Measuring CSR Planning, Performance and Effectiveness

Regardless of the specific strategic planning processes for corporate social responsibility (“CSR”) initiatives, companies must be sure that they create adequate controls so that activities carried out in furtherance of the strategic, tactical and operational plans can be monitored and evaluated.  This serves several important purposes including making sure that the plans and their associated activities are being executed properly and on a timely basis and that adjustments can be made as necessary in order to remedy weaknesses in the original plans and/or adapt to unforeseen changes in the company’s business environment.  Attempts to measure strategic planning effectiveness had traditionally been limited to using financial criteria that provide a scorecard of the financial performance of the company; however, new approaches to assessing organizational results and performance adopted over the last few decades had expanded the notion of strategic planning effectiveness to include many other non-financial, qualitative criteria associated with core business process, customers, employees, organizational learning and innovation and other core areas in the companies important for the overall organizational performance.[1]  For example, companies can now choose from among a wide range of new tools including activity-based management, value-based management, the balanced scorecard, “benchmarking” and customer relationship management.[2]

Wolk et al. argued that performance measurement provides vital information for advancing social innovation, which they defined as the process of developing, testing, and honing new and potentially transformative approaches to existing social issues.[3]  They believed that having the right performance metrics, data, and analysis in hand allowed social innovators (i.e., nonprofit organizations, government agen­cies, and businesses that offer innovative, results-driven solutions to social problems) to make well-informed management decisions to drive continuous improvement and long-term social impact and answer the following fundamental questions[4]:

• How do we know how well our organization is progressing against our mission and goals?
• What should we measure in order to have critical information without becoming overwhelmed with data?
• How should we report and discuss our performance internally among staff and board members to maximize learning?
• Where should we focus our organization’s limited resources in order to increase our effectiveness today and achieve sustainabil­ity over the longer term?
• How can we most effectively measure and communicate our performance and impact to external stakeholders?

Wolk et al. advocated for the adoption of a performance measurement system as a means for organizations to efficiently collect and make use of data about their activities (i.e., programs, services and initiatives run by the organization) and operations (i.e., human resources management, technology, financial management, governance etc.).  From their perspective, a performance measurement system constituted a cycle that included four major phases of activity[5]:

• Measure: Organizations operating performance measurement systems use indicators, metrics that are tracked regularly, to assess their activities and supporting operations.
• Report: Organizations can use several types of reporting tools to compile performance measurement data into a format that is easy to analyze including a dashboard, which includes a focused selection of indicators to provide periodic snapshots of the organization’s overall progress in relation to past results and future goals, and/or a report card, which contains highlights from an organization’s internal dashboards and facilitates sharing data exter­nally with social impact investors and other stakeholders.
• Learn: Using the selected reporting tools, an organization’s leadership and other key staff members review and interpret perfor­mance data in order to make well-informed decisions and identify opportunities for improvement and necessary course corrections.
• Improve: The organization implements its decisions to improve its activities and operations and the performance measure­ment cycle begins again.

Development, implementation and continuous refinement of the performance measurement system mentioned above includes various steps such as planning; choosing what to measure (e.g., indicators of organizational health, CSR program performance and social and economic impact) and how to do it; creating processes, such as dashboards, for using the data in day-to-day decisions, performance reviews and overall strategic planning; and auditing the measurement process and related systems to ensure it is working and identify improvements that might be necessary to remediate reporting issues and generate even more useful data.  Attention to the performance measurement system should not be delayed until the end of the strategic planning process.  In fact, when weighing and selecting CSR commitments the members of the leadership team must consider whether it will be feasible to measure progress toward a particular commitment and generate sufficient data to transparently report on the company’s performance.  If something cannot be measured, it will not get done, and attempting to explain a commitment that lack clear metrics and targets will only cause confusion among stakeholders and create skepticism about the company’s CSR strategies and skills.

Closely related to CSR performance measurement is reporting and verification, two important tools that companies use to measure changes related to CSR programs and initiatives and communicate on them to the company’s stakeholders.  One way to describe reporting is the process of communicating with stakeholders about the company’s economic, environmental and social management and performance.  Verification, sometimes referred to as “assurance”, provides comfort to recipient of the CSR reports that the information that has been included is accurate based recognized criteria (e.g., codes and standards to which the company may have agreed to adhere) and internal audits, industry (i.e., peer) and stakeholder reviews and professional third-party audits.  Reporting not only educates stakeholders, it should also improve the management of the CSR program and ensure that persons involved in the program will be accountable for their actions.

The scope of the company’s reporting and verification efforts will depend on various factors including the size of the company, the stage of development and focus of its CSR commitments, legal requirements, the financial and human resources available for investment in those activities and the degree to which companies want and are able to integrate sustainability indicators into their traditional reporting of financial results.   When establishing plans for reporting and verification it is useful to obtain and review copies of reports that have been done and published by comparable companies and, of course, it also important to have a good working understanding of well-known reporting and verification initiatives such as the Global Reporting Initiative (“GRI”) Standards and the AccountAbility AA1000 series.  Companies should decide early how they intend to report on their CSR activities in order to ensure that their information and performance measurement systems are set up in a way that allows for creating the metrics necessary to generate the reports.  Reporting can be done in a number of way: special reports were prepared for each of the specific stakeholder audiences such as employees; separate sections on environmental and social benefit activities in the same annual reports in which financial results are presented; or in a separate sustainability report.  In years to come, it can be expected that regulatory interest in sustainability reporting will increase and any changes will need to be incorporated into each company’s reporting system.  In line with the anticipated changes is the likelihood that CSR reporting will become a professional specialty akin to financial accounting.

Finally, the audits of the performance measurement system and the verification procedures conducted in conjunction with preparing the CSR reports should be used to carefully evaluate the effectiveness and scope of the company’s CSR initiatives and generate ideas for modifying and improving those initiatives.  Like any strategic initiative, CSR programming should be dynamic and responsive to external changes and credible data that something simply is not working well and will not lead to results that have been promised to stakeholders.  The breadth and formality of evaluation processes will vary among companies; however, at the core the task is to sit down and determine what is working well, why, and how to ensure that it will continue, while at the same time identifying things that are not working well and trying to figure out why this is the case.  This is the point where companies need to identify and analyze barriers to success of their CSR initiatives and decide whether those barriers can be overcome or if it is better to revisit original goals and make new ones.  These are hard questions, particularly when a project is near and dear to one or more of the senior executives of the company, and evaluation should be done objectively and with input from a variety of perspectives including external stakeholders.  The process should be documented and described in the organization’s CSR reporting and communications and stakeholders should be informed about how the results of the review were used to make changes in CSR-related strategies and programs to improve performance.

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.

Notes

[1] B. Sukle and S. Debarliev, “Strategic Planning Effectiveness: Comparative Analysis of the Macedonian Context”, Economic and Business Review, 14(1) (2012), 63, 66.

[2] L. Digman, Strategic Management: Competing in a Global Information Age (Mason, OH: Thomson Learning, 2002).

[3] A. Wolk, A. Dholakia and K. Kreitz, Building a Performance Measurement System: Using Data to Accelerate Social Impact (Cambridge, MA: Root Cause, 2009), iii.

[4] Id. at 3-4.

[5] Id. at 6.