IBM Global Business Services

FinancialManagement

Corporate Social Responsibility

Highlights

■ Organizations should capture the

financial benefits from improving

the social and environmental

impact of business operations

and activities.

■ Corporate Social Responsibility

(CSR) will mature into another

input to performance manage-

ment and risk management.

■ The CFO and the Finance organi-

zation are uniquely positioned to

address both performance man-

agement and risk management

and, as a result, should be the

steward for CSR data, driving

the performance monitoring,

reporting and decision making

around CSR activities.

■ An overall performance manage-

ment strategy, which includes

CSR, is needed to establish

processes and systems that inte-

grate information across the

entire value chain and provide

timely, consistent and robust

information and decision

support.

Reducing energy consumption, environ-mental and social performance, recruitingand retention of top talent based on sus-tainability policies, new revenue streamsfrom “green” products and services (“the opportunity of making green by being green,” Jeff Immelt, CEO of GeneralElectric introducing the approach toEcoMagination)—these are all aspects of acorporate socially responsible businessthat has moved beyond compliance andrisk mitigation to capture financial benefitsfrom new business opportunities thatimprove society and the environment. Infact, CEOs are increasing investments incorporate social responsibility by 25% overthe next three years, according to theIBM Global CEO Study 2008.

As a result, there is a need to manage the performance of an enterprise’s CSR activities. According to TheEconomist Intelligence Unit’s “Doing good:Business and the sustainability challenge”March 2008 survey, the top CSR objective

is communicating the organization’s per-formance on sustainability to investors andstakeholders. This requires including CSRin your enterprise’s overall performancemanagement strategy to establishprocesses and systems that integrateinformation across the entire value chainand provide timely, consistent and robustinformation and decision support.

According to Abbey Joseph Cohen,Managing Director at Goldman Sachs,“investors, and companies themselves,recognize that there are metrics and goalsthey need to be looking at other than thestraight financial metrics…so, for example,a company needs to measure its successnot just on the basis of things like earningsand revenues, but also on the basis ofwhether they’re doing what they should bedoing in the environmental area, whetherthey’re doing what they should be doingwith regard to worker safety and otherissues.”

Corporate social responsibility matters

CSR activities are critical throughoutyour enterprise—it touches all functionswithin the value chain. What are theimplications you might be missing?Within operations for example, CSRissues involve emissions and waste,biodiversity and ecological impacts,energy and water usage, worker safetyand labor relations and hazardousmaterials. After-sales service issuescould include disposal of obsoleteproducts, handling of consumables and customer privacy.

A great example of CSR involves Wal-Mart’s CEO Leo Scott’s speech on“Leadership in the 21st Century.” It hasset three ambitious goals across itsvalue chain: to be supplied 100% byrenewable energy, to create zero waste,and to sell products that sustain itsresources and the environment.

What are the benefits behind address-ing CSR? Firms that focus on CSR outperform their peers according toGoldman Sachs and Dow Joneslists/indices. In addition, the same EIUsurvey indicates that companies withstrong share price growth over the pastthree years place a greater importance

on sustainability issues. Companies thatrank themselves as “much better” thantheir peers in social and environmentalfields show profit growth of 16% andshare price growth of 45% versuspeers’ performance of 7% and 12%,respectively.

CSR and the role of Finance

Our view is that CSR will mature intoanother input to performance and riskmanagement. Finance is uniquely positioned to be the steward for CSRdata and help drive the performancemonitoring and reporting of CSR activities. To provide additional opportunity and reap the full rewards,CSR management and reporting shouldfeed into both performance and riskmanagement.

For Performance Management, yourenterprise should coordinate externalmessaging on your CSR strategy andreport on progress against CSR goals.IBM can help link CSR performanceindicators with strategy and operationimperatives and create the scorecardsto better measure and report perform-ance across integrated enterpriseprocesses. In addition, IBM can helpidentify the critical decisions linked toCSR related data, define criteria, createdata definitions, find reliable datasources for CSR reporting and imple-ment tools to monitor performance.

Risk Management entails assessing thevarious present and future CSR risks tobusiness operations, such as legal,political, reputational, supply chain dis-ruption, embedding CSR concerns intobusiness operations, then incorporatingrisk into performance management’sfact-driven approach. IBM can helpidentify, assess, manage and optimizeCSR risks. Our services provide thegroundwork for solid reporting practicesto be able to provide CSR risk relatedinformation to key stakeholders, man-agers and executives for decision sup-port when and where it is needed.

Six major areas for a performance man-agement strategy including CSR

Our holistic approach encompassespeople, process, information content,decision management and technologytransformation, from strategy to design,through implementation. IBM can helpCFOs use information as an asset tosupport enterprise strategies thatinclude CSR. Our approach centers onsix major areas to develop and imple-ment a performance managementstrategy:

1. Envision and plan. What are the keydecisions and what is the proposedbusiness direction (including CSRstrategies)? Who are the key decision makers, who are the information consumers, and what arethe impacted business drivers andassociated metrics?

2. Analyze current state. How well do your technology infrastructure/analytical tools support performancemanagement?

3. Define (Governance, InformationStrategy). What are the critical decisions and the associated decision makers? What is the per-formance management vision andguiding principles? What are thegaps of the existing/planned analyti-cal initiatives to support performancemanagement?

4. Design (Organizational Blueprint,Process Blueprint, TechnologyBlueprint). What analytical processesneed to be implemented? What arethe implications to the enterprise’sorganization, and supporting applica-tions and data assets?

5. Develop Roadmap. How should per-formance management projects beprioritized? How can the initiatives beresourced and planned?

6. Implement and realize benefits. Howwill the decisions be governed?What change programs are neces-sary to implement the plan and what is the framework for benefitrealization?

An effective performance managementframework and vision, which includesCSR, involves linking corporate strate-gies and activities for action, aligningyour organization’s decision manage-ment to the governance structure, integrating your information assetsthroughout the value chain, with theproperly aligned business drivers andassociated metrics, streamlining datasourcing and developing a singlesource reporting environment.

Why IBM

The development of a performancemanagement vision, process and sys-tem design, framework, and analyticalcapabilities and techniques can be

supported by IBM’s intellectual capitaland broad expertise across industriesand geographies. Our BusinessPerformance Management (BPM) prac-tice includes over 400 engagementswith companies over the past threeyears.

With more than 4,100 financial man-agement resources located across theglobe, IBM has a strong record of serv-ing as a trusted advisor to CFOs andfinance leaders. Our dedicated teamsof research and thought leadership pro-fessionals provide insights into theissues facing finance professionalsthrough deep finance function expertisecoupled with effective technologyimplementation and integration capability.

We offer proven finance transformationtools and experience, such as SAP,Oracle and Cognos. IBM financial man-agement consulting services bringstrong partnerships; we are the numberone SAP Consulting Provider and aleading integrator of Oracle/Hyperionapplications. Our recent acquisition ofCognos has added over 200 experi-enced Cognos practitioners to ourFinancial Management practice. Ourconsultants have worked with 75% ofthe global Fortune 50 and 80% of the FT 50.

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