A Measure of Success – CSR Business Intelligence

It would seem that we have been over this a thousand times before… What gets measured gets managed. It was true when we invented TQM in the 80’ties and LEAN in the 90’ties and while we seem to forget about basic management skills when we adopt network organisation and self-empower our employees it is still true that if you can stick a number to your performance there is a much better chance that improvements follow close behind.

My good friend Michael Koploy have for a number of years been working with evaluation and documentation of CSR performance. As I he has realised that with CSR comes complexity on a scale that is mind-blowing. For TQM, LEAN and other quality management systems there were at least boundaries that was relatively narrow outlook defined by customers, suppliers, competitors and employees, but with CSR there are no scope.

So how do you work with CSR data, how do you get your hands on it and how can you present it in a way that gives meaning to decision makers and stakeholders. Michael has adopted an approach that might work and builds on some of the fundamentals of TQM and at the same time takes into account that the world (and organisations with it) is always changing. Build on three basic principles with data as “King”.

First – Automate and improve data collection to get a better picture of corporate sustainability;

Companies generate millions of data points every day and as time of progressed much of these systems have been integrated into various systems like SAP or other Business Intelligence (BI) structures. Finance, HR and operations have for a long time used these systems in order to improve their processes and it is high time that CSR professionals do the same.

Second – Use analytics applications to find trends and make informed decisions;

The graphic integration that comes with advanced BI systems can prove to be even more useful when it comes to sustainability performance. Often we see fragments of a total effort displayed in the CSR report or through corporate announcements and newsletters. But what we really need to specialised and specific information that is valuable to the individual stakeholder. For instance if I’m interested in anti-corruption issues I would like to be able to access the policies related to the issue but also audit reports and key performance indicators tracked in real time. What I do not need is a general understanding that this or that company is working actively to reduce corruption in its supply chain I want to know the “how”.

Third – Develop sustainability teams that are data-minded and accountable for business decisions.

The Crap-in-Crap-out principle is of cause also applicable when it comes t CSR Data gathering, reporting and presentation. So when data have to be managed it is done by people who know what they are doing and not by some random employee who have little or no knowledge about a given subject. A team approach works because it forces us to articulate our assumptions about how the world works and enables us to be challenged on our views. Within the field of CSR there are many opinions about what is the right thing to do and how its should be done, so instead of just having one person deciding a team of people agree and are accountable for the approach.

Data is not only king when it comes to CSR it is central, but not without the right people and approach to come with to terms with sometimes difficult to comprehend facts about the organisations that we work with. Data and data processing can unveil truths about an organisation which calls for hard decisions and sometimes for managers to change their perception of right and wrong. But without a common BI platform we will never get close to realising the knowledge that we can gain from systematic and comprehendible CSR data approach.

Boundaries of CSR

One of the concrete slabs that marks the borde...

Border between North and South Korea

Sustainability seems to be an all-encompassing concept with no limits to its practical usage. Numerous times we have discussed the problems related to issue that we do not really have a good workable definition of CSR. But in my mind we should at least have some kind of framework that will enable us to differentiate between what is and what is not CSR.

I have compiled a few pointers as to areas that could help to guide professionals in their work and to some extend myself as well.

CSR -> HR

Not all the activities of the HR department is related to CSR even though they do deal on a daily basis with some of the most important organisational stakeholders such as employees, unions, management, etc. However, just because one department has contact with key stakeholders it does not mean that they practice CSR. One border that can be used to make the distinction could be the concept of law (or rules) and voluntarism. The rules that the HR department works under are normally well defined, either through the law, negotiations with the unions or internal procedures that shapes the day-to-day work. In this context CSR would be activities, which are outside the law that the department (and thereby the organisation as a whole) take upon themselves on a voluntary basis. This could be the creation of stakeholder networks outside the organisation itself, development and education of employees that enables them to be qualified for jobs that are not directly linked to the activities of the organisation or invite stakeholder groups which are affected by the activities of employees, unions and management that are under normal circumstances not invited to engage. So while the boundary is hard to define it is clear that not everything that the HR department does can be viewed as CSR some things are just processes, organisational development and tactical decision making.

