Introduction
It is easier to name the many types of programmes and activities under the banner of CSR that it is to draw quantifiable conclusions about them. Since CSR encompasses both
discrete programmes such as employee volunteer projects a nd more nebulous principles like cultural sensitivity, some types are easier to measure than others. Measurement of CSR can be broken down into three separate categories. First, measuring the order of magnitude of CSR at the present time: how many companies are implementing some kind of CSR, on what scale, and in what specific ways? Second, quantifying the social and environmental impact of existing programmes - in othe r words, quantifying corporate social and environmental performance (CSP). Third, identifying, measuring, and
explaining cause and effect relationships between companies' CSR activities and their financial performance.
6.1 Measuring current order of magnitude: Since CSR can be
operationalized in so many different ways; there are no reliable aggregate numbers available on CSR activity at the present time. The 'Global Reporting Initiative,' a key coalition of corporations, NGOs, accountancy organisations, business associations, and other stakeholders from around the world convened by the United Nations Environment Programme, confirmed in 2001 "there is a need to assess the uptake of CSR practices and aggregate and disaggregate data from various sources" (White, 2002). More readily available are case studies and some quantitative data on individual types of programmes, collected by
companies, governmental organisations, NGO's and coalitions. One notable source is the United Nations Global Compact website, which provides
information on CSR measurement in more than 180 countries.
6.2 Measuring corporate social and environmental performance :The current corporate social and environmental performance arena is crowded with a plethora of measurement and assessment tools. Most tools are specific to a program category or type, making comparison and aggregation difficult. While some governments require certain types of reporting, most of the current measurement and reporting regimes are voluntary. For example, the Caux Round Table, which regularly brings together 250 senior business leaders from 25 countries, published its 'Principles for Business' in 1994. This document
"seeks to express a worldwide standard for ethical and responsible corporate behavior and is offered as a foundation for dialogue and action by business and leaders worldwide" (Caux Round Table, 1994).
A second example of the private-sector working to develop its own standards is the
accounting profession. Accounting firms and professional accou nting societies, including the American Institute of Certified Public Accountants, the Institute of Chartered
Accountants in England and Wales, and the Society of Management Accountants of Canada, have designed frameworks of CSP indicators that companies can voluntarily apply. According to consulting firm KPMG, 35% of the world's 250 largest corporations now issue environmental reports (Kolk, 2000). A final example of private-sector
innovation in the area of standards is the social investing field. Social investing firms have constructed indexes of companies that are screened on social and environmental standards. In particular, KLD Research and Analytics's FDI (Domini 400 Social Index) screens for alcohol, tobacco, gambling, nuclear power, and military contracting
involvement, environmental impact, charitable contributions, women and minority directors and managers and other issues. The company's BMSI (Broad Market Social Index) consists of all companies within the Russell 3000 that pass similar screening criteria.
6.3 Determining linkages between social and environmental outcomes and financial performance: Many managers and companies are concerned about social or environmental problems, but still wonder why it should be their responsibility to get involved. Ultimately, most scholars and observers believe that only a proven cause-and-effect relationship between CSR activities and financial performance can dramatically increase CSR activity. Proving or demonstrating this linkage is often termed 'making the business case' for
corporate social responsibility. "The search for a link between CSP and financial performance is a quest that was begun many years ago and is not yet concluded. During the past 25 years, dozens of studies have examined this relationship"
(Roman et al., 1999)
Academic research has employed a plethora of different methods to measure relationships, as discussed in the earlier sections. Often, quantitative measures such as the above-mentioned KLD index and TRI database, company voluntary reporting, company levels of philanthropy, and manager surveys such as the Fortune Magazine Most Admired Companies list, are compared to financial statements.
6.4 Making the business case
a) CSR as a source of competitive advantage: Making the business case involves not only establishing a quantifiable between CSR involvement and financial performance, but also explaining to companies how CSR activities can be conceived as a source of competitive advantage. In other words, what are the specific benefits of CSR programs and activities; how do they contribute to the financial bottom line? Benefits such as cost reduction, human capital, reduced regulations, access to capital, consumer demand, improved business conditions, and new market opportunities are frequently reported.
b) Cost reduction: Costs can be cut through cleaner, more efficient
technologies, recycling, pollution prevention, and other means, Such measures not only reduce input costs in the short-run but also compliance and liability costs in the long run. For example, 3M's 'Pollution Prevention Pays' and Dow
Chemical's 'Waste Reduction Always Pays' programs have produced hundreds of millions of dollars in cost savings over the past decade.
c) Human capital considerations: Studies have shown that CSR activity increases companies 'ability to attract and retain employees, reduces employee turnover, and increases productivity and quality of work. Greening and Turban (2000) found that prospective job applicants are more likely to pursue jobs from socially responsible firms than from firms with poor social performance
reputations. This is an important finding given that a talented, quality workforce becoming an increasingly important source of competitive advantage for firms.
d) Reduced regulatory oversight: According to Business for Social Responsibility (2001), "companies that demonstrate they are engaging in practices that satisfy and go beyond regulatory compliance requirements are being given less scrutiny and more free reign by both national and local
government entities. The U.S. Federal Sentencing Guidelines allow penalties and fines against corporations to be reduced or even eliminated if a company can show it has taken 'good corporate citizenship' actions and has an effective ethics program in place."
