Conducting a CSR Assessment

While frameworks and suggestions for implementation of corporate social responsibility (“CSR”) do vary, there is almost no controversy that in order to make informed decisions about the content of a new CSR initiative, or changes to an existing program, the board of directors and members of the senior management team must engage in a rigorous assessment process in order to obtain an accurate picture of the current state of the company’s efforts and activities with respect to economic, environmental and social responsibility.  The assessment process will rely on a variety of tools and actions including internal surveys, stakeholder engagement and reviews of publicly available data for peer organizations (e.g., corporate websites, annual reports and CSR reports).  Assessments can be done using internal resources or organizations can turn to outside consultants for assistance.  In either case, reference can be made to one or more of the formal procedures that have been developed to assess the level of an organization’s responsibility such as SA8000, AA 1000 and ISO 26000.  There is no universal template for conducting a CSR assessment, and how information is collected depends on organization-specific factors such as available resources, products and services and the legal and other external environment, however, key elements of an effective assessment include: assembling a skilled and experienced working group, developing a working definition of CSR; identifying legal requirements; reviewing corporate documents, processes and activities; and identify and engaging key stakeholders through interviews, surveys and observation.  Assessment should be seen as a continuous process, which means information and results should be carefully inventoried in order to provide a foundation for new inquiries in subsequent planning periods.

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While frameworks and suggestions for implementation of corporate social responsibility (“CSR”) do vary, there is almost no controversy that in order to make informed decisions about the content of a new CSR initiative, or changes to an existing program, the board of directors and members of the senior management team must engage in a rigorous assessment process in order to obtain an accurate picture of the current state of the company’s efforts and activities with respect to economic, environmental and social responsibility.  The UN Global Compact has counseled organizations to address assessment through a disciplined process that includes mapping out industry issues, benchmarking competitors and peers using indicators based on global standards (i.e., the UN Global Compact) and gap analysis (i.e., ranking the organization based on indicators, conducting quantitative and qualitative analysis of scores and rankings, comparing against scores and rankings of competitors and peers and identifying gaps, strengths and weaknesses that can be integrated into formulation of strategies).[1]  The process relies on internal surveys and stakeholder engagement and also calls for reviews of publicly available data (e.g., corporate websites, annual reports and CSR reports) and identification and capture of leading CSR practice examples.  The deliverable from this process should be report for the board of directors and senior management that includes the rankings, an honest assessment of the organization’s strengths and weaknesses and specific recommendations with respect to integration of CSR into the overall strategy of the organization.[2]

A formal CSR assessment was the first step in the “planning” phase of the CSR implementation framework proposed by Hohnen and Potts, and they recommended that the assessment cover the company’s products and services, decision making processes and operational activities and culminate in a thorough gap analysis that takes into account both risks and opportunities and focuses attention on the company’s strengths and weaknesses and how its CSR profile aligns with its strategic and business goals, peers and best practices.  Hohnen and Potts argued that the CSR assessment should provide decision makers with an understanding of the company’s values and ethics; the internal and external drivers motivating the company to undertake a more systematic approach to CSR; the key CSR issues that are affecting or could affect the company; the key stakeholders who need to be engaged, and their concerns; the current corporate decision making structure and its strengths and inadequacies in terms of implementing a more integrated CSR approach; the human resource and budgetary implications of such an approach; and existing CSR-related initiatives.[3]

Maon et al. recommended that companies assess their current CSR status through auditing of current CSR practices and benchmarking competitors’ practices and CSR norms and standards.[4] The audit should begin with reviewing existing mission statements, policies, codes of conduct, principles and other operating documents; consultations with key managers representing key business functions inside the organization, CSR and industry experts and, quite importantly, interviews with interested and knowledgeable stakeholders that the company has previously identified.  Maon et al. explained that the purposes of the various audit procedures should be to identify organizational characteristics relating to key aspects of CSR including the social and environmental dimensions and impacts of organizational activities, corporate governance issues, corporate commitment to sustainability and the societal dialogue process, and build trust and promote cooperation between the company and stakeholders.[5]  Maon et al. also noted that given the complexity and scope of the CSR concept, companies should consider using one of the formal procedures that have been developed to assess the level of an organization’s responsibility such as SA8000 and AA 1000.[6]

