Social Assessment continued by Chris Nelder
		The criteria As the search for appropriate methodology evidences, even the task of selecting the criteria can be problematic. Everything is relative. In some industries, a mere reduction in toxic emissions, which are generally deemed unacceptable yet which are a product of a necessary business activity, will win applause. As an example, Gravitz points to Monsanto: "They've made enormous strides in reducing their toxic emissions; they've reduced by 50% of what they were around 10 years ago, and they're trying to go to a zero toxic emission by the year 2005 or something like that. DuPont has made a commitment, H.P. Fuller is another who has made such a commitment, and these companies need to be applauded for those kinds of efforts because plenty of companies who take the attitude, "Hey, I'll do whatever I can get away with" where these people are really going after it. And then there's another school of thought that says, very good, good first step, now, when are you going to start thinking about what your products are? And then there's a school of thought that says whether the product is dangerous or toxic, but let's look at whether or not the product's production is sustainable for generations to come." Amy Domini describes her criteria this way. "Our core definition of a socially responsible company at Kinder, Lydenberg, Domini is a company that sees what heretofore had been a public burden as an opportunity. Those, you could probably count on the fingers of one or two hands. That is our most exciting find. When we find a company that views offering health care services to inner-city welfare recipients as a market opportunity, we get excited. But beyond that, we look at companies that provide relatively mundane products and see whether they have a structure in place to have a net benefit to the broadly-defined community as a result of their making the product available." Domini emphasizes the importance of reading the whole picture, whatever the particular relevant criteria may be. "To give you an idea of the benchmarks and what they might involve, under Community, we have as a benchmark that the company has consistently given over 1.5 percent of trailing three-year net earnings to charity. Now, corporations can give 5 percent and get tax benefits. But at 1.5 percent, that wasn't a randomly chosen number. Only about 15 percent of our universe--of the 800 or so companies that are the biggest or else the most socially responsible--meet that standard. So we view that as a significant data point. It's not gonna make or break it for them--Philip Morris does that, that's not gonna get over the fact that they're in the tobacco business--but it's a piece of information. But then innovative giving, supporting self-sufficiency among the economically disadvantaged, and non-traditional federated charitable giving drives in the workplace--only about one company in 25 has that kind of giving. "So these data points are things we can use to give us more information, but they don't really in and of themselves tell you something. Workforce reductions: A 15% reduction in workforce would hurt people, that's not attrition. Cash profit sharing: only about 15 companies in our universe have cash profit sharing of 5% or more. A lot of them give you company stock, but not cash profit sharing. So the benchmarks we've developed, any one of them is meaningless. But if you put them together and you stand back and read the picture, then you have an idea. You can say, 'I can sleep at night knowing this company is in my portfolio.'" The Need for Validation Dr. Simon Zadek of the NEF sums up the need for validation neatly: "This unholy mixture of socially responsible activities and public relations hype created, in short, a verification problem." He identifies the reasons for auditing as "to enable verification of claims, transparency about activities, and accountability to stakeholders." The recent Hanson report on BSI was independently validated by NEF, and Zadek uses the example to illustrate the need for such independent verification: "The recent experience of the fierce debate about the ethics of Body Shop illustrated the problem very clearly. All parties to the debate presented little more than anecdotes, which did not allow for real clarity about Body Shop's activities to be achieved. This experience is testimony to the need for an improved approach to verification." Organizational benefits Clearly, one of the benefits of assessment and independent validation is helping to move discussions about social performance out of the realm of beliefs and emotions, and toward a more scientific and widely-accepted approach. But others are quick to point out the direct benefits organizations can realize by implementing internal review policies such as the British models recommend, and by simply recognizing the need for occasional external validation. Not the least of these is how your stakeholders perceive you. After Hawken's experiences with his assessments of Ben & Jerry's, which illustrated some of the inherent conflict in a company commissioning its own external audit, he still gives them "huge high marks for their courage, and their candor, and their openness, and their willingness to do it. Of all companies, they're certainly the most open, and so they deserve a huge amount of credit really." He asserts that the changes Ben & Jerry's undertook as a result of his assessments were beneficial to the organization overall. Hanson sees it this way: "This information is useful to management. Auditing is important for understanding and managing liability. Bad relations with the community will hurt you, employee dissatisfaction will result in additional costs. There is a very pragmatic value to social performance data." Domini's perspective from the investment world also reveals the bottom-line value: "The five-year record came out [on the Domini Social Equity Fund], we beat the Standard and Poor's over the first five years, and we got a lot of press in a lot of important places as a result of that. Now that is an argument that is going to be used by management and human resource people in corporations all over the place saying, look, these kinds of things (cash profit sharing, on-site day