Policy Innovations Digital Magazine (2006-2016): Innovations: Information Gaps Hinder CSR Achievement

IBM recently completed its second annual survey of senior executives from around the world about the importance of green and sustainability issues to their corporate strategies, and the results are encouraging in some respects. But they also indicate how far businesses still need to go to be truly sustainable.

The overwhelming majority of the 224 respondents remain committed to incorporating corporate social responsibilities principles into their business strategies—despite the global recession—to improve business performance, societal contribution, and reputation. Sixty percent said it was more important to their strategic objectives than it was a year ago, with only 6 percent saying it was less important.

We now live in faster, flatter, more interconnected world, and that is changing business strategy, as is a greater awareness of systemic risk and its consequences. In addition, stakeholders of all types—investors, partners, employees, governments, NGOs, and most of all customers—are highly attuned to sustainability issues, closely monitoring what companies do, and making business and regulatory decisions based on what they see.

These conditions make a strong case for a sustainable approach to doing business, one that recognizes that the long-term health of an organization is inextricably tied to the well-being of society and the planet.

To be sustainable, businesses are now embracing a relatively new objective: optimizing their operations to minimize environmental impact and improve social outcomes in a manner that also maximizes performance.

But our survey showed a significant gap between the business and sustainability goals companies are setting for themselves and their actual ability to attain them. At the crux of the problem is information.

Specifically, the survey findings showed:

• Companies aren't collecting and analyzing all the right information about CSR or aggregating it often enough. That means they can't implement real changes that would fundamentally increase efficiency, lower costs, reduce environmental impact, and improve reputation with key stakeholders;
• Few are collecting enough CSR data from global supply chain partners—missing a major opportunity to reduce inconsistency, inefficiency, waste, and risk that can ripple through a global supply network;
• Most still don't understand the concerns of their key stakeholders, particularly customers, and are not actively engaging them. That means they're not capturing valuable insights that could improve their businesses and provide access to new opportunities.

The Information Gap

I'll provide an illustration of the information gap problem. Many companies are trying to reduce their energy use and lower their CO2 emissions—to reduce costs and improve efficiency, meet growing government regulations, and address stakeholder concerns.

In order to do that, they need to know where and how they are consuming energy throughout all phases of their operations—everything from datacenters, to office space, to manufacturing, to delivery to customers, and the entire lifecycle of their products. Then they need to determine where they can make reductions balanced against considerations like, cost, quality, and service.

But in our survey, only 19 percent of the respondents said they are collecting data on CO2 emissions weekly or more frequently. The rest are collecting it no more than monthly and most only quarterly. That may be sufficient to meet government or stakeholder demands for information, but not nearly enough to make systemic changes that would reduce environmental impact.

Early efforts suggest that collaboration is essential to addressing this gap. Instead of going it alone, leading organizations are exchanging information with customers, industry groups, and NGOs to expand their pool of knowledge and to benchmark against similar companies. They are joining with partners, suppliers, and even competitors to exchange leading practices and ultimately create common standards for sustainability. Standards are a requirement for effectively implementing a CSR strategy over the long term.

Key Survey Findings

Some of the key findings of the survey further illustrate the information gap and why it's occurring.

Eight-seven percent of executives responding to the survey say they are focusing CSR activities on improving efficiency, and 69 percent say they are using CSR to help create new revenue opportunities, but only 30 percent are collecting data frequently enough to make strategic decisions that address inefficiencies across eight major categories—CO2, water, waste, energy, sustainable procurement, labor standards, production composition, and product lifecycle. Twenty-four percent are collecting this information only monthly and 32 percent no more than quarterly.

Twenty-nine percent aren't collecting any data at all from their supply chains. Eight in 10 aren't collecting supplier data for CO2 and water, and six in 10 aren't checking supplier data for labor standards.

Sixty-five percent say they still don't understand their customers concerns about CSR issues, while 37 percent aren't conducting any research on the topic.

The bright spot in these findings came from companies that outperform competitors. Outperformers rank consistently higher in collecting every type of CSR information frequently or in real-time across all major green and sustainability categories—from CO2 emissions and water conservation to ethical labor standards and sustainable procurement. They also ranked higher in information collection from suppliers.

Nearly twice as many of the outperformers said they understand customer concerns about CSR. They also are more proactive in collaborating with key stakeholders and twice as likely to rate open sharing of information among business partners and stakeholders as being of the highest importance in achieving their CSR objectives.

That indicates at least a correlation between business success and effectively executing on strategic CSR goals.

Bridging the Gaps

To succeed in filling this data gap and succeeding in incorporating CSR principles into their business strategies, companies need to consider the following actions:

• Identify information gaps and needed analysis. Is the CSR information they're collecting relevant and timely enough to make strategic decisions? Are they getting the information they need from their business partners and suppliers? Do they understand their customers' CSR concerns as well as those of other key stakeholders?
• Align objectives with those of stakeholders; then prioritize. Stakeholders require a lot of information, but their information demands can't be the only focus. Are companies collecting information that helps them meet their business objectives, and are they communicating those objectives to stakeholders?
• Assess leading practices and benchmarks. Have they identified sustainability leading practices and benchmarks for their key CSR activities? Are they participating in industry or activity-focused coalitions that are developing leading practices and benchmarks? Are there frameworks or scorecards to weigh the impact of activities against overall objectives?

The answers to these questions can help set and prioritize a course of action. As these actions advance a company's CSR strategy, they'll be well positioned to reap the business benefits of more efficient operations and better balance with diverse social and environmental ecosystems.

Jeff Hittner is the CSR leader for IBM Global Business Services. He works with a range of industries and clients to address the emerging role of CSR and sustainability in core business strategies.