How to Measure the Impact of Corporate Social Responsibility (CSR)?

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How to Measure the Impact of Corporate Social Responsibility (CSR)?
Suman Rao, Member
If we keep in mind the Four Stages of CSR-implementation by Martinuzzi and Krumay (With a CSR-scope moving from Project ⇒ Quality ⇒ Strategic ⇒ Transformational), that makes me wonder how to assess the impact of the corporate dollars spent on CSR.
More particularly, how to assess whether CSR initiatives and investments are at all serving the (strategic/transformational/etc) objectives?
For example if a company has a choice between building a school and building a hospital, which one should it choose and why?
Appreciate any thoughts...

Corporate Social Responsibility Accreditation
john stahley, Member
The agency I work for is accredited through the American Correctional Association. Accreditation promotes improvement in the management of correctional agencies through the administration of a voluntary accreditation program and the ongoing development and revision of relevant, useful standards.
- Project Orientated: Staff prepared for ACA Audit for 6 Months.
- Quality Orientated: ACA renewal is every 3 years, Prison Rape Elimination Act brought new changes this review.
- Strategic: Information Sharing between institutions is enhanced, ie, lessons learned.
- Transformational: We are always moving from Good to Great, the triennial review aids in renewing employee awareness to laws and our corresponding responsibilities with implementation.
The ACA is a private entity, and enables our organization to assure the public that we are in compliance with all ACA standards and practices.

Behavioral Scales for Corporate Social Responsibility
Charles P. Keith, Member
I especially like the stages as described by Anneke and its link to competitive advantage. These stages are behavior oriented in that we can actually diagnose an organization's development using behavioral ranked scales and perhaps even predict the corporate's perception of its competitiveness or lack thereof. Nicely stated Anneke, thanks for the summary. Anyone interested in developing a behavioral rank scale for these levels?

Behavioral Scales for CSR
Tom Wilson, Member
@Charles P. Keith: Good idea, Charles, give it a go. You seem to have something in mind.

To Build a School or a Hospital?
john stahley, Member
The answer depends on trending demographics, infrastructure age, private and public interests as it relates to investment. The trend in the U.S. is to socialized medicine. This has repercussions as it relates to the availability in investment dollars. A construction company needs to use a long term forward thinking approach before it makes a determination to focus its business and CSR efforts on school or hospital construction.

School or Hospital? The Equity Concept
Suman Rao, Member
@John: linking the dilemma to forward thinking has a lot of merit indeed. In sustainable development (an objective of CSR), there is a concept of equity: "Equity derives from a concept of social justice. It represents a belief that there are some things which all people should have, that there are basic needs that should be fulfilled, that burdens and rewards should not be spread too divergently across the community, and that policy should be directed with impartiality, fairness and justice towards these ends." (Falk et al. 1993, P. 2).
For CSR, a school investment is an investment in long term / intergen equity. While a hospital investment is an intragen / near term intergen equity.
One difference between good companies. And great corporate citizens is: to what extent their “equity” shares represent both types of equities: financial as well as sustainable. Perhaps some of the great corporate citizens have millions of intragen and intergen investors/shareholders because they believe in the corporate citizen’s abilities to deliver on both.

School and Hospital?
Charles P. Keith, Member
@Suman Rao: I find it interesting that the question is posed as an "either/or" proposition rather than "both/and". A community with school will supply the business with qualified workers who in turn, will create families that need medical care.
If the strategy is either school or hospital, it is still a good thing, but will not maximize the long term benefit for the company. Yes, the focus is on the long term benefit for the company which makes it strategic rather than philanthropic.
The question then becomes "what do we build and in what order do we build it?" Satisfying a true community need that will in turn position the company will be part of the determining factor as is sustainability of the effort, risk assessment, and a myriad of other considerations.
If the company is thinking through both options or more, they may be moving from the quality or project level toward transformational.

School or Hospital?
Suman Rao, Member
Charles your point on "What do we build and in what order do we build it" is indeed a very objective way of looking at CSR. We are of course discussing community situations where there is choice of a school OR a hospital. If for example we were discussing the company's own employees and their families residing in the vicinity of a large manufacturing plant, then it would be school AND hospital discussion -part of employee welfare (not CSR...).
That said, school or hospital - as you rightly put is dependent of the need of the community. But how is this “community” defined and who decides what the community needs? There are layers of community need determining entities - from UN onward down to the local level...
One possible solution is to work with town planning authorities (assuming they have determined their social priorities correctly). Perhaps they need 2 schools in 2 locations instead of a school AND a hospital in the same area?
Are 2 schools (according to CSR coordinated with town planning) > 1 School + 1 Hospital for CSR? Maybe?

Seed Capital as a Transformational Constraint
Tom Wilson, Member
@Charles P. Keith: You have made exactly my point regarding designing a transformation process as a venture capital start-up. The first step is to define the mission of the project specifically to address the either/or - both/and dilemma.
When I refer to "community", I am referring to the client system as a discrete instrumental community that is an element in a larger, geographic community. The needs of the instrumental community come first. This is where your behavioral scales serve to define the boundaries or the transformation. Transformation begins with focus: thinking globally will follow.

