If your business is going to spend money on CSR and Social Value it must understand why it is doing it, and how that supports business value.
Every year businesses of all types from all over the world collectively spend hundreds of millions of dollars on CSR and social programs, without really analyzing and understanding the Why.
At best, they understand the “Social Value” Why (what “Social Value” they are trying to create and why it is important), but little or no understanding of how to optimize social, business and environmental value, and why it is important to do so.
Yes, there are growing numbers of businesses and professionals that are getting good at this and do Know the Why. They are analyzing and understanding the Why and figuring out how to optimize social, business and environmental value from CSR and sustainability budgets. They are connecting the pieces and building the path that links CSR budgets to #ValueCreation; social, business and environmental value.
This article is written to help business leaders to better optimize value creation from CSR and sustainability budgets and programs.
1. Know the Why(s)
Let’s begin with the basics Whys. Why is at the heart of every value proposition. It is important to know and understand the Why from the perspectives of as broad a range of stakeholders as possible. When you know and understand the Why from your perspective and from as many other perspectives as possible you put yourself in a much better position to optimize value and impact across social, business and environmental dimensions.
Put simply, the Why is What’s in it for [put stakeholder/interest here]. It is the value proposition.
Business Value Why: Investors and owners put money into businesses with the expectation that they will make a profit and create shareholder value. Shareholders expect that when business money is spent there should be business value created. Of course, this could be indirectly, but smart businesses will limit spending that produces only indirect value and benefit and look for more strategic areas to focus their budgets.
In general, successful businesses are quite good at optimizing for shareholder return and business value; seeking ever greater efficiencies as they seek to optimize value creation in relation to inputs and opportunity costs.
The “Social Value” Why: Growing numbers of businesses and business people recognize the importance of contributing to “Social Value”. They are aware of society’s growing expectation that business can and should create “Social Value” as part of its pursuit of business value. This isn’t to say that all businesses are actively engaged in supporting or creating “Social Value”. But, many are, and that number is increasing rapidly. We have seen much progress (and yes, there is still far to go in many cases – but I prefer to focus on progress, rather than lack of perfection).
Businesses worldwide are collectively budgeting hundreds of millions of dollars to create “Social Value”. This is good. Unfortunately, many of them are looking at “Social Value” creation in isolation from “Business Value”. They are seeking to understand the “Social Value” Why as if it existed in a vacuum, separate from the business value.
This isn’t to say that the “Social Value” Why should always be less important than the business value Why (for a fuller discussion on this relationship see other posts on the CSR Value Continuum). It is simply to say that neither the “Social Value” Why the “Business Value” Why exist in a vacuum.
Smart businesses and smart managers will seek to thoroughly understand both, and find ways to optimize and integrate them, creating more “Social Value” AND more “Business Value”. They will seek to move from zero-sum, where money spent on “Social Value” means less money for business value, to a more strategic and integrated approach that optimizes value across both dimensions.
“Environmental Value” Why: Much of what we discussed about the “Social Value” Why applies to the “Environmental Value” Why as well. The thinking and approach that seeks to understand the Why in relation to business and “Social Value” is similar and smart businesses and managers will seek to optimize value creation across social, business and environmental dimensions. This applies not just to CSR and Sustainability budgets but to all areas of business activities and operations.
Smart businesses will look for those projects and opportunities where there is a higher degree of alignment and potential for synergy; areas where there can be more environmental, social and business value, simultaneously.
The Environmental Value Why is increasingly impacted by expanding environmental regulations, growing public expectations and demands and an environmental economics framework that is evolving to enable effective accounting for natural capital, eco-system services and other emerging issues and frameworks. Indeed, there are many cases where these emerging environmental economics frameworks are actually creating major business opportunities where business is handsomely rewarded for environmental efficiency breakthroughs.
Despite all that, the principles are the same.
1. Understand the Why for social, business and environmental value,
2. Understand how your budget, your project, your business affects (and can affect) each
3. Seek to optimize and align, maximizing value across all dimensions.
If it is so simple, why don’t more businesses do it
Despite the seemingly simple logic that suggests the importance of focusing on optimizing across social, environmental and business value, many are simply not doing it. Many continue to literally throw budget at social issues and causes, without thoroughly analyzing how efficient they are at creating “Social Value”, and how it relates to business and environmental value.
