VA
Insights

A McKinsey Global CSR survey in 2009 shows more than 50% of CSR professionals don’t know whether social, environmental, and/or governance programs are creating shareholder value for the organization. VA believes the situation shall be similar in China today.

With increasing number of companies engaged in CSR programs, while most of them have brought in certain level of social impact, many are facing the challenge to create higher value for the company to ensure sustainable CSR investments.

VA believes there are two factors that companies shall consider for better CSR value realization: project selection/ design, and systematic management.

CSR Project Selection/Design

Similar to product strategy in the business world, differentiation is the key to a winning CSR program, which can be achieved through 2 pathways:

Differentiation in CSR sector selection

Our research shows among Fortune top 100 companies in China, over 80% are engaged in children/education related CSR activities, followed by over 70% in environmental protection sector, while less companies are working in poverty alleviation or community development sectors

CSR professionals may consider a less-crowded sector to build a differentiated CSR program versus competitors. This also enables the company to stand out easily in media coverage or other external communications

Differentiation in program design

Low competitiveness is just one criterion in selecting CSR focus sector. Other considerations such as leverage of business expertise and available resources, in many cases, may finally lead to education type of sector that has already attracted lots of other organizations.

However, still many companies can stand out within a competitive sector. Innovative solution, tailored program integrated with business operation, long-term commitment instead of ad-hoc activities are just a few examples of how to design a differentiated CSR program.

For example, in poverty alleviation sector, when most companies are supporting projects run by NGOs, a global beverage company has chosen a fair-trade program in coffee plantation where the coffee will be used in its own chain café.

Another example is community service projects run by a company specialized in personal care products. Since the company is using directs sales model in China, most of its direct sales force are pressurized by negative public image. Participating in community services has effectively raised self-esteem, moderated frustration of sales force, and reduced attrition.

Systematic CSR Management

A good program design can help value-creation, but not necessarily value-realization. Systematic management is crucial. However, due to limited resources and perceptional issues, CSR program in many companies are not managed at the same professional level as other business functions. Below are the key elements of a management mechanism that shall not be neglected.

Tracking and reporting

For both of social impact and business impact, clear objectives, a set of indicators and periodical tracking are important tools to manage CSR programs.

This information shall be released regularly, which builds a strong foundation to assess the effectiveness of initial program design, identify improvement areas, and more importantly, justify CSR investments.

We’ve seen the trend for global companies to track financial performance of CSR activities, and integrate sustainability with financial reporting. Analysts in the capital market believe that sustainability data can help diminish financial risks and improve investment opportunities.

Communication

Regular internal & external communications can greatly help engage various stakeholders to value the efforts and CSR investments

Specifically, for consumer goods companies, social media can be an effective tool for cause marketing. A Nielson survey in 2011 finds that socially conscious consumers are more likely (59%) than other groups to use social media to help make purchase decisions

We’ve seen more and more companies moving from ad-hoc and project-based CSR involvements to a strategically planned and professionally managed CSR practice. And VA suggests CSR professionals should keep asking the 3 questions:

• Do we have a differentiated CSR program?
• Have we integrated CSR with business strategy?
• Is our CSR program systematically managed?