The prevalence and scope of corporate social responsibility (CSR) initiatives has exploded over the past decade. Yet roughly half of companies say they are not adequately measuring the impact of those efforts.
CSR programs purport to support the overall strategic direction of companies in a number of ways, including:
- Employee engagement (my issues with the term “engagement” aside),
- Client retention (another ugly word),
- Recruitment of new employees,
- Corporate reputation/goodwill,
- Building relationships with a number of key stakeholder groups (e.g., community leaders, clients, investors, partners), and ultimately
- Growing revenue/profitability.
By their nature, CSR initiatives impact a number of different groups, each with their own goals (which may not align with the strategic direction of the company), and advance a number of potentially conflicting goals.
This reality is the driving force behind the confusion most organizations have about quantifying the impact of their CSR programming. After all, which goals are to be prioritized? Should success be measured relative to an internal audience or an external one? If both, how should disparities be rectified?
Why measure CSR?
Before we discuss this further, let’s take a step back and understand why we’d want to understand the impact of these programs on traditional business outcomes or KPIs. After all, if the goal of the program is simply “doing good,” then why is it necessary to quantify impact? Isn’t it sufficient to simply do good?
“The impacts of CSR programs are far-reaching and temporally dispersed, but that doesn’t mean it is impossible to measure the impact they have on your business’ bottom line.”
For most companies, the answer is “no”—but not for the reasons most of us would assume:
- One school of thought is that CSR programs are an end in and of themselves, and that companies that subscribe to this philosophy are seeking to do good for the sake of doing good. If that’s your company’s position on CSR, great! However, you should still strive to quantify the impact, if for no other reason than it will allow you to maximize the good you can do with the resources you have—and convince skeptical stakeholders of the value of your efforts.
- The other (and I daresay, more common) school of thought is that CSR is an investment—a means to an end. As such, and like every other investment, it should follow a traditional trajectory: an initial outlay of capital to fund the program, followed by a return (in the form of additional revenues, increased firm value, improvement in KPIs, etc.) that exceeds the initial outlay. As with most investments, the return is likely to materialize over time, rather than be immediate. This is the case with outcomes such as:
- improved perceptions of the company as “a good place to work” or “socially responsible,”
- improving employee morale,
- enhancing recruitment efforts, or
- attracting new customers.
All of which are measurable. (And if you aren’t measuring that last one, you may have bigger problems than knowing how your CSR is doing.)
How to get started measuring CSR
Regardless of which of the above goal(s) are the impetus for a CSR program, it is clear that they should be quantified. Excuses that the calculations necessary are too complex or the volume of impacts too great simply are not acceptable. It is true that this is not an easy problem to solve—few measurement challenges are—but let’s not let the perfect get in the way of the necessary.
As an example, consider revenue/profitability. This can be impacted by CSR in (at least) a handful of ways:
New Customer Acquisition—This can be measured by:
- Calculating the incremental increase in new customers from a CSR-focused campaign vs. a traditional one (after discounting for natural growth, etc.),
- New leads generated through CSR-originated relationships,
- A “with-or-without you” mixed-market test, or
- Any number of other ways.
No one method is perfect, and no single method will completely capture all of the value created by your CSR program. That’s OK. Start with what you can and build on it moving forward. Communicate your progress to your C-suite.
Scared of numbers? Hire a statistics/finance/physics/mathematics graduate student from a local university and task him or her with building a few models. You’ll be amazed what they find—and you’ll be supporting your CSR program in the process.
Lifetime Value Increase/Relationship Expansion—This one is a bit more complex, but again, measurable. For some companies, customers or clients acquired through or who participate in CSR-driven activities tend to be more valuable, less prone to churning, or more inclined to expand their relationship with your company. Each of those can be measured. Make sure you tag your CSR-related outreach so you can segment your results and attribute them appropriately.
For customers, something as simple as a lifetime value (LTV) comparison between customer groups or a regression analysis can reveal startling outcome data. This approach can be used to quantify the impact on customer retention, which should be captured in LTV.
Cost Savings—The other side of the profitability ledger is the “expenses.” For many companies, going green actually saves green, and lots of it. A quick conversation with your finance team (as a CSR professional, they are your best friends!) can reveal startling savings. For instance: switching to low-flow toilets or air dryers in bathrooms as part of a sustainability initiative can result in savings of $10,000+ per year.
Then there are:
- Supplier relationships (lower cost and/or higher quality products, which in turn reduces inventory loss and replacement costs)
- Brand reputation savings (which reduces internal and external expenditures on communications, as well as boosts stock price/market capitalization)
- HR costs (recruitment, churn, new hire costs), etc.
The list goes on and on, but you don’t need to have a comprehensive one. Just start somewhere. Find the low-hanging fruit. Build from there.
What I hope the above examples demonstrate is this: While the impacts of CSR programs are far-reaching and temporally dispersed, that doesn’t mean it is impossible to measure the impact these initiatives have on your business’ bottom line. And it certainly doesn’t mean you succumb to the inertia that is the status quo. Any company, regardless of size, can begin to quantify the impact of a CSR program. In many instances, the very act of starting this process unearths new avenues for exploration, inquiry, and improvement.
As you advance down this path, you can use what you’ve found, both retroactively (to assess the impact of prior initiatives and programs) and prospectively (to optimize the deployment of CSR resources and/or compare different programs). However, absent a framework for business leaders to assess and evaluate the efficacy of these programs relative to the goals set for them, it is nearly impossible to determine if a CSR program is working and if so, how well.
This is not an easy challenge to overcome or a simple problem to solve. But if you take nothing else away from this article, please remember this: try. Start small. Build from there. Don’t let the perfect get in the way of the necessary—and measuring the impact of your CSR program is necessary. ∞