care centers, and so on) seem to be indications of more profitable companies--the stock does better. It's going to be used by financial professionals, arguing that there's room in the portfolio for other considerations beyond the pure bottom line." Making corporations more responsive Zadek sees the broader benefit of social auditing in that it "allows corporations to become more responsive to social dimensions of its activities. Social auditing therefore can offer a form of accountability that is integral to on-going planning processes. It recognises the intimate relationship between allowing stakeholders voices to be heard and taken into account, and the effectiveness of decisions made and actions taken." As evidence, he offers these quotes from within organizations who have been through the assessment process: "a way in which stakeholders can have an input into the organisation" "it allows us to show really what we are doing" "it makes commercial sense to it..it is part of the quality trail" "it is an incredibly powerful tool, and so threatens vested interests" "it can generate real debate from many people in different situations" "as a Chief Executive, it does frighten me, and I think that this is the value of it" "the resulting exposure is a very significant factor" Visions for the Future Taking the successes and problems of social assessment together, one wonders what the future of the science will look like. Hanson optimistically predicts that that in five years, social auditing will be as common as environmental auditing is today. He sees private-sector mainstream firms such as Arthur D. Little and ERM performing the auditing and verification tasks, but acknowledges that in the uncomfortable term ahead, sorting out good auditing from marketing initiatives disguised as ethical policy will be difficult. For consumers, he recommends taking a close look at the experience base and the methodological sophistication of the auditor. Social auditors will probably be certified, he says, although a current certification initiative right now in Britain is probably premature. "The next 5 years will be a time of experimentation and shakeout," he says, "It will take time for companies to try their experiments and for the experimentation to be validated." From the investing standpoint, Domini sees the future of assessing SRI as a matter of "seeking out models of sustainability, models of corporate social responsibility, which is quite different from the pragmatic approach that has dominated the field. This is building on a new economics. And this seeks out the Odwallas and the great companies that have integrated into their creation a commitment to go beyond the norm, in terms of recognizing the impact they're having on their vendors, their customers, the products that they deliver, the employees, the broad range of stakeholders." Not surprisingly, Gravitz sees the picture from a cooperative viewpoint. "My personal attitude is, we've got to take all of these steps and take them simultaneously. Some people have to be working with the very large companies and getting those changes made there. Some people need be answering the question of what kinds of products and services we want in our society that meet people's needs now--all people's needs, not just the very few--and how they can be sustainably produced and maintained so that people in the future can also have their needs met. It's too soon to start critiquing one or the other, we've got to all keep working, as hard and as furiously as we can, in the general direction and get the methodologies refined and learn from one another. We have to encourage people to try as many things as they can." Alternative GNP? One of the most exciting proposals for the future comes from the San Francisco-based research group Redefining Progress, who propose that the Gross National Product (GNP) economic index should be revised to reflect the actual costs of human activities, and not just the benefits. As it is now calculated, virtually every human activity translates into something that is perceived as being good for the economy, including excessive energy consumption and environmental disasters, because all of those activities result in increased commerce. One doesn't have to think on the idea very long before realizing that it's a bit of a Modest Proposal. Under such a method, the US would look more on par with Third World countries, because of the huge environmental cost of its per-capita consumption of natural resources. However, if systemic change is really what we're after--and isn't it?--we must recognize that financial considerations are at the heart of most of our activities as a species, and therefore, it is exactly where we must begin to change our perceptions. Hawken finds hope in the idea. "I think they're doing some really good work, and I don't think it's as modest as it might appear because systems organize themselves around information and energy--any system does--and the information coming into a system, if it's incorrect, will cause a system to act in all sorts of ways that are in its own worst interest, and that's exactly what you see: too much energy going into a system, and the system itself is getting the wrong information. A system cannot function intelligently until it has proper feedback loops. So I think they're really onto some important stuff actually." What do you think? If you got this far in reading this article, you must really care about the subject. Please drop me a note and share your thoughts. Was this a useful article for you? Did it affect the way you think about SRB/SRI? And how about the Alternative GNP proposal, did it inspire your thoughts? Or, if you prefer, Discuss it! What do you think about this article? This is important, I want more I found it interesting Ehh, it was OK It's not that significant I don't care Subscribe Now! CONTENTS Introduction Roots of Social Assessment Problems of Social Assessment Emergent methodology The criteria The need for validation Organizational Benefits Visions for the Future What do you think? "It is an incredibly powerful tool, and so threatens vested interests" "A system cannot function intelligently until it has proper feedback loops "
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