As for benchmarking CSR practices, Maon et al. explained that the recommended process was an opportunity for the company to continue to highlight what should remain and give competitive advantage, and to identify inappropriate activities with respect to CSR.  According to Maon et al., benchmarking included three broad critical steps: identifying and selecting the best performers for each CSR-related issue to be benchmarked on the basis of the organization’s industry knowledge for industry-specific issues and on the basis of recognized CSR champions for what concerns CSR more general issues; identifying norms and standards used or developed by competitors and measuring the performance of the best-in-class companies for each benchmark being considered; and comparing with the organization’s performance for each variable to determine the gap between the organization and the best performers.[7]  The benchmarking process not only has strategic value, but also provides the company with information that can and should be supplemented going forward through networking with and learning from peers elsewhere in the industry and other stakeholders who can share experiences and help the company build capacity with respect to CSR capabilities.  Maon et al. noted that companies should join CSR business networks at global, national and regional levels in order to facilitate contact with counterparts at other companies and gain access to best practices relating to CSR issues and data that can be used to ease the ongoing process of benchmarking.[8]

Clause 7 of ISO 26000 promulgated by the International Organization for Standards provides guidance on putting social responsibility into practice in an organization including conducting an assessment to understand the organization’s social responsibility as a predicate to integrating social responsibility throughout the organization and establishing processes relating to communications, changing organizational culture, strategies and operations, building internal capacity for social responsibility and reviewing progress and improving performance.  Section 7.2 of ISO 26000 recommends that organizations conduct a review to determine how its key characteristics relate to social responsibility, determine the relevant issues of social responsibility within each core subject and identify the organization’s stakeholders, and that the review should include, where appropriate, factors such as[9]:

• The organization’s type, purpose, nature of operations and size
• Locations in which the organization operates, including whether there is a strong legal framework that regulates many of the decisions and activities related to social responsibilities; and social, environmental and economic characteristics of the areas of operation
• Any information about the historical performance of the organization on social responsibility
• Characteristics of the organization’s workforce or employees, including contracted labor
• Sector organizations in which the organization participates, including the activities related to social responsibility undertaken by these organizations; and the codes or other requirements related to social responsibility promoted by these organizations
• The organization’s mission, vision, values, principles, and code of conduct
• Concerns of internal and external stakeholders relevant to social responsibility
• Structures for and the nature of decision making in the organization
• The organization’s value chain
• Current attitudes, level of commitment to and understanding of social responsibility by its leadership

The goal of the assessment is to collect as much information as possible to move to the next step of developing a new CSR strategy or making necessary changes to an existing strategy.  How that information is collected depends on organization-specific factors such as available resources, products and services and the legal and other external environments and some issues may require more attention than others.  While the value of an assessment should be clear and the topics for the review are primarily “high level”, conducting an assessment is a challenging and time-consuming process given the expansive objective of getting a good idea about what the company stands for and how it operates and the range of resources and people needed in order for the assessment to be effective.  For example, it will be difficult to put together a leadership team and synchronize their schedules so that they can collaborate on the other tasks such as reviewing documents and existing processes and engaging with stakeholders.  In fact, many companies stumble on the path toward integrating CSR into their businesses at the very beginning because the assessment seems to be so difficult.  In order to reduce these potential problems, companies can consciously take a more modest approach along the lines generally suggested for smaller businesses and focus their efforts on one or two key areas at the very beginning.  Even a small project can make a significant difference and provide the company with the experience and confidence to expand its CSR activities as time goes by.

Companies may use independent outside consultants to assist in the assessment process; however, this approach should be used sparingly since it is important for company personnel to become directly involved in the CSR mindset.  Business for Social Responsibility (www.bsr.org) is one of many organizations that offer sustainability services to companies interested in implementing a CSR initiative including assistance with assessments, stakeholder engagement, development and implementation of CSR strategies and designing internal management systems that integrate CSR into the company’s organization and culture.  One area in which an independent third party can provide value is with respect to “gap analysis” (i.e., comparing the current state of affairs to the position that the company would like to achieve in the future, a position that should be formulated with regard to the action of competitors and universal CSR standards), since third parties can look at the company’s strengths and weaknesses more objectively and bring a deeper portfolio of information regarding the marketplace that can be used for comparative purposes.