CSR -> Marketing

For many who do not know much about CSR is the marketing aspect always being put forward as the most prominent reason why companies engage in the activity. However, for most companies the marketing approach is far from what is core to CSR activities. If one look at the costs of social audits, greening the supply chain, effective risk management systems, training and education alone, you can be sure that any marketing professional would tell you that from budget perspective ends does simply not meet. So thinking of CSR as good advertising would simply be too narrow a view. There are elements within CSR that marketing can use such as environmental branding or fair-trade labelling, but the concept of CSR is much more complex than just a way to sell more products. When one defines the border between the two one could look upon CSR as a concept that marketing can use elements of, but which does not constitute the whole of the organisational effort to be sustainable. A good illustration would be that if the organisation only thought of CSR as a way to promote products it would only cater limited number of stakeholders and they would soon realise that there are many more powerful and influential groups out there.

For some organisation it could prove valuable to use an IMC or Integrated Marketing Communication perspective on their CSR activities, in order to create consistency across the may channels that the organisation communicate through. A concept I have written about before.

CSR -> PR

CSR communication can both be convincing and at the same time create mistrust. If an organisation tells the truth and tries to do better in good times it can find that stakeholders will be more loyal and understanding in times of trouble. Some call this the Teflon or Halo effect of crisis communication. That it would seem the some organisation can get out of all kinds of trouble that others would find close to “life threatening”.

Public Relations s normally set within the communication department or as a division of marketing, dealing mainly with one prominent stakeholder namely the Press. Dealing with the media is like a double-edged sword. If you are able to get their attention during the good times you can be sure that they will be there when things go down hill. Some managers think that they can “manage” the press in the sense that they can decide what journalists write. However, nothing could be further away from the truth. Actually the more an organisation tries to manage the press the more they will feel a counter pressure. As organisations have learned to spin or frame stories in a certain light so has journalists learned not to use only one source on their stories. That is not to say that all journalists will investigate all the claims that an organisation makes about itself, but sometimes they do and if they find that they have been lied to it will be very difficult to gain the trust back. Just think of Nike and Sweatshops, Wall-mart and labour rights in the US, Apple and human rights in China or Shell and oilrig dumping in the North Sea. While all these stories are old, some even over 20 years, they still stick to the brand like tare and are testimonials to bad PR and poor CSR.

CSR -> Finance

Something new to the world of CSR is that the concept gains more and more acceptance within the finance department. Traditional have finance found that the concept of CSR was something for others to deal with looking at the concept as soft or were eve hostile towards it in a Friedmanian way. One could say that the boundary between the two was at the door of the department. But as the CSR have matured and to some extend finance departments as well, we now see the two worlds converge. To just name a few areas one could come up with Responsible Investments that increasingly have become a source of financing for companies that wants to be perceived as sustainable. Lists like the FTSE4GOOD or DowJones sustainability index have made some modern companies realise that there can be real financial benefits of working strategically with the concept of sustainability. The whole area of Risk management has been expanded with the introduction of CSR. Until recently risk management was limited to IT systems, good corporate governance and whistle-blowers, but with the introduction of CSR new elements have been added that have the potential of reducing new areas of risk. More and more companies are introducing social auditing together with the due diligence systems when making investments because they realize that social risk can make or break the long-term profitability of an investment. Companies include stakeholder engagement in their efforts to listen and understand less salient voices such as NGO and other organisations that have a stake but no direct dealings with the organisation. Other area of contact can be within financial reporting. Investors not only like to know about profits and margins, etc but also what the company is up to in relation to the environment, labour and human rights, and what it does in relation to corruption all in order to understand the risks that they can expect on their investments.

So at the moment the boundary between finance and CSR is blurred as finance and CSR people are trying to find out where we should draw the line or where we could get the most good out of the relationship.

