Return on Investment in Corporate Responsibility

Cesar Saenz

• Publisher: Emerald Publishing Limited
• Year: 2018
• ISBN:
  9781787562516
• Topic: Economics
• Subtopic: Sustainable Development
• Index: Economics

In today's climate, companies must be economically successful and at the same time take social responsibility. Author Cesar Sandro Saenz Acosta introduces a new SROIM (Social Return on Investment Management) model, to design and measure the social value created by companies. SROIM is a framework for tracking, understanding, measuring, and reporting the social, economic and environmental value created by a project, a program, or a business. This value creation can be done:

• Before the project is initiated
• During design and development, to plan for maximum value.
• During implementation, so that maximum value can be attained.
• During post-analysis, to assess the delivered value against the anticipated value.

Acosta presents a methodological approach that can be replicated throughout an organization, to demonstrate a company's creation of value through the social return of the investment.

CHAPTER 1

INTRODUCTION

Corporate social responsibility has emerged over several decades, for the purpose of improving the image of organizations with their social actors (interested parties or stakeholders), as well as to demonstrate the social sensitivity of businesses and their creation of shared value; however, companies increasingly face the challenge of measuring this shared value of their interventions in the social environment in which they operate. If they successfully achieve this, they will have taken a huge step that will allow them to consolidate permanent sustainability and social responsibility policies.

Companies currently inform the impacts of their social responsibility projects through their annual sustainability reports or statements. These reports are presented with management or scope indicators, such as for an educational project, the presented indicators are the number of training sessions provided to the teachers of educational institutions, the number of books delivered to the children, etc., and the same occurs in health projects, where they tend to mention indicators such as the number of training sessions held for the families, the number of nutritional reinforcements delivered to the mothers and children, etc. The problems with these management indicators are the following:

• They do not show the impacts generated in the beneficiaries, and much less the change generated in other actors directly or indirectly affected in this type of intervention. This does not help to communicate the social value generated by the company to its community.
• They do not help to make social investment decisions. The executives who approve these investments are unable to see the multiplier effect of this social investment. Many of these executives manage financial indicators that help them make investment decisions and require the knowledge of financial indicators such as the return on investment to decide where to invest. If executives know the return on investment of a social project, they will have better judgment to decide where to invest and achieve a greater social impact from their investments.

The above does not mean that companies do not generate impacts with their social investments; on the contrary, companies are sure that they achieve a positive impact with these investments for many actors of their community and they also perceive that these actors obtain a profit as a result of their participation in these investments. In other words, the impact is in the field; it is present in many actors, but, until now, companies do not have a simple and objective tool that enables them to recognize said actors and their impacts, as well as calculate the social return on investment.

To cover this gap, the Social Return on Investment Management (SROIM) model is presented, which is a tool that enables social responsibility projects to be measured in a simple and systematic manner, and which is able to identify the real impact and measure the social return on investment of these projects.

SROIM will help companies improve the communication of the results of their social responsibility projects, and in that way demonstrate the value creation shared with their community. In other words, the first objective is to know the real impact of the social responsibility projects and the second objective is to determine their economic contribution through the social return on investment.

Additionally, SROIM has the following benefits for companies: demonstrates that its projects are win-win, improves the perception of the community with regard to the help received, improves the institutional image, validates the social investment with the results obtained, and improves the selection of social programs.

The objective of this book is to provide the necessary knowledge to measure the results of the social responsibility projects with the SROIM model. Therefore, the book has been divided in the following manner:

In Chapter 2 the philosophy on which SROIM is based is described briefly, using the story of Marriage as an example.

In Chapter 3 the SROIM model is presented, where the two main objectives of the SROIM are described, which are the visualization of the impacts and the calculation of SROIM.

In Chapter 4 how to achieve the first objective of SROIM is detailed: the visualization of the impacts; in other words, the main tools to be used are described, such as the social network, the sustainability indicators, and the life cycle of the target beneficiary. To illustrate the use of these tools, the Marriage project is used, which will enable these tools to be understood more easily.

In Chapter 5 shows how to achieve the second objective of SROIM, that is, the calculation of SROIM, which involves the gathering of information, the insulation of the intervention, the calculation of the monetary value and the social cash flow. In all cases, various examples are shown to understand the concepts behind this stage.

In Chapter 6 provides a series of application cases of the SROIM model in social responsibility projects in various aspects such as health, education, productive projects, and environmental project. In these cases, the development of all the stages of the SROIM model are presented.

Finally, in Chapter 7, the integration of the social programs is shown by means of the transversal impact indicators. This will provide organizations with an executive control matrix of their interventions.

It is hoped that this book complies with helping the various professionals to measure social responsibility projects in a simple and objective manner, thereby communicating these results better.

CHAPTER 2

UNDERSTANDING THE PHILOSOPHY OF THE SROIM MODEL: MARRIAGE CASE

To understand the SROIM model in a simple manner, we develop the example of the marriage between Kevin and Sabrina. This story is divided into four stages: falling in love, marriage, children, and grandparent stages.

