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Business is changing in the United States. You saw it when Toyota bet on the hybrid Prius while gas was still cheap. Now they are surpassing General Motors in U.S. sales and number of vehicles stamped “Made in the U.S.A.” You read about carbon footprints and how to minimize them. The word “green” is attached to everything imaginable, often as a sales gimmick. A backlash against “greening” has spawned the term “greenwashing.” So amid all this hype, how can a company honestly become “greener” and still be credible in this hyperactive environment? How is your company effectively measuring green and corporate social responsibility (CSR)?

Consumers expect more from the companies they buy from these days. Companies ahead of the curve are experiencing some success. Starbucks, for instance, has the highest return-customer numbers in its segment and base success on core tenets other businesses balked at as too costly, such as health care for both part-time and full-time employees, and using Fair Trade coffee beans. Another model company, Whole Foods, employs a rigorous evaluation of every product sold to ensure no artificial ingredients are used.

Companies across many industries are now approaching green and corporate social responsibility (CSR) measurement from different angles. Some are trying to use the Global Reporting Initiative framework and some follow one or several key metrics. This article offers a framework that helps leverage the balanced scorecard, simplifies reporting for corporate social responsibility and provides general guidance to suit various industry needs to track and measure CSR impact.

Overview: Balanced Scorecard

The balanced scorecard is a methodology devised by Robert Kaplan and David Norton and published in the mid-‘90s. Simplified, the premise is that a business cannot be measured on financial results alone; other important factors are analyzed to provide the foundation for the business’s financial success or failure. The balanced scorecard addresses four measurable areas, called perspectives – learning and growth, internal business process, customer satisfaction and financial.

The Perspectives: Renamed and Organized

If you question the foundation of most businesses, you begin to realize that the financial numbers are the end game – the measure that indicates the ultimate success or failure. Success or failure starts in a different place. It starts with the people: employees and management. A business without people is not a business. People are the first priority to having a successful business. The right people are critical. Once you have people, you need them to do something. We call that process. They are following a process to generate a product or service. A bunch of goods or services without customers is no good, so that leads you to customer satisfaction. Once you have customers you can begin to track your financial results. In this article, these perspectives are slightly modified to just be people, process, customer and financial.

Why Themes Matter

Each perspective (people, process, customer and financial) is assigned a broad theme. The theme helps you understand where to focus the measures. Some frameworks get into hair-splitting specifics and do not give you the flexibility to do what makes sense for your own company. Themes are guardrails – stay between them and have your measures line up with the theme conceptually.

For example, the theme for process is reduce. If you look at process, you could create a lot of measures for process; but if you want to really impact green, your focus will be on something that reduces energy consumption, material usage, non-sustainable material consumption, paper consumption, etc.

Later you’ll read about core metrics that will be useful in most cases. However, your business may be unique and require a more specific measure. In that case, use the theme to guide the measures and focus.

Define Themes

Some reporting frameworks attempt to give you overly specific measures. For example, CSR metrics related to people might include references to the number of Native Americans employed by your company. The themes discussed in this article are only guides, however, to help your company create measures that make sense for your organization. You may choose to use these measures or find there are more poignant ones due to your company’s specific situation. In that case, you should reference the themes to understand the intent behind the measures to help guide you.

People

Engage Explained
In general, people want to belong to something be it a community, cause, or family. Working helps people find greater meaning in life; something to rally around. The theme for people is engage.

This is not a cheesy corporate rallying cry, mind you. Today, we hear a lot of lip service from corporations about focusing on their people. Let’s face it, it is much easier to say the right words than to consistently do the right thing. Even companies with great mission statements routinely diminish or eliminate the employee bonus pool while ensuring executives receive extraordinary compensation. The same companies and executives question why there is a lack of employee engagement and loyalty. If a company wants great results that persist over time, it has to focus on a basic value – treat people well and engage them.

Southwest Airlines is one company that consistently does an amazing job of engaging employees, and it reaps substantial financial rewards. Typically well-treated employees extend that same courtesy to customers, and customers reward those companies with business. Treating people well has to emanate from the business’s core values or it will be seen (rightfully so) as a hollow attempt to connect with employees. Companies that truly engage employees use this as a compass that drives business decisions.

Process

Reduce the Process
You can see tangible change quickly in this process area. Reduce is a broad theme and can impact time-to-market, quantity and types of materials used, manufacturing efficiencies, and the size of a shop floor, just to give you an idea.

In recent years, many progressive companies began focusing on reducing carbon footprints with the expectation that carbon would be taxed and limited in the future. This is a great step on the path of "reducing" process. However, there is more to be done. This is the easiest internal sell because impacting the process area can result in hard dollar savings.