Seed Capital as a Transformational Constraint
Suman Rao, Member
Tom, your point on the need to define the mission of the project is well made. In general this holds for investments such as schools and hospitals.
Now, think of a community hall where the corporation holds a famous rock concert - all communities will want to attend. As a contrast, think of a community waste handling plant the CSR wants to set up. In this case the instrumental community will be glad to have it located in the larger geographical area (not-in-my-backyard syndrome).
On the behavioral scales, your idea is interesting... Would like to know more.

Rationalize the CSR Decision
Charles P. Keith, Member
@Suman Rao: Let's ensure the question of either a hospital OR a school does not become an academic discussion. As you pointed out, perhaps the community needs two schools and then a hospital or vice versa.
Either way, the corporate entity must rationalize its decision regarding choice of how it acts on its social responsibility. Future thinking corporations will always tie their efforts back to the corporate strategy as to not do so would invite losses:
- Loss of funds,
- Loss of goodwill (at doing the wrong thing),
- Loss of the capability to do business within a country/region, etc.)
Working with town planning authorities would be a strategic level of CSR, though at a minimal level. I am working on a Behaviorally Anchored Rating Scale that might illuminate what activities are visible at each level of CSR across a number of dimensions. I believe that all organizations move up and down a maturity scale with the change in customers, situation, management, etc.

Philanthropy is a Valid Investment Strategy
Tom Wilson, Member
@Suman Rao: You got my point exactly. In general, the instrumental community is better served to approach the stakeholder communities (a term your reply just suggested to me) as an exercise in philanthropy, which is the most efficacious form of venture capital.
The nature of dynamical capitalism (which can be inferred from the Parable of the Talents) will ensure the greatest long term benefit to all communities because of the lack of the fiscal burden required of a purely ROI expectation of the instrumental community. Again, the advantages of beginning a transformation process with a DISCRETE PROJECT, such as suggested in Stage 1 of the Martinuzzi Krumay Framework presented by Anneke allows for a great deal of infinities to be removed before additional resources are committed to an evolving global change strategy.

Philanthropy is a Valid CSR Investment Objective
Suman Rao, Member
Tom, I'm glad you brought the important points of stakeholders & dynamic capitalism (parable of talents). I think what distinguishes a CSR investment from other investments is its objective of philanthropy - rather than thinking of owners/employee welfare, the company is now thinking of human welfare (of which its stakeholders are a subset). So I would agree philanthropy is a CSR investment objective to support a company's growth sustenance rather than an investment strategy to sustain profits. Growth is a superset of profits.
If the CSR investment is properly designed with correct philanthropic goal/objective, the lives of people can be bettered and more importantly the betterment can be sustained. The sustenance aspects require that the goal is correctly chosen and the investment has economic merit. For example the school: 5 years after passing out from school, a percentage of the students who are gainfully employed should be working on the school needs resources & management system. That would ensure employability skill in 5yr. Else the company could be left with humanitarian NPAs to deal with.

Philanthropy is a Valid CSR Investment Objective
Suman Rao, Member
Charles, good post! In some countries, it is (becoming) mandatory for “for-profit” companies to spend a % of their profits in CSR. That being so, it is only natural that companies would tend to link CSR to their investment strategy for profits. On the face of it that is not bad at all.
However, expect over time the % to become a matter of debate-every successive government would try to increase that % to show how people-friendly they are. For a company, unlike routine strategies e.g. expand a market, introduce new products etc. Which it has freedom to choose with a goal of profitability. But social responsibility is not defined clearly anywhere …the goals are nebulous at times with multiple agencies involved.
It is important to engage stakeholders of the “community” in CS(E)R planning and implementation tactfully (strategically if you like), so that a company's growth can be sustained through diversified and planned philanthropic initiatives that are socio-economically meaningful.

Philanthropy is a Valid CSR Investment Objective
Charles P. Keith, Member
Suman, you make a valid point regarding government pressure (or even cultural pressure) for "for-profits to contribute into CSR related activities. If over time, pressure to increase contribution levels continues, it may reach a breaking point. As an example, the state of California has instituted massive environmental rules and changes. No doubt, between 1975 and today, two separate times that I have lived in California, the air quality improvement, among other things, is astonishing. However, companies are leaving California because of the taxes and mandates. So as with every "system", regardless of the activity and strategy, there is a continual seeking for balance. Our goal in CSR, I think, is to help keep forward momentum without losing our balance.

Philanthropy as a Valid CSR Investment Objective
Suman Rao, Member
Charles very true. The balance is quite important. Just because one is an environment enthusiast, one does not relish being paid a visit by a dark snake to wish and shake hands for Happy New Year! Unsustainable taxes and mandates point to the imbalance between the social and economic objectives.
It is a pity that despite tools such as the TBL and the Balanced Scorecard neither the government nor the corporates have found the "balance" in socio-economic objectives. This distortion I think is caused amongst other things by dark politics.
A similar case in point was the Kyoto Protocol fiasco...Keeping the forward momentum without losing socio-economic balance is perhaps the most essential as well as the most challenging requirement for a 21st century corporate to sustain its growth.


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