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CEOs Embrace Corporate Social Responsibility With New Urgency, but Do They Risk Angering Shareholder

Posted: July 10, 2006

Ask any Fortune 500 CEO to talk about how philanthropic and socially responsible his or her company is these days and you will likely open a floodgate of conversation ranging from carbon-offsetting and fair labor standards to employee volunteering programs. As reported in the June 26 issue of BusinessWeek, CEOs of companies including GE, Procter & Gamble, and British Petroleum are going to heightened lengths to develop a "congenial" reputation and improve the public image of their companies. Even Wal-Mart CEO H. Lee Scott Jr., whose company has often been noted for its unrelenting focus on shareholder value, has finally relented to negative press about the company's links to social and environmental problems and launched a number of distinctly community-related initiatives. This corporate pendulum swing may be seen as an inevitable reaction to the public's cynicism about recent scandals, but the shareholders of aspiring socially responsible companies may also push back unless CEOs can definitively answer the following question: Is all of this benefiting -- or hurting -- the bottom line?

Surprisingly few business executives are prepared to answer that question with more than anecdotal evidence. According to Christine Letts, the Rita E. Hauser Lecturer in the Practice of Philanthropy and Nonprofit Leadership at Harvard University, rigorous evaluation of corporate social responsibility programs is a challenge. "Historically, companies have thought of philanthropic activities as being very separate from business operations, in a place where measuring performance wasn't a priority," said Ms. Letts. "Now that companies are tying philanthropy more closely to business strategy, the discipline of measuring results is getting a lot more attention." Measuring philanthropic impact may be a priority, but that doesn't mean that companies have figured out how to do it well. At a recent closed-door CEO roundtable discussion hosted in New York City by the Conference Board, many business leaders agreed that measuring the results of their community outreach is the biggest challenge they face. With corporate giving up 14% in 2005 according to 62 large companies surveyed by the CECP (Committee to Encourage Corporate Philanthropy), shareholders may start demanding more accountability.

Common Impact Inc., a Boston-based nonprofit solutions company formerly known as Harbinger Partners, has developed measurement and evaluation systems to help its corporate partners better understand and report on the business benefits associated with its skills-based volunteering programs. In the same CECP survey noted previously, 87 percent of all companies said they had at least one formal volunteer program, with 44 percent offering paid time off for employee volunteering. Common Impact provides its corporate partners, including Fidelity Investments, State Street Corporation and Cisco Systems, with feedback that demonstrates the actual benefits that their employees derive from volunteering, along with data about community impact and social return on investment. For example, Common Impact can report to Fidelity that as a result of the nine nonprofit engagements their volunteer teams have completed for organizations including Generations Inc., Somerville-Cambridge Elder Services, and the Boston Learning Center, 80 percent of participating volunteers reported developing new skills, 60 percent reported meeting new colleagues, and the estimated value of the projects ranged from a 110 percent to 500 percent return on investment.

"People are usually shocked when they see the data we are able to share with them from our projects," said Theresa Ellis, CEO and founder of Common Impact. "There is a tremendous opportunity to help companies see clearly how these activities are contributing to their overall business quite concretely," Ellis continued. "Our goal is to help more companies feel confident that they are directing their employees' volunteer time to programs that benefit their brand, employees, and community."

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