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June 26, 2008

Corporate social responsibility turns green

  • The most successful businesses will find a way to combine profits with helping the environment.
    • By HILARY FEIER and VAL HASKELL
    Hitachi Consulting

    The notion of corporate social responsibility (CSR) is experiencing a tremendous surge of popularity nationwide, as well as in the Seattle area. CSR involves a company’s effort to minimize its impact on the environment, better engage employees and take care of them in ways beyond a paycheck, and give back to the community. Some consider CSR a natural and necessary evolution in corporate responsibility for helping people and the planet.

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    Feier
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    Haskell

    Local firms lead

    Many Pacific Northwest companies are helping to define the corporate responsibility movement. Starbucks, for instance, has the highest return-customer numbers in its segment with success based on core tenets other businesses balked at as too costly. These include items as diverse as health care for both part- and full-time employees to sourcing Fair Trade coffee beans.

    Similarly, Nike is the highest scoring company of 60 currently evaluated by Climate Counts, a nonprofit organization that publishes a scorecard annually of well-known global companies based on their green quotient.

    “We look at four major categories when we score,” said Wood Turner, project director for Climate Counts. “They are review of climate impact, reduction of climate impact, climate policy stance and reporting on climate actions. Nike hits the mark on all four of these categories, which make up what it takes to be a true climate leader.”

    From a corporate commitment perspective, Microsoft has invested in a private transportation system to reduce carbon emitted through commuting. It has also created a new chief environmental strategist position and has been replacing all of its polystyrene cafeteria products with compostable cups, plates and flatware.

    Microsoft director of environmental communications Francois Ajenstat said, “In addition to looking at internal programs, Microsoft is uniquely positioned to help drive reductions in IT energy consumption, which can have a profound environmental impact globally.”

    CSR gains momentum

    So what has happened in recent years to convince United States businesses to care more about CSR? Climate change, for example, emerged as a mainstream issue as events such as hurricane Katrina devastated New Orleans in 2005, and some credit former Vice President Al Gore’s film “An Inconvenient Truth,” which was released in late 2006.

    A focus on global energy issues has also intensified as crude oil prices have topped $135 per barrel, driving consumer awareness to conservation efforts, alternative fuel development and green technology investment.

    Boeing made a bet on more fuel-efficient and environmentally friendly jets while gas was still cheap and now it is positioned to capture much of the commercial aircraft market. The 787 Dreamliner, which is being built with 50 percent composite materials (versus 12 percent for the popular 777), is 20 percent more fuel efficient and will produce 20 percent fewer emissions than comparably sized jets.

    The opportunity

    Each company has the opportunity to help solve the problems CSR addresses. Unfortunately, some companies have been accused of green-washing — making themselves seem environmentally concerned just to sell product. Even if that is the motivating force, is it relevant if they are improving what they sell or reducing environmental impact?

    It is relatively easy to claim good intentions and more challenging to deliver on them. The trick is to measure the impact. There are a number of national and international organizations that promote CSR reporting guidelines and actively monitor corporate performance. The emerging trend is a move toward clear and comprehensive public disclosure of CSR data with an emphasis on measurable performance versus marketing spin.

    The Global Reporting Initiative is one such example. The initiative’s vision is that reporting on economic, environmental and social performance by all organizations is as routine and comparable as financial reporting. Officials have developed a sustainability reporting framework, of which the sustainability reporting guidelines are the basis for organizations to use for disclosure about sustainability performance. These guidelines also provide stakeholders with a universally applicable, comparable framework in which to understand disclosed information.

    From a monitoring and watchdog standpoint, Climate Counts is another example. Its core premise is that “Business has the power to change the world — and you have the power to change business.” Climate Counts publishes a company scorecard to show consumers how serious companies are about stabilizing climate change — and how they compare to their competitors. The annually updated scorecard reflects publicly available information on the efforts of companies to address climate change or avoid it altogether.

    Business intelligence helps

    Business intelligence and specifically “balanced scorecard” methodologies are natural fits with companies wanting to become CSR leaders. The balanced scorecard is a well-established methodology devised by Robert Kaplan and David Norton that was published in the mid-1990s. The premise is that a business cannot be measured on financial results alone.

    Other important factors provide the foundation for the business’s financial success or failure. These other areas or “perspectives” are: learning and growth, internal business process and customer satisfaction. Each perspective can include metrics that effectively measure CSR initiatives and help the organization realize benefits. Given these dependencies, there is a strong indication that CSR has moved from a tangential public-relations-driven initiative to a business imperative.

    The best scorecards focus an organization on the selective critical success factors necessary to meet strategic objectives. Business intelligence applications can help highlight whether CSR initiatives are having the expected financial impact (cost reduction or revenue generation) as well as track non-financial items (material waste reductions and carbon-footprint minimization). These accomplishments merit celebration and recognition in annual reports, quarterly reports, press releases and corporate social responsibility annual reports.

    Companies with strong corporate social values, such as REI, have embraced this transparency by publishing an annual stewardship report. In an article recently published in the Seattle Post-Intelligencer, REI’s Kevin Hagen, director of corporate social responsibility, commented that REI data forced management to rethink what intuition has told them. For example, Hagen said company leadership believed that most of its greenhouse gas emissions were the result of energy use and transporting goods. However, data analysis showed that employee commuting was a bigger contributor along with the REI Adventures division, which encourages people to take trips.

    “That makes us go, ‘Wow,’?” Hagen said.

    Armed with this fact-based data, companies like REI can make better decisions to drive the impact they hope to achieve.

    What the future holds

    Based on the greening of America trend, it’s clear CSR will play an ever-increasing role in everyday business decisions. Strategic companies will use CSR as a way to gain financial, marketing and brand advantage. The most successful businesses will be those that find a way to combine making money with doing the right thing.

    Hilary Feier is a vice president with Hitachi Consulting’s Pacific Northwest Business Intelligence and Performance Management practice in Seattle. Val Haskell is a senior manager with the firm’s Business Intelligence and Performance Management practice in Dallas.


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