Assessing the Impact of Corporate Social Responsibility

Corporate social responsibility (CSR) is now a well-established field in which companies are expected to take measures to improve their impacts on society and the environment. But why should businesses be more responsible, how can this influence development, and how can they assess their impact?

During the European Development Days 2015 panel discussion on ‘Managing business impacts on sustainable development’, Sustainalytics (a sustainability research and analysis firm) presented their case study of the Thai prawn industry. Sonja Siewerth, Associate Analyst with the firm, explained that the widespread use of forced labour in the Thai prawn industry is a result of rapidly growing demand for cheap prawn from developed markets like Europe, North America and Japan.

The situation in Thailand is a prime example of major players dropping the ball when it comes to enforcing responsible behaviour throughout the reach of their operations. “The Guardian conducted a six month investigation on the Thai prawn industry last year, and it revealed that CP Foods, a major producer of prawn, was involved in forced labour allegations in the supply chain,” said Siewerth.

Several major retailers suspended their contracts with CP Foods following the investigation’s revelations and an international task force has been set up to address the issue reactively. “I found it interesting that, for example, Carrefour was very responsive to these allegations and withdrew its licence with CP Foods. This is a clear case where a company is listening to stakeholder voices to address a sustainability related issue,” added Siewerth. But how can the private sector proactively manage its impact and remove risk from its operations?

Impact Assessment Tools

With growing awareness and engagement, companies will see more and more resources being developed to help them identify their impacts. “I think we are at a very interesting point at the moment,” said Wolfgang Meyer, Vice-Director of the Center for Evaluation at Saarland University (CEval).

For example, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, a German federal enterprise in the field of international cooperation for sustainable development, is participating in the development of a tool that will allow companies to evaluate their social and ecological impacts, and then introduce positive impacts into their business models.

Thomas Rolf, Senior Manager at GIZ, highlights the need for not only identifying risks and negative impacts, but also for discovering “unintended positive impacts” through evaluation of companies’ business models. He used the example of a public-private partnership that sets up solar powered charging stations for mobile phones in Africa. The charging stations ended up producing surplus power that could be sold, thereby introducing reliable and renewable energy for the local community, while generating enough revenue to maintain the station. This was an unintended impact, but nonetheless the type that can help a company “translate their business model into the development language,” he said.

There are already a multitude of impact assessment, evaluation, and other tools available. The Social Business Scorecard (SBS) produced by CERISE, a French network for ethical finance, is a free online tool that assesses the processes in place to reach impacts. It provides a common framework for social businesses - businesses that have objectives other than profit maximisation - to self-assess the processes that they use based on seven key elements, for example ‘Purpose’, ‘Ethical Principles’ and ‘Profits’.

The B Impact Assessment is an example of a tool that can be used by large organisations. It was developed by the Standards Advisory Council, an independent committee of experts from academia and the corporate world. Impacts are measured in the areas of ‘Governance’, ‘Workers’, ‘Community’ and ‘Environment’. Etsy, the online marketplace for handmade items, used the tool to determine its baseline impact performance. The company then addressed its weaker areas by introducing new policies and practices, such as employee volunteering days.

So where do organisations start once they have decided to embark on the impact assessment process, especially with hundreds of tools like these examples available?

GLOBAL VALUE Project

GLOBAL VALUE is a three-year project funded by the European Commission that aims to establish clear pathways for companies who want to assess their impacts on sustainable development. Meyer, a collaborator on the project, explained that there is such a wide range of tools available, from “really quick and dirty” tools to incredibly complex and time-consuming processes that demand a great amount of time and resources from companies.

With the variety of tools available potentially acting as a barrier to companies starting on the impact assessment process, the main deliverable of the project will be an online navigator to help them identify which tool would be best tailored to their needs. They are also working with three multinational companies to road-test different tools and will publish those results alongside the navigator. 

“By doing this we hope to increase market transparency for businesses wanting to engage with these issues,” said Norma Schönherr, Project Coordinator and Research Fellow at Vienna University of Economics and Business, regarding the project’s mission. She cited the development of an “expert crowd” as one of the project’s potential keys to success: “We’re relying on the power of crowd intelligence to inform what the project really needs to deliver.”

The value of conducting business responsibly lies not only in complying with the law and avoiding financial and reputational risks, but also in sustainably accessing rapidly growing markets. Rolf emphasised that “there’s an untapped potential for SMEs [small- and medium-sized enterprises], to connect them to [developing] markets and then also to connect the business goals with the development goals.”

As more and more companies wake up to the realities of conducting business in the 21^st century, the requirement for a consistent and accessible approach to impact assessment and evaluation will only grow stronger. “The way forward is that we have an open dialogue and an open communication, and we are starting to share knowledge and work on certain issues, like the issue in the prawn industry in Thailand, together,” said Siewerth.

Please note that the European Commission does not endorse the tools mentioned above, these are examples shared for the purpose of knowledge sharing.

This collaborative piece was drafted by Emma Brown with support from the capacity4dev.eu Coordination Team.