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How do you mea­sure re­turn on in­vest­ment into cor­po­rate so­cial re­spon­si­bil­ity ac­tiv­i­ties?

Element - - Contents - By Clare Emily Ray­bould Clare Emily Ray­bould runs Ac­count­abil­ity Now, a so­cial en­ter­prise that sup­ports busi­ness lead­ers to find the best area of fo­cus for their CSR ac­tiv­i­ties and cre­ate shared value through ef­fec­tive part­ner­ships with the non-profit org

Mea­sur­ing CSR.

Stake­hold­ers are in­creas­ingly de­mand­ing a new level of ac­count­abil­ity and in­no­va­tion, and the mea­sure­ment of so­cial, as well as eco­nomic value re­lated to cor­po­rate so­cial re­spon­si­bil­ity (CSR) in­vest­ments. This re­quires viewing value through a dif­fer­ent lens; demon­strat­ing in­no­va­tive so­cial value cre­ation as well as cost ben­e­fits, and man­ag­ing the con­flict: that of­ten a le­git­i­mate dol­lar value sim­ply can­not be given for phil­an­thropic in­vest­ments.

Demon­strat­ing so­cial as well as eco­nomic value is mea­sur­ing and re­port­ing a shared value. Shared value is not so­cial re­spon­si­bil­ity, phi­lan­thropy, or even sus­tain­abil­ity, but a new way to achieve eco­nomic suc­cess, de­fined as so­cial re­turn on in­vest­ment (SROI).

SROI is a glob­ally ac­cepted frame­work for mea­sur­ing and ac­count­ing for shared value; a much broader con­cept of value. It in­cor­po­rates four well­be­ings – so­cial, en­vi­ron­men­tal, cul­tural and eco­nomic costs and ben­e­fits – and places stake­hold­ers at the heart of the mea­sure­ment process.

The ap­proach to SROI de­pends on the stake­hold­ers to whom a com­pany has an obli­ga­tion to be ac­count­able, so the first step to mea­sur­ing CSR value is iden­ti­fy­ing them. Stake­hold­ers in­clude in­vestors, cus­tomers, ven­dors, sup­pli­ers, em­ploy­ees, com­mu­ni­ties and gov­ern­ments; how­ever in re­al­ity, the cus­tomer is the key stake­holder. CSR ac­tiv­i­ties must bring the cus­tomer and the com­pany to­gether and the cause cho­sen must res­onate with them. It is their loy­alty and their will­ing­ness to pay a pre­mium price for a prod­uct or ser­vice that is bet­ter for the en­vi­ron­ment, or a com­pany that sup­ports a cause lo­cal to them, which di­rectly af­fects prof­itabil­ity. This must not guide de­ci­sions re­lated to CSR ac­tiv­i­ties, but hu­man im­pact is crit­i­cal in mea­sur­ing CSR’S in­ter­ac­tion with fi­nan­cial per­for­mance; con­sid­er­ing the im­por­tance of cog­ni­tive and af­fec­tive re­sponses in con­sumer choices.

Tra­di­tional met­rics of ROI de­tach us from the hu­man im­pact. SROI, on the other hand mea­sures ef­forts to cre­ate eco­nomic value and in­crease hu­man well­be­ing and re­quires these con­sid­er­a­tions, as well as sound en­vi­ron­men­tal man­age­ment, to be in­te­grated into the core of a com­pany’s cul­ture. CSR ac­tiv­i­ties are thus co­he­sive with this cul­ture and the com­pany op­er­a­tion, and a CSR brand is de­vel­oped, which ac­knowl­edges, un­der­stands, mea­sures and fos­ters aware­ness of all im­pacts.

SROI also tracks the pos­i­tive im­pacts and the long-term cu­mu­la­tive ef­fects of re­spon­si­ble part­ner­ships – shared re­spon­si­bil­ity, such as public pri­vate part­ner­ships (PPPS), those with stake­hold­ers or those with non-profit or­gan­i­sa­tions work­ing in the area of com­pany ac­tiv­i­ties. Mea­sur­ing these pos­i­tive im­pacts re­quires agree­ing ap­pro­pri­ate met­rics and re­port­ing re­quire­ments at the out­set of part­ner­ship and con­tin­u­ous en­gage­ment with part­ners, as well as other stake­hold­ers, to iden­tify the key is­sues and demon­strate the re­la­tion­ship be­tween the in­puts, out­puts and out­comes of CSR.

Mea­sur­ing to­tal ROI into CSR is done by adding up all the ben­e­fits, sub­tract­ing any neg­a­tives and com­par­ing the re­sult to the ini­tial in­vest­ment. Us­ing an ex­ter­nal part­ner to sup­port this is an im­por­tant en­abling fac­tor. Ini­tially they can of­fer in­sight into where in­vest­ments will cre­ate op­ti­mum long-term shared value. They can en­sure ac­count­abil­ity and eval­u­ate, once out­comes have hap­pened, whether they were in­tended, whether as­pects of change would have hap­pened any­way, or whether they are the re­sult of other fac­tors, thereby re­duc­ing risk. Fi­nally they can col­late the data needed to cal­cu­late SROI and value out­comes for de­tailed fi­nan­cial state­ments.

SROI also tracks the pos­i­tive im­pacts and the long-term cu­mu­la­tive ef­fects of re­spon­si­ble part­ner­ships

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