2.1. AWARENESS-RAISING STAGE: FALLING IN LOVE

Kevin is a young, single, 25-year-old professional, who works in a well-known company and has a great future ahead. Kevin’s company provides him with various labor benefits which cover health, accidents, etc.

Kevin is invited to attend his best friend’s birthday party. After being at the party for some time, he notices a young 17-year-old girl entering the party. She is Sabrina who is just out of high school and has big dreams of beginning a university career. She has a younger 9-year-old brother and they live with their parents.

Kevin was impressed by Sabrina’s beauty, and for some reason he thought the following: “I feel that I have to meet her and that if I don’t, I may regret it for the rest of my life.” This is how Kevin was able to introduce himself and, with much finesse, caught Sabrina’s attention. Since then, they began to date for several days, and then weeks.

At Sabrina’s home, her parents noticed changes in her and found out about Kevin. This relationship seemed serious; however, her parents were worried because they thought that she was too young to fall in love. Moreover, the plans for their daughter were to study for a career first, and love would happen later. Her younger brother was occasionally invited to accompany the couple to amusement areas, and sometimes received tips from Kevin, making him happy about his sister’s relationship with Kevin.

This relationship provoked some jealousy toward Kevin among Sabrina’s friends, since they could not go out with Sabrina as much as before. Furthermore, Sabrina used to have many suitors who when became aware of this relationship felt discouraged and stayed away from her.

In this entire falling-in-love process, during their dates, Kevin and Sabrina went to many restaurants, discotheques, among others, and this group of suppliers of goods and services benefitted from greater sales and income.

Moreover, the environment also suffered impacts, since the couple consumed products which led to the generation of waste and emission of greenhouse gases (such as CO₂ or carbon monoxide).

This stage of the story is displayed in Figure 2.1. Note the couple with the different stakeholders, as well as the benefits and social costs of this stage of the story.

Figure 2.1. Awareness-raising Stage: Falling-in-Love Stage.

2.2. MARRIAGE STAGE

After some time as boyfriend and girlfriend, Kevin decided to ask Sabrina to marry him, and she immediately agreed. This made all the family members happy and they started preparing for the wedding. The wedding involved a major investment by the boyfriend. He had to contract an expert company for organizing all events of the wedding, as well as contract different suppliers of products and services to cover all the needs of the event.

With regard to Sabrina’s family, her younger brother who had the smallest room in the house was very happy because he could have his sister’s room, whereas her parents were happy seeing their daughter’s happiness. Her old friends were falling away, with only some of them appearing at the wedding, and her old suitors also disappeared.

After the wedding, Kevin had to inform his workplace of his marriage, so that he could register his wife as beneficiary, as applicable by law, of the rights of health insurance, family allowance, among others. This generated an increase in the labor expenses of Kevin’s employer.

The marriage was legally registered in the corresponding government agencies.

In addition, once again the environment is impacted by the generation of waste and greenhouse effect gases.

This stage is shown in Figure 2.2.

Figure 2.2. Implementation Stage: Marriage.

2.3. CHILDREN STAGE

The years pass and children arrive with all responsibilities that this stage brings in a traditional family. Kevin and Sabrina dedicate themselves to the family, to their work as parents, trying to bring their children up properly, paying the acquired debts (mortgage, schools, health, etc.), and following the routine to achieve it. This has generated changes in their appearance since they are no longer paying so much attention to staying in good physical condition.

Furthermore, marriage with children has led the service suppliers, such as banks, to develop marketing strategies offering house mortgage loans, car loans, loans for their children’s education, which are acquired by Kevin and Sabrina; this generates income for these suppliers.

Moreover, Sabrina’s parents, who are now grandparents, are more than happy with their grandchildren, and are dedicated to spoiling them, giving them presents, listening to them, and having a good time with them.

The couple’s friends are relatively new, as a result of their relationship with other parents from the children’s school, with family members, and with new neighbors.

The children were also registered at Kevin’s work center and in the corresponding governmental entities.

During all these years, the environment was also impacted by the generation of waste and the emission of greenhouse gasses. This stage is shown in Figure 2.3.

Figure 2.3. Use Stage: Marriage with Children.

2.4. GRANDPARENTS STAGE

Finally, Kevin and Sabrina’s children grew up and had their own children. This converts Kevin and Sabrina into the happiest grandparents. Their grandchildren receive time, affection, and gifts from them.

We can say that Sabrina’s parents are no longer present in this stage since they passed away some years ago.

With regard to Kevin and Sabrina’s suppliers, they are few, compared with the previous stage, but enough for a good old age. Now, Kevin and Sabrina enjoy the good friends who are still with them.

Also during all these years, the environment was impacted by the generation of waste and the emission of greenhouse gasses. This stage is shown in Figure 2.4.

Figure 2.4. Final Stage: Grandparents.

This entire romantic story has a happy ending, and can be seen as a series of stages lived by the protagonists. The particularity of the stories is that they can be counted stage by stage so as not to lose any details and see them as in a movie, as shown in Figure 2.5.

Figure 2.5. The Life Cycle of the Marr...