Closing remark

These are just some of the boundaries of CSR has with organisations and corporations especially. I’m sure as the concept evolves it will expand even further into everyday operations and how corporations conduct their business. I’m also sure that some of these expansions will be fruitful while others will be dead ends and bring nothing new to the organisations ability to operate other than more complexity. I also believe as we get out of the financial crisis we will experience that companies will try to see how they can use a CSR approach to do improve their business and ability to crate a sustainable business.

It’s all about what you do – from gender equality to strategic benefits

Most international surveys rank the Scandinavian countries among the very best in terms of women and men’s equality. At the World Economic Forum are all the Nordic countries among the top 10 and the independent NGO, Women Watch the small group of countries in northern Europe is also among the very best. So there is little doubt that there is something at the Scandinavian approach to gender equality, which rings true.

Although we are close to being world champions in the equality discipline it has not been something we have been particularly good at exploiting in a commercial sense. Instead we have resorted to toasts and speeches and we highlighting the individual women who have actually been able to beat their way through the glass ceiling.

In Denmark we have come up with initiatives such as charter for more women in management which is a set of principles like the Global Compact that is meant as tool for strategic gender equality development within originations or the torch campaign were individual companies communicate how they work with equality within their organization. While these initiatives are very fine they have the drawback that they simply perpetuate women and femininity as a handicap.

It is not because equality is not a real problem and that for many women means that being thirty is also de-facto means the end of their professional career in management. I just think that if we continue to regard the female gender as a handicap, we will never move beyond the challenges that both the country, but more specifically the individual companies are facing in terms of organizational development and continued competitiveness. A novel approach towards gender equality that has not exactly been dominant in the current debate neither here in Scandinavia nor to my knowledge anywhere else in the world.

Companies in charge know how to use sex

Men and women are in many ways different and in many cases, the direct opposites, like Mars and Venus, if I had to take a familiar example. Yet we are out unable to function without dealing each other’s good and sometimes bad sides.

Take, for example the trait of being entrepreneurial and the willingness to assume risk. Here is one of the traits that we perceive as being masculine and it is something we as a society appreciate. It turns out also that around. 2.5 times more men are entrepreneurs than women. Of course there are also female entrepreneurs and we are lucky to have them, yet it is a trait we usually put in connection with being a man.

As a counterweight to the enterprising men we see the risk averse women. The ability to understand and devise strategies to avoid risk is something we associate with feminine traits. It would be wrong to say that men can’t be risk averse but as we traditionally have favored the risk-taking in men and given credit to women who understand and is able to avoid risk it is the traits we see now as being most prominent. Remember that I do not judge if these traits are good or bad if they have come from the creation of stereotypes or if it is something in our genes, but only look at how people actual act.

There are many companies that have discovered that women are good in the role of risk monitors. Thus, more than 45% of audit committees in the Swedish OMX companies of women, which is in contrast to that is somewhere between 10 to 20% women on boards in general. It turns out also to companies with a gender-differentiated Board of Directors and generally cope better with the crisis at least the first one in 2008. These organizations have been able to respond quickly and consistently to market changes and have implemented the changes needed to make money in a difficult market. Examples include the Swedish Hennes & Mauritz (clothing and fashion), or the Danish firms Carlsberg (beer and soda) and D/S Norden (shipping), who all have women in both the Board and executive management. All three companies have fared well through the crisis and although it has been difficult, they have been able to exercise constant care in very troubled waters.

I’m not sure that these businesses have completely understood the significance that gender has had on their ability to adapt to its environment in an efficient manner, but in any event, it worked.

The patriarchal business is stalled

In contrast stand the less diversified firms, or said in another way, those who either did not want or have failed to attract other than male employees into their strategic management group. These companies have not been able to get rid of their risk as the market they operated in changed. This can obviously be due to many factors, but the interesting thing is that they generally perform worse than their more diversified counterparts. As a consequence of their inability to understand the organizational risks that they faced, they have not been able to show a sufficient earning capacity or have had direct losses. Both of which have been penalized by the stock markets to a degree where some of theses companies are valued less in terms of market price than the value it has according to its books.