Numerous self-assessment tools are available to assist companies in conducting an internal assessment; however, care should be taken to avoid bias and conflicts when the assessment is being done by company personnel.  One resource to consider is available from Ceres, a non-profit organization advocating for sustainability leadership (www.ceres.org), which has developed and disseminated its Ceres Roadmap as a resource to help companies re-engineer themselves to confront and overcome environmental and social challenges and as a guide toward corporate sustainability leadership.[10]  In addition, a number of CSR tools are available at the website of the World Business Council for Sustainable Development (www.wbcsd.org) including tools for measurement and assessment and guides on managing CSR projects. The Global Environmental Management Initiative (www.gemi.org) has an expansive library of publications and interactive tools to assist companies in their efforts to achieve environmental, health and safety excellence including materials on engaging employees in sustainability, integrating sustainability into the organizational culture, supply chain sustainability and social responsibility reporting.  The Caux Round Table (www.cauxroundtable.org) (“CRT”), an international network of principled business leaders working to promote moral capitalism, has developed a number of toolkits, publications, codes, standards and guides to help companies cope with growing expectations for responsible business conduct including self-assessment and improvement tools and guides to CSR and business ethics codes and “best practices” standards.  The CRT website also contains links to materials available from other leading sustainability organizations.

There is no universal assessment template; however, best practices indicate that companies should begin by incorporating the five stages identified by Hohnen and Potts into their assessment processes: assemble a CSR leadership team; develop a working definition of CSR; identify legal requirements; review corporate documents, processes and activities; and identify and engage key stakeholders through interviews, surveys and observation.[11]  While presented in order, companies can obviously vary the stages and there will be overlap.  For example, stakeholder engagement often begins early in the assessment process.  Additional stages or activities are often added to those mentioned above, such as identifying and attempting to measure the economic, social and environmental impacts of its strategies and operational activities.  In order to do this, historical information needs to be gathered, cataloged and evaluated.  The information collected during the assessment stage can also be used to identify and prioritize the organization’s key CSR activities in advance of formulating recommendations for the CSR strategic plan.  While the main purpose of the assessment is to set the stage for developing an overall CSR strategy, some larger companies have made the assessment an end result in its own right and have made reports including the key results of the assessment and input from stakeholders available to the public.[12]   Before beginning the assessment process, plans should be made for inventorying all of the documents and other information that is collected so that the information can be easily accessed and a baseline is established for subsequent assessments to be conducted for future planning periods.

Alan S. Gutterman is the Founding Director of the Sustainable Entrepreneurship Project.  This article is an excerpt from Alan’s book Strategic Planning for Sustainability.  For more information and tools on the subject, see here.

[1] UN Global Compact: Training of Trainers Course Guidance Manual (New York: UN Global Compact), 38.

[2] Id.

[3] Business Strategy for Sustainable Development: Leadership and Accountability for the 90s (Winnipeg, CN: International Institute for Sustainable Development, 1992), 22.

[4] F. Maon, V. Swaen and A. Lindgreen, Mainstreaming the Corporate Responsibility Agenda: A Change Model Grounded in Theory and Practice (IAG- Louvain School of Management Working Paper, 2008), 24-27.

[5] Id. at 25.

[6] Id.

[7] Id. at 26.

[8] Id. at 26-27.

[9] ISO 26000 Guidance on Social Responsibility (Geneva: International Organization for Standardization, 2010), 71.

[10] Ceres, The Ceres Roadmap for Sustainability (www.ceres.org/ceresroadmap)

[11] Business Strategy for Sustainable Development: Leadership and Accountability for the 90s (Winnipeg, CN: International Institute for Sustainable Development, 1992), 23.

[12]  Extensive information on sustainability reporting is available from GRI (www.globalreporting.org), an international independent organization that helps businesses, governments and other organizations understand and communicate the impact of business on critical sustainability issues such as climate change, human rights, corruption and many others.