We need to understand impacts better

22 January, 2018

My new book, The Company Citizen, argues that the problems of the planet, nation and community can’t be resolved without the active engagement of business, alongside other sectors – and furthermore, that a business case can be made for that activity.

A legitimate question arises: ‘How do we know what impact is being delivered?’ And the simple answer is, in general, ’We don’t know’.

For sixty years, ‘Corporate Social Responsibility’ has been the process by which some companies, especially corporates, engage with communities locally or around the world. Too often, especially in the past, the reporting of CSR has been as superficial as the activity itself. Its traditional metrics, starting with pounds donated and volunteer hours contributed, are measures of input and not impact or outcomes; reflecting neither change nor progress they persist because they’re easy to measure and report.

Even ‘pounds donated’ can mislead: some companies deliberately conflate corporate contributions with employees’ charitable fundraising. And in the UK, the British Government has recently removed the requirement of companies to report explicitly on their charitable donations.

CSR is too often seen as optional, remote, ‘semi-detached’ from a company’s mission, so why should companies put effort into reporting on it meaningfully?

More enlightened employers associate their company’s community engagement activity with their own mission. Some employment agencies donate skilled volunteering hours to deprived communities to create opportunity; a brick manufacturer uses volunteer time to run an ‘inclusive’, poor-friendly (and highly successful) finance scheme to sell construction materials. Some companies don’t just spend time listening to children read but measure the change this generates. Volunteers working for Boots Opticians help to screen toddlers for eyesight problems.

All such schemes can generate social change which can be measured and apportioned to the company’s activity. Environmental changes caused by business can, of course, be measured too, hopefully to demonstrate net positive impacts.

Some employers have discovered another metric which matters: employee engagement. This is, no doubt, a good thing. The engaged employee is more loyal, longer-lasting and more productive than those less so. And employee engagement is enhanced by activity with purpose – especially if linked to the company’s own mission.

Over any ten-year period, studies show, companies which are more sustainable, ethical, responsible and engaged are actually more profitable than those less committed. Such profit is still the authentic bottom line metric for most businesses.

Integrated reporting creates a mindset for companies to think about the resources and relationships they rely on and the outputs and outcomes that arise from these interactions. The so-called capitals model, ensures an organisation is thinking about their ‘social and relationship’ capital and how it affects their ability to create value in the long term, alongside other capitals, such as natural, human and intellectual.

Social and relationship capital has traditionally been considered CSR. But by understanding that it is actually a capital that the business needs, relies on, and must nurture, they are evolving the way they measure its impact and are viewing it in the context of how the organisation operates as a whole.

Perhaps, once businesses establish the legitimacy of such reporting, we can get the message across to governments. We need to change that touchstone of inappropriate reporting, Gross Domestic Product, to make it more appropriate across all the capitals a business draws on.

Ultimately, what you measure (and report upon) is what matters. This is something that well-meaning companies with good social and environmental performance might consider as they continue to pay executive bonuses according to short term profits or share price criteria. If the world of business is to really be a force for good it must measure what matters to us all, over the long term. It will pay off!

The Company Citizen’ is available from Routledge.