e) Consumer demand: Increasingly, consumers are demanding good behavior on the part of companies; patronizing companies they perceive to be good corporate citizens and boycotting companies with poor reputations. The Internet has allowed for faster and easier consumer access to company
information, and websites such as Co-op America's 'The Responsible Shopper' are specifically tailored to assist consumers in altering their buying behavior. Just how sensitive is consumer-buying behavior to the social environmental
performance of companies? A 1999 survey showed that two-thirds of U.S. consumers want companies to expand their roles to embrace broader social goals, and that half are paying attention to the social actions of companies
(Environics, 2000). A study by McWilliams (2001) confirmed the rise in consumer sensitivity to corporate social performance, but also found that such sensitivity is tempered by other factors such as product price, advertising, level of disposable income, consumers' tastes and preferences, demographics, and the price of substitute products.
Several scholars have compared consumer sensitivity to CSR across cultures. Zalka et al. (1997) compared behavior in the U.S., the U.K., and South Africa, and found that consumers in the U.K. were most willing "to boycott and avoid buying from, investing in or working for irresponsible companies," followed by South African and then U.S. consumers. The study also found that in all three countries, women and people with left-leaning political orientations were more
likely to display sensitivity to companies' social performance. Maignan (2000) found that "consumers in France and Germany appear more willing to actively support responsible businesses than their U.S. counterparts," and a study by Polonsky et al. (2001) showed northern Europeans to display more sensitivity than southern Europeans to corporate citizenship issues.
Companies can capitalize on such consumer sensitivity by using social and environmental performance to build their reputation and brand image. One way to do so is through cause marketing, "a strategy designed to promote the
achievement of marketing objectives (e.g. brand sales) via company support of social causes." Annual spending on cause marketing in the U.S. alone exceeds $ 1billion (Barone, 2000). Other methods are public relations, package labeling, and information on the company website. A proliferation of awards programs in recent years, by which companies are recognized and rewarded for outstanding social and/or environmental performance, have also, helped companies to
establish their reputations. In 2003, Lupin26 has come up to the top business world FICCI-SEDF CSR awards. Previous years winners included TISCO (1999), TELCO (2002) and HINDALCO (2002). The other top sic companies in the year 2003 were ITC, WIPRO, Indal, Canara Bank and Gujarat Ambuja Cements. These awards are measuring the contribution.
f) Improved conditions for doing business: Strategic community
investment, both social and environmental, can enhance the capacity of a local environment over the long-term. Such investment builds the capacity of the local community, yielding concrete benefits such as greater availability of its natural resources, a better-trained workforce, and a consumer market better able to patronize and sustain the business.
6.5 Tata Sustainability Human Development Index
In India The Tata Council for Community Initiatives (TCCI) with the help of UNDP has undertaken pioneering work in developing a sustainable human development index to benchmark the contributions of Tata Corporates in the spheres of social development and environmental protection. This is indeed a significant step towards systematically
measuring the impact of Corporate Social Responsibility (CSR) initiatives of these
companies on the ground. UNDP feels privileged to have participated through its Human Development Resource Center in the TCCI initiative, sharing its experience in human development reporting and anal ysis. For more details on Tata Sustainability Index log on to http://indiango.com/tata.pdf
6.6 Measuring CSR- Resources available
Using standards to measure CSR is not widespread, but a number of organisations are developing benchmarks to monitor CSR.
Global Reporting Initiative for reporting on CSR http://www.globalreporting.org/index.htm
Business Impact / Winning with Integrity from Business in the
Communityhttp://www.business-impact.org/bi2/homes/winning.cfm. This is perhaps the most accessible site around, and has some useful guides on
developing and implementing a CSR strategy. However, there is still scope for trade unionists to improve the models in the Winning with Integrity initiative as it fails to involve trade unions at an early stage – in fact only in the latter stages does it advocate engaging and consulting with workers!
SIGMA (Sustainable Integrated Guidelines for Management) http://www.projectsigma.com/SIGMAProject/Links.asp
AA1000 framework and the Global Compact http://www.accountability.org.uk/ The organisation behind AA1000 is Accountability the institute of social and ethical accountability.
UN Global Compact (www.unglobalcompact.org) provides a number of tools for businesses to support human rights, labour and environmental standards.
International Labour Office
(www.ilo.org,www.itcilo.it/english/actrav/telearn/global/ilo/code/main.htm) has a code of conduct for multi-national enterprises and suggest labour standards for its member nation states.
United Nations Environment Programme (www.uneptie.org) produces annual reports on benchmarking the sustainability of corporations.
6.7 Conclusion
The measurement of CSR helps businesses to better align organizational responses to the requirements of the stakeholders that they serve. The measurement of CSR will
undoubtedly be useful for the CEOs and all the employees who devote precious time and resources in upholding their common commitment to society.
Measurement of CSR can be broken down into three separate categories. First, measuring the order of magnitude of CSR at the present time: how many
companies are implementing some kind of CSR, on what scale, and in what specific ways? Second, quantifying the social and environmental impact of existing programs - in other words, quantifying corporate social and
environmental performance (CSP). Third, identifying, measuring, and explaining cause and effect relationships between companies' CSR activities and their financial performance.