You want CSR transformation? Start with CSR governance

Blog: Capgemini CTO Blog

While it’s difficult to pin down exactly how many companies have announced new climate and social commitments in recent months, what we do know is that at least 30 multinationals from all sectors have bet on achieving carbon neutrality before 2050. These include Amazon, Repsol, Equinor, Total, Unilever, Facebook, and Apple. Capgemini too has announced an increased ambition to be net zero by 2030 and to achieve carbon neutrality for its operations no later than 2025.

Delivering on CSR objectives

These ambitious commitments underline the growing pressure on private sector organizations to make tackling the world’s social and environmental challenges part of corporate strategy. As such, beyond the announcements themselves, companies will have to demonstrate their ability to truly deliver on their corporate social responsibility (CSR) objectives, including these environmental commitments. Failure to do so could result in a harsh and irrevocable backlash from investors, policymakers and customers. Beyond the threat, engaging in a sustainable-driven transformation is a powerful lever for growth and opportunities, as detailed in Capgemini’s report “Why Purpose-driven organizations are winning consumers’ hearts”.

Rethinking CSR governance for a major transformation project

For many, achieving these objectives requires an in-depth transformation of how they operate. Each new project within that transformation must be clearly thought through to maximize its societal impact. Thus, the new challenge for companies is to define a strong yet attainable CSR ambition, to which it can be held accountable and that infuses all the company’s activities.

As with any transformation, achieving such ambitious goals can require rethinking governance. CSR projects face specific challenges, often involving numerous stakeholders and in response to strong reputational issues. There is also no immediate or quantifiable business impact, as well as a long or even non-existent ROI. Thus, CSR governance implies multi-stakeholder steering and finding the right level of tension to mobilize funds and people towards effective decision-making.

5 ways to bring to life your CSR objectives

We believe that, with good governance, achieving CSR objectives is possible. Here are our five insights on how to get there:

Insight#1 – Alignment with purpose

A company’s purpose relates to the role it intends to play in society, beyond its economic value.
As the trend is now set, most of those who haven’t yet unveiled their corporate purpose are, at least, working on it, or thinking about it seriously. But phrasing a purpose and unveiling it are just the start. Embedding the purpose in day-to-day business activities and aligning all CSR initiatives to it is crucial to giving teams and external stakeholders a clear vision of the company’s intentions.

Insight#2 – High level sponsorship

Position the CSR team so that it is best placed to be part of the company’s strategic decision-making. The benchmarks carried out by Capgemini repeatedly show that, although positioning CSR in the communication department has been the trend for many years, this is no longer fit for the new challenges. A link to strategy, to a business BU, or directly to the CEO is key to enable CSR to influence all levels of the company.
Currently, we rarely see a strong finance/CSR duo and official CFO sponsorship being applied, yet it is one of the most effective methods of ensuring the release of budgets or the adaptation of existing investment processes to the constraints of CSR projects. The quarterly publication of extra-financial results alongside the financial results can help to sensitize employees and give credibility to the approach with external observers.
High level sponsorship means creating a direct link between CSR and the executive committee. At the very least this should be through the presence of the CSR manager on the ExCom, or by delegating CSR responsibilities directly to ExCom members from the business lines (not just central functions). Only 37.5% of CAC40 companies have a CSRO sitting at their executive committee!

Insight #3 – Set quantifiable and public objectives

Make a public commitment to quantified objectives, validated through a recognized, transparent, international methodology. This not only puts the entire organization under pressure to deliver, but also enables progress to be made thanks to the intervention of competent external stakeholders (submission of a CDP report, SBTi validation, certification process: B-corp, AFNOR, Ecovadis). We also recommend that the company’s business strategy should be inspected through a CSR lens (societal externalities) when formulating the strategic plan.
Evaluate ESG (Environmental, Social and Governance) criteria by external rating agencies.
Use external ESG ratings adapted to the activities – always use several to vary the methodological angles of the calculations – as an indicator of the CSR policy performance: these can be monitored annually by the ExCom, communicated regularly internally and externally (notably in the extra-financial report) or even, as in the case of certain companies, be weighted with other CSR criteria.
Index a percentage of the variable share of managers’ remuneration on the achievement of CSR objectives. This is a key criterion for raising awareness. While this is a powerful tool, care must be taken to ensure that the CSR criteria on which variable pay is indexed are adapted to each job or function, so that employees do indeed have a means of positively influencing the criteria on which they are assessed.
Deploy a network of CSR correspondents, at both BU ExCom and managerial levels, in all entities. This ensures a link between the ‘heart’ and the ‘periphery’ of the company, and a similar degree of managerial involvement at all levels. The CSR policy, if it is to be steered by a central body, must be implemented by the business lines with (possibly in the long term) CSR governance at Group level, which must be fully integrated into the business line.

Insight #4 – Integrate CSR in the company’s business

Carefully assess how each business can integrate CSR into its daily life: clearly define the scope of CSR for each business and identify quick wins with the teams, from changing the way of doing business more ‘cleanly’ to the creation of offers or products with a positive societal impact.
Integrate CSR into traditional decision-making processes by applying a CSR ‘filter’, in particular to support investment decisions. A number of measures can be used to secure the financing of these projects: internal shadow carbon price, internal carbon tax, sustainability fund, adaptation of the ROI levels required for CSR projects, sustainability index applied to each project, etc.
Finally, to ensure CSR is truly integrated into the business it is important to calculate the societal and environmental impact of projects after their implementation. This will enable their success to be assessed so that the most successful projects can be replicated.

Insight #5 – Three levels of vision to effectively steer CSR strategies

In addition, we believe three levels of vision are necessary to effectively steer CSR:

Strategic vision: define the business project, possibly the purpose, the medium and long-term vision of CSR with quantified and publicly stated objectives for the Group;
Tactical vision: translate these objectives into roadmaps for each entity that qualify projects, deadlines and managers.
1. Appoint a PMO to set the pace, centralize information and report data
2. Deploy a robust CSR data collection and analysis tool
3. Ensure that stakeholders’ technical skills are increased according to their business lines (development of skills often required in eco-design, LCA, legal, etc.)
4. Deploy high-level cross-functional governance (N-1 ExCo) to ensure the creation of synergies between the various business lines/functions.
Foresight: ensure that the CSR department/function develops forward-looking thinking to anticipate societal changes and regulatory requirements.

No one size fits all for governance

The new governance needed to steer an organization’s CSR will have to adapt to the company’s sectorial issues, its structure and its culture. While no standard governance can be associated with a given level of CSR performance, the above elements are nevertheless essential. At the same time, they may not be wholly sufficient to the task, so will need to be adapted and extended to match each organization’s unique situation.

While defining this governance, organizations must learn to think about CSR in terms of results, and thus develop a method for evaluating the performance of their policy. Communication is essential, but on its own is no longer enough. Moving deeper into the decade of proof, any company committed to a sincere CSR approach must drive CSR by results.

So moving forward, are you willing to lay a beginner’s eye on your own organization’s CSR governance? What surprises you? What would you keep, what would you change? As organizations are massively engaging on the journey to sustainability, the way the ship is steered will make the difference as to whom gets safely to harbor.