How a Detailed Analysis of a Company’s Environmental, Social, And Governance Efforts Established a Benchmark and Identified Opportunities
Corporate social responsibility (CSR) is no longer just the idea that a company is obligated to give back to the community and make up for some of the environmental impact of doing business. Today, CSR is much more than that. It represents a measure of a company’s corporate citizenship and has become an integral part of modern business practices and stakeholder relations.
Investors look at CSR metrics to determine whether a company’s leadership has appropriately examined and prepared for risks. Employees and potential employees want to understand whether a company will be a good employer. Customers and business partners want to know whether they are doing business with a company that is responsible and forward-looking.
Rather than simply being interpreted as a stand-alone endeavor within a company, CSR must be integrated into the organization’s planning and execution and, therefore, be directly tied to the company’s business performance. Beyond simply understanding and benchmarking business performance as it relates to CSR, it is important for a company to be able to identify and communicate how its CSR activities benefit the communities it reaches, in addition to enhancing business performance.
Hawthorne Strategy Group’s CSR Audit uncovers and analyzes a core subset of environmental, social, and governance (ESG) metrics and benchmarks them in comparison to the reasonable expectations of prospective investors, current and potential employees, and the publicly reported performance of peer companies. The goal is to translate those learnings into business practices that will:
-Enhance current CSR efforts
-Increase public understanding and recognition of those efforts
-Improve the overall perception of a company’s brand
A Case In Point
An example of how we achieve this can be demonstrated by a CSR Audit we recently completed for a global medical device company. As the company pursued a path toward an IPO, there was a desire to assess and organize their CSR efforts in order to differentiate and support the brand in the public market. Over the course of approximately 10 weeks, we conducted a detailed audit of the company’s CSR activities and those of the company’s top competitors using a defined set of priority ESG metrics to assess where the company stood in relation to similar companies on these important factors.
An overview of the processes included:
-We conducted a qualitative and quantitative examination for a group of 8 peer companies using publicly available data and focused on 47 performance metrics, as well as the companies’ CSR structure and communications efforts. The metrics were selected to represent a cross section of activities within three areas — environmental, social, and governance — with a focus on areas of particular interest to investors. We completed a similar process the company with examination of internal materials and interviews internal stakeholders.
-Because communication has a significant impact on perception, both internally and externally, we also examined available information related to communication methods, notably recruitment tools and positioning, for all peer companies as well as the company
-Once data and information was gathered, it was recorded into a comprehensive report. Using a proprietary scoring system, we assigned a rating for each metric to demonstrate how each company compared to the others. To help convey where we felt each company stood on each of the ESG metrics, we then assigned a grade that correlated to varying degrees of activity, reporting and transparency. Various factors were considered, including the execution and implementation of ESG metrics as it relates to environmental activities, business practices, company goals, and overarching policies.
Ultimately, the findings were used to assess the company’s strengths and weaknesses and identify opportunities and potential threats. These were then used to create a roadmap and three-year action plan to enhance and promote their CSR efforts in order to improve their overall corporate reputation and position them attractively to investors as they began the IPO process.