An example of a company that has a high organizational risk seen with a gender perspective is firm Vestas. Time after time, Vestas has disappointed the market mainly because they have not had a good feel for what their stakeholders wanted to know and therefore could not live up to expectations that primarily professional market analysts and portfolio managers had. As a consequence, we have seen share prices today are at the bottom even when compared to its tangible value. As I have blogged about Vestas before there is no doubt that they have a good product, excellent production and are market leaders so there is no reason why there share price should not be much higher than it is today.

Two typical strategic moves that male-dominated companies have been using are first, to try to save themselves out of trouble by cutting costs; secondly to dismiss its leaders. It is not because this is a particularly patriarchal features that organizations use in times of recession, but the strategies only aims to reduce costs and simultaneously makes them unable to think further ahead, the whole exercise ends up in an actual fight for survival. To use an analogy it is like beating the body into submission and when that does not bring results we cut of the head. Not that some companies do have a lot of fat which can be trimmed but if there is no strategic thinking behind the cost reduction it will mount to little less than the ultimate loss of the business.

Everything else being equal, companies that have come through the crisis by adapting to and cultivating new markets perform better than those who are just coming through to save and reduce their organizations as the only means of maintaining a solid balance sheet.

The Scandinavian competitive advantage

Both here in Denmark but also in particular the rest of the countries were gender equality is high we have a resource that is not only unique but also virtually impossible to copy. By using our human resources to its full potential, we can provide competitive advantages in both the short and long term that will enable companies to navigate more safely and with less risk on the global market.

Universities and business schools produce far more women than male candidates. If business continues to let this resource remain unused and under utilized, we must compete on parameters where do not have many chances such as production costs and human and labour rights areas were we are unable or unwilling to compete.

Today there are already well-developed tools that can contribute to positive gender development in private and public organisations. The question is whether the HR departments, executives and board members are willing and have the courage to embark on an organizational debate about strategic consequences that extend far beyond the words and cheers and speeches in for example Charter for more women in leadership, Torch and other kinds of woman leader priced which reduces the debates to centre around gender quotas or not.

As individual and members of organisations we have to come to terms with the fact that women and men bring different approaches, viewpoints and perspectives to organizational development. And that these differences can be utilised strategically by organisations that know how. Through an understanding the differences that gender contribute with, we will be able to attract and retain skilled employees and thus be able to reap the benefits found in the fact organisations consist of people that think and behave differently. Female and male employees contribute, for better and for worse, to the development of companies and that the sexless organisation does not exist and that it is better to work to exploit these differences rather than ignoring them.

Has the CSR movement really won the battle or have they lost the war?

Bank of America Tower

Image via Wikipedia

In the article from the Economist from 2005 Clive Cook argued that the CSR movement have won the battle for ideas about the virtues company and not least the harts and minds of executives around the world.

As Cook put it in 2005 “CSR commands the attention of executives everywhere—if their public statements are to be believed—and especially that of the managers of multinational companies headquartered in Europe or the United States. Today corporate social responsibility, if it is nothing else, is the tribute that capitalism everywhere pays to virtue.”

And there is no doubt that CSR have made its way into almost every crack of the business process from Human Resources and employee benefits to product development and production. These seem to be no escape from CSR everywhere one goes there seem to be a big sign that boasts about how corporations in some obscure way bring good to the world. Reports are being issued, social media are bring utilized and campaigns are being run just to boast about how this company is creating shared value or is leading the fight against green house gasses.

It would seem that the CSR movement have not only got the a good grip in the tail of the business beast but that it is also able to make a good buck for itself along the way.

“The winners are the charities, non-government organisations and other elements of what is called civil society that pushed for CSR in the first place. These well-intentioned groups certainly did not invent the idea of good corporate citizenship, which goes back a long way. But they dressed the notion in its new CSR garb and moved it much higher up the corporate agenda.”

