Recently my firm had an opportunity to construct and present a financial projection of a global corporation’s potential return on investment (ROI) from its corporate social responsibility (CSR) activities. This is the kind of analysis that is all too rare in the CSR world. Our findings? If the company took the kind of leading edge, strategic approach to CSR and corporate giving as its major competitors, it had the opportunity to generate a healthy triple digit percentage increase from its current CSR investments. But if it stayed the course the losses crept over a $100 million. The executives’ eyes grew wide. “You mean to tell us that over a three-year payback period, our CSR could generate over a billion dollars in financial value?” they said. “No,” we replied, “based on your current approach, we’d predict the loss. But if you embrace the strategic practices of leaders, you’ll see the billion in returns.”
This illustrates the opportunity and challenge for business. A leading CSR association, ACCP, finds that two-thirds of its Fortune 1000 members say they’re under pressure to demonstrate a measurable business case from their responsible practices and corporate giving. Across industries, C-suites and Boards see competitors across the globe moving at warp speed to cut prices and disrupt products and services. Wall Street demands that companies trim any perceived fat away from operating expenditures. At the same time, communities are in dire need of support to improve access to education, health, safety, well-paying blue-collar jobs, affordable housing, nutritious food, the arts, healthy ecosystems, and public R&D. As needs grow and public funding dries up, companies are increasingly called to fill the gap.
The typical company and its executive team treats this as a dilemma and perceives the corporate giving function as a kind of unstated business tax. These companies are missing a tremendous opportunity. Start with projections that see a $12 trillion global opportunity for commercial solutions that will help the world achieve by 2030 the United Nations’ Sustainable Development Goals (SDGs). These are ambitious goals calling for the world to end poverty, hunger, climate change, and environmental degradation while enabling the world to provide education, safety, and work for all. The Global e-Sustainability Initiative forecasts a $2.1 trillion opportunity for the tech sector alone. The healthcare industry could see trillions as well. Nearly every industry has a chance to capitalize on the opportunity the SDGs create.
Next, consider the findings of IO Sustainability’s landmark research with Babson College. Our “Project ROI” study finds that, when done well, CSR has the potential to generate financial returns that include up to a 6% boost in share price; a 20% increase in sales; a 13% jump in productivity; a 50% decrease in employee turnover; and a boost to reputation worth up to 11% of a company’s market cap.
The trick here is doing CSR well. Companies that do it poorly may suffer losses. Doing it poorly means keeping silent and/or bragging too much about one’s good works. It means throwing dollars to causes that don’t meet community needs or relate to the company’s purpose. It means treating giving like a burdensome form of compliance with rote PR promotions.
Companies that do it well take a disciplined approach driven by a clear strategy. They fit giving priorities to the company’s core purpose, strategies, products, and competencies. They commit to make an impact in those areas of fit. They manage with clear objectives and measures in mind. Finally, they connect: communicating clear messages about their efforts; involving communities, customers, employees, and shareholders in CSR design and delivery; and finding opportunities to partner. Companies that take this approach find eye-popping results. Unilever has aligned its corporate giving and marketing teams together, and set the goal for them to collaborate in meeting the ambitious goals of its Sustainable Living Plan that includes improving the health and well-being for more than a billion people. The result: brands defined as far along in this strategic approach accounted for half of the companies’ revenue growth. Nestlé highlights that the brands furthest along in its Creating Shared Value strategy (supporting health, community development, and the environment) generated greater sales those than that trail.
‘The Global e-Sustainability Initiative forecasts a $2.1 trillion opportunity for the tech sector alone. The healthcare industry could see trillions as well. Nearly every industry has a chance to capitalize on the opportunity the SDGs create.’
Benefits aren’t limited to B2C industries. B2B firms such as Accenture, KPMG, and PwC have prioritized major commitments to make tangible impacts on work force development, access to digital skills, and education. These attract and retain the best people while demonstrating to clients’ capabilities beyond what they knew before. SAP uses its CSR approach to drive down employee turnover. The company’s analysis finds a 1% drop in voluntary employee departures adds between Euro 40-50 million to operating profits.
One key finding from our project ROI research: when it comes to corporate giving it’s better to be bold. Accenture has set the target to equip over 3 million youth with the skills to succeed in a high-tech work force by 2020. Kellogg has set a goal to create 3 billion “better days” by the end of 2025, measured by: providing 2.5 billion food servings and reaching 2 million children through breakfast programs. Walmart and Target are each setting stretch goals related to health, hunger, education, and environment respectively. By going big, these companies are creating opportunities to distance themselves from the competition and win the wars for wallet, talent, share of mind, and investment.
Another vital lesson is that the Field of Dreams strategy doesn’t work for corporate giving and CSR. Benefits won’t accrue simply because a company has built a giving and CSR program. This is not bad news. Who would trust a claim that literally anything goes and the dollars will still flow? To succeed, a company needs every function to show top notch discipline, strategy, and execution. The good news is that this holds true for corporate giving. A well designed and implemented approach does have the potential to improve the quality of life for communities while generating quantifiable returns at levels any business line leader would envy.
Steve Rochlin is CEO of IO Sustainability. He is also the lead author of Project ROI (visit www. iosustainability.com/project-roi/). IO Sustainability helps companies build strategic, value generating approaches and business cases for CSR and corporate giving. IO’s forthcoming reports on “The Business of Social Investing” with ACCP, and “The Business Case for Corporate Involvement in Community Health” with Babson College will appear in early 2018. He can be reached at [email protected]
