Saturday, February 13, 2010

Corporations should take CSR seriously

Over the last three years there have been enormous shifts in the global economic landscape. These shifts have been underway for a long time, but they have become more obvious, and they have accelerated in an exponential manner.

Europe and the United States have increasingly used financial constructs to be able to report profit and growth. The balance sheet of the corporate world has been wrong in many cases because the law and regulations allowed the companies to ignore unfunded liabilities, and pretend they did not exist. A bankruptcy move an unreported liability from the company to the government ... and nobody squeals. The stockmarket goes up when companies fire workers and make more profit ... but the economy tanks ... and nobody squeals.

Meanwhile the BRIC countries ... Brazil, Russia, India and China have each emerged as economic power houses. People in the US brag that the US economy is still "n" times bigger than the Chinese economy ... but the US GDP is almost 70% consumer consumption and there is more than 17% that is healthcare. So it may be big but is it healthy. If real reality was used for the comparison then there should be a metric that recognises that a sneaker that is in the Chinese economic data at say $5 flows through the US economy as a $150 sneaker. Something is dreadfully wrong with the metric. The Chinese, the Indians and the Brazilians are building out new infrastructure and production facilities ... the US is sitting on a backlog of critical infrastructure repair and maintenance that needs doing, but won't get funded.

CSR is an idea that puts the corporate organization on the right side of history. The corporate business is where wealth is created ... but this wealth gain in the corporate world has been, in many cases, offset by a terrible destruction of socio-economic value. This has been very obvious with the housing bubble burst where years of banking and financial services profit was earned while setting the stage for the value of the housing market to crash. CSR should be seeing these things before they happen so that the business model of the organization gets changed.

CSR is not part of the first team. Too often CSR is part of a PR exercise, and not at all relevant in the big decisions of the enterprise. The CEO may talk about CSR, but how many actually support CSR and integrate these ideas into the business. Not many!

Community Analytics (CA) will help to make the CSR movement far more credible. CSR needs metrics that tell the story of the value impact of the corporate enterprise ... metrics that are as reliably produced as those that are subject to GAAP rules and are audited. This is what CA will do ... and as CA does this, it will be possible to compare how much the enterprise has increased the profit, and at the same time how much community value has been achieved ... or not. The profile of companies will change for the better.

Whether or not a corporate entity is transparent or not, whether the corporation publishes data or not, the CA initiative can observe how the entity behaves, and incorporate that into the structure and reporting for the community.

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