The changing tide of corporate social responsibility (CSR) reporting
Every company, charity to fortune 500, creates ‘impact’ (vis-à-vis material effects) on society and environment. New models are needed to objectively define, benchmark, and report on these impacts.
CSR has been used in the vernacular since the 1960’s. Under its auspices we have seen a paradigm shift in the way businesses think and talk about their impact on society and the environment. It has nobly served its purpose, but we would argue its models are becoming increasingly outdated.
Historically, CSR has often sat on the periphery of companies’ decision-making horizons. While business leaders have made attempts to mitigate social and environmental issues through their CSR wings, until recently these decisions were not typically seen as central to a company’s core business interests. Now, recent shifts in governance, consumer, and investor behaviour are forcing companies to incorporate social and environmental concerns into the core of their decision making process regarding their product(s) or service(s). As a result, CSR is undergoing a phase shift, moving towards the next era of corporate responsibility, which centres around understanding the material effects that a given company, product and/or service is having on the ecosystem(s) in which it operates.
Using the UN Sustainable Development Goals for corporate impact reporting
This phase shift is evidenced by the fact that more businesses are now embracing “impact management and evaluation” methodologies, to understand how a given product or service creates material effects (positively or negatively) on society and environment. Yet in this nascent, emergent phase of impact reporting, the ecosystem lacks an objective framework to define, monitor, assess, and communicate these impacts. We are of the opinion that the market is shifting attention to the United Nations Sustainable Development Goals (UN SDGs) as an objective framework through which to understand and report on impact.
The UN SDGs are a set of goals agreed upon by the world community to “end poverty, protect the planet, and ensure prosperity for all.” Of the 17 Goals (ranging from topics such as women’s empowerment to climate action, education to employment), each is composed of a set of nuanced targets and indicators that can be leveraged to trace and report on the material effects created by companies. These are objective to the extent that they have the goodwill, support, and acknowledgement of the world community – more so than conducting CSR reporting with subjective and isolated metrics.
Applying SDG reporting to your business – why and how to do it
SDG reporting enables a company to take social and environmental concerns into the core of their decision making processes across all business functions. The targets and indicators that underlie the UN SDGs are precise and nuanced, enabling a company to have a holistic understanding of how each function (i.e. strategy, HR, supply chain, partners, etc.) of its business creates impact.
Aleron has developed a structured diagnostic tool that that allows any company to understand how their business functions map to the SDGs. We believe that SDG reporting offers a much more powerful alternative to traditional CSR reporting, letting a business understand its impact on the wider world in a consistent, objective way.
To spell out the discrepancy, traditionally, CSR has targeted issues outside of its core business, and used its resources to try and tackle the external issues that CSR has identified. For example, from a traditional CSR perspective, a company might identify that poverty in the local community is an issue. In an effort to tackle said issue, the CSR team might appropriate X amount of funds to local charities and run an employee engagement campaign that boosts awareness and volunteer efforts.
In contrast, SDG reporting informs the understanding of the value levers (i.e. core business operations), both internal and external, that exacerbate or reduce social and environmental issues. Using the above example of poverty in the community, from an SDG reporting perspective, a company will understand specifically how its presence in the community (i.e. wages, employment, displacement, employee benefits) and how its products/services are affecting the issue of poverty in its specific context.
Understanding where and how business functions are regressing or progressing the UN SDGs enables a company to identify blind spots of risk, hedge against future systemic risk, create a better working environment, retain employees, and enhance their bottom line.
With unprecedented challenges facing humanity (e.g. climate change, migration, resource scarcity, poverty etc.), business stands as the defining catalyst to either solve these issues or perpetuate them. It is our hope that business will heed the world’s call to action and tackle, head-on, the pressing issues of our day.
Want to find out more? Have a look at some of this further reading below, or talk to us today.