Measuring the Value of CSR to the Bottom Line

While some corporate leaders have been well meaning advocates for corporate social responsibility, early adopters have been concerned that CSR will only catch on in a serious way if we can prove its value to the financial bottom line. In a measurement outcome model I developed and published in 1996 and again in 2005, I cautioned that "impact evaluation is essential to the effectiveness and viability of corporate community involvement." Further, that "companies are more likely to invest more seriously in initiatives that produce measurable results."

The good news is that McKinsey Quarterly reports in their July 2009 issue that not only are companies "creating real value through their environmental, social, and governmental activities-through increased sales, decreased costs, and reduced risks," but also that "some have developed hard data to measure even the long-term and indirect value" of such programs. Further, that "the best of them create financial value in ways the market already assesses-growth, return on capital, risk management, and quality of management."

As readers of my blog on "Leading Companies for Good" have seen, companies with strong CSR programs distinguish themselves in the marketplace, establish strong bonds with clients, customers, employees, and policy makers, and provide unique opportunities for leadership development.

I have found that the highest impact CSR programs are envisioned and led by the CEO and the board of directors and implemented with their oversight. The more effective CSR programs are aligned with the corporate mission; involve all key functions in the company, including marketing, public relations, and human resources; and integrate philanthropy along with volunteerism and nonprofit board service, as well as environmental practices.

It is heartening to see how far we've come in the past 15 years. With companies documenting CSR's value to the bottom line, there is great promise for the future!

This blog is written by a member of our expert blogging community, via Fast Company,  and expresses that expert's views alone.