There is a dearth of pragmatic frameworks and tools for managers and leaders to use and, unfortunately, there is often a lack of awareness on the part of executives and leaders. They simply don’t realize the importance of applying the same efficiency and optimization principles that they use in ‘core’ business areas to those budgets and activities that impact social and environmental value.
A full understanding of the Why will also encompass other areas that can help business improve how they manage CSR for #ValueCreationi
2. Communicate the Why
Sustainability and social impact reports are becoming increasingly common in businesses of all types, with growing numbers opting for GRI compliant reporting. If you read these you will see that most communicate almost exclusively on the social and/or environmental Why.
The business value is seldom discussed in a direct way, almost as if admitting that investing in social and environmental value also created business value would diminish it somehow. Some businesses go so far as to try to position themselves as altruistic angels, only caring about social and environmental value and never mentioning the Business Value Why.
This is simply disingenuous and will result in people discounting the communication and information. It is far better to openly and honestly communicate all the Whys. Of course, depending on the nature of the report you will highlight different Whys, but never, ever try to hide any of them.
Internal communications can also be improved substantially with clear and well articulated discussions on the Whys. Make sure that all in your company have at least some understanding of the Whys of your CSR and Sustainability budgets.
3. Engage on the Why
When you engage with stakeholders, both internal and external, invest time in understanding the Why from their perspective. If you are engaging with an environmental NGO invest time to try and understand the Value Why from their perspective and how you can support it, or minimize negative impact on it.
The same applies when engaging with other external and internal stakeholders. CSR and Sustainability professionals are often lax in understanding the Why from the perspectives of their business colleagues. It is important to understand the Why for Finance, Human Resources, Engineering, etc. What’s in it for them. What affect will your CSR activity have on their work and in their area of responsibility? What is their Why or Value Proposition from your budget?
Not all have to direct and directly traceable impacts. For example, your project may mitigate some of the social and environmental risk exposure your business has. This is good for your Finance department. It may help Human Resources with recruiting and also lessen attrition rates. It may strengthen relations with regulators and governments, facilitating compliance related communications and collaboration.
The point is less about the absolute impact and more about ensuring that your internal stakeholders understand the synergy between their work and your CSR and sustainability work.
Are you doing enough to ensure that your internal stakeholders understand the value?
If not, you may want to think about starting to do that. Having engaged and supportive internal colleagues, who understand that your budget is helping their interests can be critical, especially at budget crunch time. If you can’t immediately find a productive Why for them, try to work with them to see how you might develop one, how you can extend and expand the value proposition from your budget to include value that is meaningful to them. The bonus on this is that often, by doing that you will enhance social, environmental and other dimensions of value at the same time.
4. Metrics on the Why
Impact measurement is critical to success and smart, successful managers spend a lot of time and energy to get the metrics right, and to constantly evaluate them to see if there might be more effective metrics to track.
When setting up management frameworks to drive value creation efficiency be sure to look at metrics that encompass all dimensions of the value. Broaden your frameworks and metrics so you can manage value creation and delivery across business, social and environmental value.
This doesn’t mean setting up cumbersome and time-consuming processes (how would that support value creation). It does mean getting key strategic metrics and consistently measuring and managing to them and their impacts.
Metrics can be a great way to facilitate internal engagement and development of internal value propositions. Sit down with managers and leaders from other areas of your business to discuss what is (or could be) in it for them and what impacts you might measure to help track and optimize that value.
5. Partner on the Why
Partnerships are an increasingly attractive strategy for businesses seeking to create social and environmental value. They can create an efficiency around value and broaden and deepen impact and results.
When you have a thorough understanding of your Whys you are in a much better position to identify and vet potential partners as well as set up partnership structures and management processes that will facilitate long-term, mutually beneficial relationships.
Partnering without knowing the Whys is simply foolish and increases the chance for partnership failure and value destruction.
The starting point is to thoroughly understand the Why, from as many perspectives as possible. The better you understand it, the more perspectives you understand it from, the more efficient you and your business will be at creating value in all dimensions.
This may seem simple, but it takes work and discipline, and may often require external support and resources, especially at the onset when you begin shifting towards a Value Efficiency approach to creating social, business and environmental value.
There is often a lot of internal work to be done, creating awareness and building consensus and building out the Whys from different perspectives and understandings. Fresh Eyes can sometimes be helpful in separating the forest from the trees and enabling broacher, more comprehensive perspectives.
But, whichever way you proceed, using internal resources or seeking external support and assistance, your business and your career will benefit if you enhance your understanding and Know the Why. And, you will deliver more social, business and environmental value.