Corporate social and environmental responsibility is widely considered to add value, but the metrics just aren’t there yet to quantify the effect on shareholder value. That is one of the conclusions drawn by McKinsey and Company researchers based on their recent survey of Chief Financial Officers (CFOs) and investment professionals, shared here with their permission. In today’s unsettled global economic climate, survey respondents considered corporate governance programs more critical to value than social or environmental programs. While the survey found some distinct differences between the views of CFOs and those of the investors, solid majorities of all respondents expect environmental, social, and governance programs to create more value in the next five years. This finding suggests an opportunity in developing better metrics for documenting and trending such value adds.
McKinsey’s researchers report that both CFOs and professional investors see the existence of high-performing environmental, social, and governance programs as a proxy for how effectively a business is managed; more than 80 percent of both groups say that is at least “somewhat” true. Their survey suggests that this view is more widely held among Europeans than among Americans. By wide margins, CFOs, investment professionals, and corporate social responsibility professionals agree that maintaining a good corporate reputation or brand equity is the most important way these programs create value. Beyond that, there was a lack of agreement on which activities add value.
I can well imagine that the perceived value can be influenced by personal perspectives. Those among us who choose to recycle, support public transit, and live green at home are more likely to put great stock in our organizations’ environmental programs, and would probably agree that such programs help our organizations attract and retain top talent. However, the million dollar question is, how can those conclusions be proven?
The surveyed CFOs and investment professionals who do not consider such programs in their corporate project and investment decisions were largely agreed that the contributions are too indirect to value or the available data are insufficient to make the case. The challenge seems to be in connecting the dots and making the business case; in other words: how to show them the money.
In recent years it seems that SCN members have increasingly supported the corporate social responsibility initiatives at the places where we work, do business, and invest. SAP’s Sustainability Report demonstrates SAP’s commitment to sustainability and to assisting customers in such endeavors. I would suggest that there is an opportunity here for enterprising IT “geeks” to team up with the “suits” to identify meaningful metrics and develop tools for recording and communicating them to the decision makers in the C-suites and investment offices. It is a mystery to me why this connection has not yet been made in the minds of these financial decision-makers. When I think of corporate environmental programs, many of them are wholly or in part IT-based; landscape and data center consolidation, virtualization, mobile data collection, web meetings, and telecommuting are just a few of the green initiatives that surely have must a positive bottom-line impact. Some betterment initiatives that have an enabling technology component serve both social and environmental goals, such as the broadband technologies assisting farmers of developing countries in making their irrigation more efficient, for improved water conservation. Is the payoff really that distant, or are the contributions to shareholder value not being recognized and communicated? That is what my inquiring mind wants to know. I challenge SCN members; let’s put on our thinking caps and see if we can’t come up with some answers and persuasive facts.