But now six years down the road and one maybe two economic crisis’s down the road it the effects have not been what Cook describes. Companies have not flogged around the charities, the NGOs or CSOs in order to create a new type of development system in the face of government cut downs. In fact there have been a tendency to streamline efforts into the main business process to search for the ever-elusive business case.

While the CSR movement had hoped that companies would come to them because they had to power to publicly humiliate them through exposure in the press and other media this has not happened. Instead business have initialised CSR as part of the conditions of doing business like it has done with marketing, lobbying, employee benefits, supply chain management, etc. One could say that in public-relations terms, their victory is total but the war on ideas was not really won by the CSR moment in the end. CSR did not change the face of corporations in any significant way. So when Cook argues that “…their opponents never turned up. Unopposed, the CSR movement has distilled a widespread suspicion of capitalism into a set of demands for action.” It is a truth with modifications it would be more accurate to say that corporations reorganised.

One can just take a quick look at some of the so-called “green” companies that have been hailed by the CSR

moment as frontrunners. Companies like BP that even adopted a green logo but ended up with a huge crisis on their hands in the Gulf of Mexico. Novo Nordisk that have been instrumental in the CSR reporting scene and the fight against diabetes that seem to go from one bribery scandal to the next on a almost continues basis or Bank of America who were in the centre of the financial crisis creating bank products that they themselves had a hard time understanding and in the end lead to the fall of several major financial institutions around the world.

And maybe it was because that they did not really believed in the idea of corporate social responsibility that they were lead astray. That “they were starting to suspect that they have been conned. Civil-society advocates of CSR increasingly accuse firms of merely paying lip-service to the idea of good corporate citizenship.” So corporate executives started to think how to make the best of it, how can I “conn” everybody back, so that was what the executives did. They might have called it something different but in reality they started to dress their unsustainable products in a think “green” coating just think of the three companies I just mentioned and the companies they have been running while at the same time doing some of the most unethical acts in corporate history.

We should not blame the companies for being what they have always been. All companies are in some way or another born out of the basic idea of greed that the owner somewhere along they way would make a buck or two from what the

company was doing. So companies continue to be build around the idea that the main interest should be to make some kind of profit from its activities. “When commercial interests and broader social welfare collide, profit comes first.” And we seemed to forget that when everything went fine and that there would be a price to pay when markets started to go downhill.

As Cook so rightful said but might not have fully realised the corporations have not changed their DNA they are still the same beast that they have always been. What we need to learn is that the state, society, the environment and business need to co-exist like everything else in the world but that we will never live in perfect harmony with each other but constantly need to keep each other accountable for our actions no matter what role we play. So when Cook says “Capitalism does not need the fundamental reform that many CSR advocates wish for. If CSR really were altering the bones behind the face of capitalism—sawing its jaws, removing its teeth and reducing its bite—that would be bad: not just for the owners of capital, who collect the company’s profits, but also for society at large.” I think that this is even more true now that it was when the word were spoken in 2005 when we really did not fear the big fundamental chang

 

es that we soon after experienced.

Private business on a leash

Business needs frames and structures that they can relate to not given control over and it is the role of the state and society to constantly provide and negotiate these in order for business to strive. Like a cage in a zoo business need to be reminded that not all animals can be give the same level of freedom no matter how cute or well dressed they appear to be. A tiger however cute is still a very deadly beast and it is the same with business no matter how well one dresses up a oil company it is still producing a product which eventually will dry out and pollute atmosphere. “Private enterprise requires a supporting infrastructure of laws and permissions, and more generally the consent of electorates, to pursue its business goals, whatever they may be.” The last thing they need to be given the key to the cage under the pretence of CSR and corporate sustainability reporting and then be left to govern themselves.

Governments and interstate institutions like the federal government in the US and European union should realise that they play an important art in creating these structures that by hindering the movement of business that actually help business being sustainable. For fare too long have governments give over power to private business for them to control and decide what was good and what was not. This has only resulted in agony and pain for the populations of the world creating huge scandals, systems without transparency and business who does not realise the consequences of their actions.