As more companies integrate corporate and social responsibility into their daily business activities, a key questions continues to be asked: Does CSR help drive shareholder value?
CSR’s growing role is undeniable — for large publicly traded companies and smaller firms alike. As CFO reports: “In 2011, just under 20% of S&P 500 companies published a sustainability or CSR report. By 2013, just two years later, that number had grown to 72%.”
However, the piece — written by Babson College Finance Professor Richard T. Bliss — outlines how “many companies struggle to integrate their CSR efforts into their core mission, strategy, business model and products/services. They also face the challenge of communicating the nature and impact of their CSR initiatives to an often-skeptical audience of employees, customers, investors and even environmental/social activists. At the root of these issues is the conflict — real or imagined — between CSR activities and the holy grail of corporate management: shareholder value.”
It’s an important capability to get right. Bliss outlines two key reasons for the disconnect:
- The metrics. “Shareholder value has an unambiguous measure: the share price of a company’s stock plus dividends received… On the CSR side, no singular goal comparable to increasing shareholder value exists.”
- Friction among corporate CEOs/CFOs and their heads of CSR. Put simply, they speak vastly different languages.
So how might CSR executives improve their standing — and their story — within the companies they serve? One global expert proposes a surprising approach: “To be successful, in short, CSR directors should be putting themselves out of business,” says Alberto Andreu Pinillos, CSR expert and global head of Organizational Development & Corporate Culture at Telefónica.
In a recent conversation with Gregory Unruh in MIT Sloan Management Review, Andreu highlights the vital role of corporate social responsibility and distills a CSR manager’s job into three key activities:
1. Foresight: “The director’s responsibility here is to identify ahead of time the social and environmental risks or opportunities that may not be relevant in the near term, but will be so in the medium to long term — and then place them in front of the appropriate organizational decision makers… The CSR director acts as a ‘social radar,’ detecting emerging issues, understanding their potential importance to the company and communicating any concerns in the language of the specific executives they need to influence.”
2. Nurturing: “Just as there are incubators for startups, Alberto believes the CSR office need to act as an incubator for internal projects. This is because the CSR office usually doesn’t have the budget or manpower to implement needed changes alone. The office must work with other functional areas to bring about the needed improvements in social and environmental performance.”
3. Evangelism: A CSR office exists “to bring the company into a more sustainable mindset — to ‘spread the word’ about sustainability, in other words. But there should also come a time when the word is thoroughly spread. … The true test of a responsible company is when all functions and departments are capable of minimizing their own negative impacts and are thinking about making a positive impact on their community.”