Farron Levy, Founder & CEO of True Impact, a consultancy that helps companies measure the social and business value of their operating practices, offered good advice this week about making the business case for CSR. Here’s what he had to say direct from his e-newsletter:Q. I want to make the business case for our CSR activities. Are there any studies that can help me calculate the value on stock price? Academic research on this topic has been plentiful, but with inconclusive results. Some studies [he sites references here, but they require subscription, so I removed them] have found a positive correlation between CSR and profitability or stock price. However, correlation means only that the two conditions tend to exist at the same time. None has been able to establish that CSR causes profitability, as opposed to the reverse: that profitability “causes” (enables) CSR. And don’t expect that to change. One reason is stock price is simply too blunt an instrument to value typical community or environmental initiatives. Consider a million dollar investment by a Fortune 500 company that yields $10 million to the bottom line. This heroic return would almost certainly gain senior leadership (and media) attention, yet remain a drop in the bucket as compared to the company’s overall revenues and profitability. This dynamic – where significant department-level value can disappear when using company-level metrics – tends to exist regardless of company size. So forget about Wall Street, and start building relationships with your colleagues in sales, recruiting, HR, regulatory affairs, and so on. Coordinating with them (and tapping data they’re likely already collecting) is the easiest way to track your revenue- or cost-related impacts, and the most promising road to a compelling business case. I don’t know if we can forget Wall Street when talking to our C-level leaders, but he makes a good point. Do you agree?
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