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Wednesday, August 5, 2009

The role of Metrics and ROI in Corporate Responsibility

“Metrics, metrics and more metrics. In many ways metrics drive the success of business. Multiple variables can be condensed to the common denominator of dollars and cents, pounds and pence. Many business failures could have been avoided for want of a business case.

But, the specificity of metrics also allow us to persuade ourselves that there is more science and more certainty than there may really be and that we fully understand the complex interactions of the real world. There are solid business cases behind some of the most spectacular business failures - perhaps those where metrics were allowed to lead decisions rather than inform them.

This dilemma is magnified when viewed through the lens of corporate responsibility.”

This post is an external perspective I was invited to write on the topic of ROI and metrics, for GE's just published 2008 Citizenship Report "Resetting Responsibilities."

The rest of the piece follows:

“If we allow them to, metrics can divorce us from the human impact of our decisions. Corporate responsibility addresses exactly those issues that are the biggest challenge for metrics. Corporate responsibility involves taking account of human well being, of impact on communities outside of the normal expertise of the business, of complex interactions, of shared responsibility and of long-term cumulative effects.

But corporate responsibility will be relegated to the fringes if it does not add value to the core business. The biggest impact of most companies on society and on the environment is through the products and services they put into the market. To engage here, we need to be able to articulate compelling and sound rationales of the benefit for the business as well as for the good achieved in the community. And to remain relevant we need to be able to demonstrate this value using the same tools of quantification as the mainstream business, including return on investment.

Perhaps this is amplified most when the return on investment for the business and the benefit for the community are in conflict. Responsible businesses must have the courage to identify, articulate and quantify both sides of that conflict. In these situations though, to implement corporate responsibility fully is to embrace that our decision-making will not be conveniently packaged in a return on investment calculation captured in a spreadsheet and some metrics. As with business as a whole, metrics must not lead our decisions, they must inform them."

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