Tuesday 21 October 2014
Smarter CSR Budgets: Connecting budget to value
A CSR Thoughtpiece from the CSR Training Institute
- Wayne Dunn
Are we spending too much, or too foolishly on CSR and sustainability?
I don’t think we needed to wait for declining prices or increasing costs. Ensuring CSR budgets and activities are aligned with shareholder and social value is always important, no matter what the sector.
Reviewing your CSR budgets and activities with an eye to improved efficiency in delivering shareholder and social value is a good investment for your company, and your career.
It should be done regularly, it should be done systematically, it should have a laser-like focus on shareholder and social value and, at least periodically, it should be done by an outsider (or internal newcomer) that can bring dispassionate and experienced fresh eyes to the exercise.
While there is not a cookie cutter approach to this analysis I have found that some ways work better than others.
A methodology that I’ve found works well is set out below. Of course, every application of this methodology needs to be adapted to properly fit the situation.
The methodology focuses on identifying key issues and values for shareholders and stakeholders and analyzing the current CSR and stakeholder programming in relation to those issues and value.
It focuses tightly on shareholder and social/stakeholder value and how they connect to CSR and stakeholder programming budgets.
It will often identify redundancies, synergies, risks, strategic opportunities and new partnership potential.
It is a fairly simplistic approach, which I have found makes it more usable and ultimately produces better results.
But, you need to resist the urge to over-analyze. There might be comfort in making long lists and answers to each questions. But, that is seldom the best use of your time or your company’s resources.
Do the analysis quickly and see what the results are. When you see the results you should know if they look and feel right, or if you need to go back and do a deeper analysis, or ask more/different questions.
The key issue throughout all the steps below is value.
Shareholder/business value and social/stakeholder value. They are what should connect the CSR budget, issues, stakeholders and programs.
If there is a value disconnect it needs to be addressed.
The focus of the process presented below is to identify value disconnects and also value efficiencies across issues, stakeholders and programs.
The outcome is an overall CSR program that is more efficient at delivering value to shareholders and stakeholders.
1. What are the business issues that the CSR budget needs to address?
List and group the issues.
There should be a direct connection between CSR spending and business issues. Every penny of the budget should connect back to a business issue.
In general the business issues will group around or across themes such as risk, value/opportunity, reputational/brand, etc.
There may be some that don’t fit neatly in or across these areas but your intuition and experience will probably suggest how they should be grouped
2. What are the social/stakeholder issues that the CSR budget needs to address?
List and group the issues.
In the same way that CSR spending needs to connect directly to business issues it also needs to connect directly to social and stakeholder issues. It is all about the alignment of these interests.
Social and stakeholder issues, especially in developing economy contexts, can often be grouped along the Millennium Development Goal / Sustainable Development Goal key themes of poverty reduction, education, healthcare, environment and gender
There may be some that don’t fit in these groupings so, same as with the business issues, let your intuition and experience guide you in grouping and organizing them.
As you identify and organize issues be sure to identify the stakeholders and their interests that link with the issues. There will seldom be an issue that does not link with one or more stakeholder groups.
3. Are there any other issues that the CSR budget should be addressing?
Sometimes there are additional issues that might not seem to be social or stakeholder issues but that you think should be addressed by the CSR budget/program.
Make a list of them and, if it makes sense, group and organize them. If there aren’t any that is good too
4. Review and analyze these issues
Take a quick, but consistent look at the issues identified above.
Don’t spend a ton of time on it, but enough to get a sense of key issues and, most importantly, their connection to shareholder and social/stakeholder value.
Below are some questions that I’ve found helpful for doing a quick but consistent examination of issues.
· Did it change in importance over time?
i. Was this issue on the radar last year?
ii. Was it more or less important?
· How does this issue connect to shareholder value?
· How does it connect to social/stakeholder value?
· Who else is interested in the issue (possible partners/collaborators/synergy)?
5. Make a list of CSR and stakeholder programs and activities
This list should already exist and be up to date but, surprisingly, it is often a bit of a scramble to get it together.
In my experience this is because there is seldom an overall strategic CSR plan that guides the development and implementation of CSR and stakeholder programs.
Without a strategic plan to serve as a guide CSR programs and activities often evolve ad-hoc in reaction to various issues and events
At any rate, if a list already exists use it, but check it to make sure it has all the programs and activities on it. If there isn’t a list you need to make one (and be sure it is kept up – it is important for many reasons).
6. Identify value, issues and interests for each CSR program and activity
This is where the gaps start to appear, and the efficiency and synergy potential. It is actually the most exciting part.
It is where this sort of systematic approach can identify exciting opportunities.
But, first you need to go through the list of CSR programs and activities and for each one list:
· All the issues that it addresses (shareholder, stakeholder and social issues);
· The stakeholders and their interests that it addresses; and
· The value it creates or preserves.
When you finish this exercise you should start to have a good sense of how each program and activity connects to value; to shareholder value and to social and stakeholder value.
7. Identify CSR programs and activities for each issue
Yes. I know it seems redundant but it is important.
When you finish this step you will have
· A program centric perspective where you can see all the issues and interest that each program addresses
· An issues centric perspective where you can see all the programs that address each issue.
8. Review and analyze the issues perspective and the program perspective
This analysis will let you see which issues have the most attention from programs and which programs address the most issues.
You have already connected the issues to value and interest dimensions so you can bring that into the analysis.
Add in budget considerations to be able to see the resourcing going towards the various issues, interests and groups.
I’ve found that some questions can help with this analysis
· Are there important issues that may not be getting enough program or budget attention?
· Are there issues that seem to be getting too much program and budget attention?
· Are there CSR programs and activities that have little connection to shareholder and social/stakeholder value?
· Are there opportunities for synergy across issues and interests?
· Are we making full use of partnerships?
There are normally project/business specific questions that would be used as well.
What is important is to do it systematically, but quickly and think through what the analysis tells you.
Too often what may have started as a good project and with a solid management framework can end up being an inefficient spend of budget and time. Things change.
Legacy projects can end up carrying over from year to year to year without serious analysis to see if they are still the best way to deliver value for shareholders and society.
When you have completed this process you will have a good sense of the current connection between issues, value and programs.
In most cases the outcomes from this process will include:
· Wind-up and closure of programs that are no longer producing value (sometimes because other programs are just more efficient at addressing the issues and creating value);
· Consolidation of some programs and activities to achieve synergies and a better relationship of impact to budget;
· Identification of partnership opportunities;
· Identification of issues that are simply getting more attention than they warrant.
Of course, this process will not address all CSR budget issues, nor will it work as a cookie cutter approach to be applied to every company and project.
It is intended as a guide to facilitate a systematic approach to a strategic review of CSR programs and budgets.
Most users will add their own tweaks and customization. That is good.
The overall intent is to help make CSR spending and activities more efficient at creating shareholder and stakeholder value.