As companies evaluate their processes, they may discover ways to minimize packaging, thereby saving on packaging and transportation costs. Ozarka Water manufactures nearly all of its bottles onsite, reducing the fuel needed to transport them elsewhere. Additionally, the bottle design uses 30% less plastic than the average half-liter bottle. Smart manufacturers strive to reduce waste as a matter of good manufacturing practice, and it impacts the environment by creating less trash for landfills.

Customer

Satisfy Your Customers
Customers are savvier than ever before with access to news and information, good or bad, available at their fingertips any time of day. They listen to reports about the need for green, sustainable products and participate in web-based social networks. They choose cleaner energy options by choosing alternative providers over traditional ones. Some long-time providers like TXU have moved to offer energy plans that benefit the environment. Businesses that reach out to fulfill customers’ desire to do the right thing with purchasing dollars are tapping into unfulfilled opportunities.

Financial

Impact the Finances
What difference does being socially responsible or pursuing green initiatives make? Sometimes CSR and green are accused of being “feel good” initiatives or not “real” business. This is where the rubber meets the road, so to speak. A business focused on doing the right thing (CSR, green, etc.) will see results given enough time and focus. Green initiatives are taking a strong hold of American business today because business is realizing that green is not just a “hippy-dippy” idea, but instead good business with financial benefits to be gained. There also are marketing and branding opportunities if a company wants to pursue that angle. Every major business publication features articles about the financial benefits of being green. Whether you read Harvard Business Review, Fast Company, Fortune or Business Week, you read about impressive initiatives some companies are taking to make the planet a better place because it makes sense ethically as well as financially.

All types of businesses can pursue CSR and green initiatives. Oil and gas, though not the first industry people think of as pursuing green initiatives, has some impressive projects that impact the bottom line. Key Energy Services, a large well-servicing company, refurbishes rigs using every working part they can from a rig that may be decommissioned for one reason or another. They take the usable parts and put them on another rig or store them for future use.

Measures Chart

Figure 2 shows a framework most companies can use to evaluate CSR and green initiatives. This is a good starting point that can be modified to meet your specific needs.

Measures in Action

People/Engage Measurement
Average employee tenure – what does that have to do with CSR? Good question. Engaged people tend to stay longer and be happier. That in itself is a contribution to the individual and society. It is important to not only consider the average tenure within the company, but to also consider the industry average. Retail, for example, has high attrition rates, but a company like the Container Store, which in 2007 had voluntary attrition of 19%, is doing very well compared to an industry average hovering near 50%.

Process/Reduce Measurement
Measuring direct impact from a green or socially responsible process change is doable.

“Energy per widget” is one way to measure consumption. Frito-Lay uses energy consumption per pound of snacks. That measurement has seen an amazing decrease of 24% since 1999. It is also important to look at the total energy consumed to balance any growth in sales that leverage fixed-energy usage.

Customer/Satisfy Measurements
Customers that buy green generally want to do their part to help the planet as long as it’s pretty easy and doesn’t cost too much. This trend has gained momentum over the years and seems unstoppable now. Looking at Whole Foods again, company leaders anticipated people’s desire to do better for the environment and a willingness to pay a premium to do so. So they took a staid grocery business and created a shopping experience. The entire brand is built on natural foods with processes in place to ensure customers truly get natural products. This has been so successful that Whole Foods went from solely being a grocery chain, to manufacturing private label items which extended their reach to the more cost-conscious buyer who wanted natural foods.

Another measurement is green products that resonate. Monitor your product mix and identify which green, sustainable, and/or recyclable products resonate most with customers. Home Depot helped to counter rising home energy costs by upping its compact fluorescent light bulb promotion. Last year’s sales increased 75% over 2006 which had a 50% increase. Customers today want the opportunity to leverage their purchases into a positive impact on the planet at minimal extra cost and no loss in performance.

Finance/Impact Measurement
One way to measure Finance/Impact would be “Amount of Energy Required per Dollar of Revenue.” – This measure drives decreases in the amount of energy put into each dollar of revenue generated. Behind this measure is the idea that reduced energy consumption is a green benefit. Toyota Motor Services built the largest LEED Gold certified building in the U.S. at the time. The building uses natural light to illuminate offices and many people opt to use only natural light. Using sunlight utilizes an abundant resource which reportedly is healthier for people than artificial light and is free. Another corporate campus that leverages green programs to financial benefit is JC Penney’s corporate location. It employs numerous energy-saving strategies that have the campus recognized by the government’s Energy Star program. Reducing energy consumption has a clear, measurable impact on corporate America.

Make it Work

Not every measurement applies to every business. Use the themes and consider which measures to use that work within those themes. If possible, think of four to six and determine which would have the biggest impact if it could be accurately measured; the fewer, the better. Many companies get lost in reports and measures and it becomes a full-time job for a staff to keep up with reporting. Simplify and modify as needed. Use the fewest measures and keep a laser focus as you and your company make life better for your employees, customers, stakeholders and communities.