><li>Charitable Giving </li></ul><ul><li>Community Education </li></ul><ul><li>Community Lending & Investment </li></ul><ul><li>Employee Volunteerism </li></ul><ul><li>Business Travel </li></ul><ul><li>Byproducts </li></ul><ul><li>Emissions to Air </li></ul><ul><li>Emissions to Water </li></ul><ul><li>Energy Consumption - Electricity </li></ul><ul><li>Energy Consumption - Fuel </li></ul><ul><li>Environmental Projects </li></ul><ul><li>Large-Scale Environmental Impact </li></ul><ul><li>Waste </li></ul><ul><li>Waste - Paper </li></ul><ul><li>Waste - Water </li></ul><ul><li>Employee Diversity </li></ul><ul><li>Employee Engagement </li></ul><ul><li>Employee Satisfaction & Retention </li></ul><ul><li>Health & Safety </li></ul><ul><li>Health & Safety - Illness </li></ul><ul><li>Health & Safety - Injury </li></ul><ul><li>CSR Spending </li></ul><ul><li>Customer Satisfaction & Retention </li></ul><ul><li>Operation control </li></ul><ul><li>Supply Chain </li></ul>
    35. 35. Standard and most frequent metrics in each category area: Environment Community Workplace <ul><li>Byproducts produced through the manufacturing process </li></ul><ul><li>Emissions to air and water through manufacturing, operations, or logistics </li></ul><ul><li>Energy consumption by type or total energy used </li></ul><ul><li>Waste produced – paper, water, hazardous, non-hazardous, other </li></ul><ul><li>Expenses or personnel involved </li></ul><ul><li>Charitable corporate giving – direct, through foundation, through employee match </li></ul><ul><li>Community investment – project spend, local taxes paid </li></ul><ul><li>Employee activities – volunteer hours </li></ul><ul><li>Customer diversity and inclusion </li></ul><ul><li>Unique projects and engagements </li></ul><ul><li>Employee diversity – race, age, gender </li></ul><ul><li>Health and safety – injury and accident rates, works day loss rates, absenteeism, workers comp claims </li></ul><ul><li>Turnover rate </li></ul><ul><li>Employee satisfaction (typically from surveys) </li></ul><ul><li>Training for employees – spend, time, or number or trainings </li></ul>Marketplace <ul><li>Customer satisfaction measures – surveys, complaint tracking, customers served, external rankings </li></ul><ul><li>Supply chain measures – supplier satisfaction, trainings, audits, total spend on targeted supplier groups, certifications </li></ul><ul><li>Customer reach in socially disadvantaged groups or areas </li></ul>
    36. 36. What Types of Things Can Be Measured?
    37. 37. Sample Indicators of Financial Performance of Investment
    38. 38. Sample Indicators of Financial Performance of Investee
    39. 39. Sample Indicators of Socio-Economic Returns to Individuals or Investees
    40. 40. National or Regional Socio-economic Returns
    41. 41. Blending Types of Indicators
    42. 42. Summary of Social Impact Value Chain
    43. 43. <ul><li>Description: social enterprise that develops community-based, integrated waste management microenterprises in Peru </li></ul><ul><li>Goals: in business to create more than financial value-- wants to restore the environment, improve peoples’ health and cultivate community-based economic development </li></ul>Example: Ciudad Saludable
    44. 44. What’s the value proposition? <ul><li>Financial value proposition is easy to count </li></ul><ul><ul><li>$$$$ revenue </li></ul></ul><ul><ul><li>$$ Costs </li></ul></ul><ul><li>Non-financial value…? </li></ul><ul><ul><li>Outputs/measurable indicators: </li></ul></ul><ul><ul><ul><li>#s of customers served with waste collection </li></ul></ul></ul><ul><ul><ul><li>tons of garbage recycled </li></ul></ul></ul><ul><ul><ul><li># jobs created </li></ul></ul></ul><ul><ul><ul><li># people trained, etc…. </li></ul></ul></ul><ul><ul><li>Outcomes/results: </li></ul></ul><ul><ul><ul><li>Less disease, fewer deaths, healthier people, less domestic violence, sense of pride and dignity </li></ul></ul></ul><ul><ul><ul><li>Cleaner water, restored fish populations & biodiversity </li></ul></ul></ul><ul><ul><ul><li>Fewer lost work days due to illness, lower health expenses, greater incomes and economic security </li></ul></ul></ul>
    45. 45. Ex: Ciudad Saludable SROI Analysis Outputs CS already counted the number of jobs created, the revenues from customer fees, and the amount of garbage collected. Outcomes Monetization - Base case
    46. 46. Ex: Ciudad Saludable SROI Analysis Outputs Outcomes <ul><li>Ciudad Saludable collected information from: </li></ul><ul><li>staff </li></ul><ul><li>microentrepreneurs </li></ul><ul><li>local health authorities </li></ul><ul><li>SVT analyst researched “proxy studies” on: </li></ul><ul><li>disease and death caused by exposure to garbage in similar regions </li></ul><ul><li>costs of waste management if provided by the government in similar regions. </li></ul>Monetization - Base case
    47. 47. Ex: Cuidad Saludable SROI Analysis Outputs Outcomes Monetization - Base case <ul><li>CS assumed “what would have happened otherwise”- if it did not exist </li></ul><ul><li>what microentrepreneurs & CS staff would have earned </li></ul><ul><li>what the incidence of childrens’ deaths from diarrhea in the region would be </li></ul><ul><li>what it would cost for the government to collect the garbage instead of CS </li></ul><ul><li>where the garbage would be if not collected by CS </li></ul>
    48. 48. Ex: Ciudad Saludable SROI Analysis Outputs Outcomes <ul><li>SVT monetized a subset of CS’s impacts using the dollar value of: </li></ul><ul><li>The increase in microentrepreneurs’ earnings </li></ul><ul><li>The relative savings to taxpayers of having CS do the waste management rather than the municipal government </li></ul><ul><li>These values were calculated relative to the investment that was required to create them. </li></ul>Monetization - Base case
    49. 49. Results: Value Captured with the Full Range of Types of Information monetized value qualitative value quantified value financial value narrative value
    50. 50. Metrics & Evaluation Take-Aways <ul><li>Simplify </li></ul><ul><li>Set clear goals & establish baseline at the outset (start where you are) </li></ul><ul><li>Measure a few things well as opposed to everything poorly </li></ul><ul><li>Concentrate on measuring a few signature programs, with a few signature measurements </li></ul><ul><li>Stories trump facts 10 times out of 10 </li></ul><ul><li>Move towards impact metrics, but blend in some evaluative metrics </li></ul>