Investing in Social Responsibility and Measuring the Return What is the Return on Investment of Your SR Business Practices?

Over 20 years ago, I opened a Ben & Jerry’s franchised shop in Rutland.  It was the 12th shop of a system that now numbers more than 600.  From the very first day, people from Rutland County and beyond started asking me to donate ice cream to their events and organization.  Ben’s dictum was fresh in my mind:  “Business has a responsibility to give back to the community from which it gains its support.”  Ice cream flew out the door!  I thought we were a Socially Responsible Business.  

It took way too many months for me to realize that these investments in the community, or the money we spent to keep up morale and retain great employees, or the costs of recycling were adding up to a significant expense and required the same Return On Investment (ROI) analysis as any other variable cost item. Twenty years later, as Executive Director of Vermont Businesses for Social Responsibility, that ROI analysis is as important, but elusive, as it was then.  It certainly feels right to treat employees, the community and the environment with respect but does it fatten the bottom line?  How can we measure the impact of these practices?

Some have written that it doesn’t matter anymore because skilled labor, fossil fuels and clean air and water are in such short supply that we have to absorb whatever costs are incurred to preserve them.  Others suggest that businesses, like humans, are spiritual entities: As they give, so shall they receive…   The “green-washers” of course just think that it’s just good PR.  I believe all of these theorists are at least in part correct.  And besides, as I learned at Ben & Jerry’s, doing it with a conscience is a lot more fun.

I know it’s not just about fun.  I hope the new Masters programs in sustainable business that are now offered at Marlboro College, Champlain College, Green Mountain College and Goddard College will build an ROI analysis for socially responsible business practices. But in the meantime for the good of our businesses and all that we impact, we should start paying closer attention to the business expenses associated with our social responsibility to determine their value.  We can start by applying some pretty standard business metrics.  Here are a few possibilities:

Externalities  
Living in harmony with the world outside your business, minimizing its negative impact is a great goal.  But it also reduces costly expenses.
• Measure it:  Track your supply chain costs, including employee commuting and business travel.    Track your waste stream.
• Invest in it:  Reduce, reuse, recycle, buy local, teleconference, telecommute, carpool, purchase thoughtfully


Workplace Health
Employee morale is hard to measure but the cost of recruiting and training employees is well understood.  Investing in employee retention is a better use of funds.

• Measure it:  Turn over rates vary from business to business but you should track whatever yours is and work to reduce it.
• Invest in it:  Communication makes the world go around and keeps employees engaged and committed.  You can track how your company is doing by keeping track of dispute resolution, the timeliness of, and participation in, performance reviews, and frequency and attendance at all-company meetings.
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Community
Your company’s community is much larger than the people that live around you.  It’s your vendors, trade associations, local government, service providers and transportation network, to name a few.
• Measure it:  Have the courage to ask for regular feedback from your community with satisfaction surveys or polls.  
• Invest in it:  Goals for money and hours to donate to the local community should be set and tracked like the United Way thermostat.  Choose to participate in projects that boost employee morale and provide company visibility.


For many years, social responsibility has implied obligation.  Things have changed. Smart businesses are increasingly aware that business stability and sustainability demand investments that may have a longer-term payback than money spent on asset capital.  In business today we recognize that human, social and natural capital need to be replenished just like your bank account. To gauge investment payback, we need to establish the means of measurement.  VBSR is building metrics of social responsibility.  To learn more visit our website at http://www.vbsr.org.