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January 23, 2009

Corporate Social Responsibility – An Emerging CIO Mandate

Eric Riddleberger
Strategy & Change Practice Leader and Global Business Strategy Leader
IBM

The trend is clear. Three external issues that are consistently rising on the CEO agenda are all related to corporate social responsibility:

? Environmental concerns—Companies are looking to improve energy efficiency, reduce their carbon footprints, and manage recyclables and waste in the supply chain, for example;
? Socioeconomic factors—Companies are being held responsible for the socioeconomic well-being of the regions in which they operate and of the people they employ;
? People skills—An organization’s reputation for CSR is becoming an important tool in attracting and retaining talented employees.

The unifying link for those three issues is information technology. IT must not only be energy efficient itself, but also provide the key metrics and analysis that allow a company to manage all aspects of CSR effectively – from environmental impact to detailed financials to labor practices. From those metrics and analyses, it also must yield the transparent information that stakeholders of all kinds – shareholders, employees, governments and NGOs, and customers – are demanding access to.

And that puts CIO squarely at the center of any company’s CSR efforts.

Leveraging information — from visibility to transparency and insight
Stakeholders demand product details such as nutrition and safety facts, as well as information about the environmental impacts of production. They also want to know about business practices such as sourcing, policies and worker safety. Seventy-five percent of respondents to a recent IBM CSR survey of 250 business leaders worldwide say the number of advocacy groups collecting information about their business has increased over the past three years.

Because information is the key to transparency and insight, CIOs are being called on to gather, analyze and communicate massive amounts of data — some of which are not currently being collected — and ensure their accuracy, reliability and relevance.

Companies need to collect and share information across a wide array of channels and with multiple constituencies — customers, partners, shareholders advocacy groups, and governments. And they need to ensure that the information they provide is relevant to those stakeholders.

Communicating compliance with regulations and standards will require quantifying, analyzing and reporting such details as:

? Carbon and environmental impacts, including water and waste management and recycling efforts;
? The conduct of a vast number of suppliers on issues ranging from labor standards to fair trade;
? The sourcing and content of each product component.

To accomplish this, CIOs will need a variety of measuring, monitoring and reporting tools. They will have to achieve traceability across the supply chain, for example, by using radio frequency identification and predictive models for supplier compliance. Companies with hundreds or even thousands of suppliers will need technologies to manage risk around their supply chains and to make sure that suppliers adhere to agreed-on ethical and environmental standards.

They must also ensure that the information they collect provides they insight they need to make changes that satisfy both the demands of their stakeholders and the needs of the business.

A better approach is to tie information to the interests of stakeholders, but first companies need to understand what they want to know. Our global CSR survey showed that although 63 percent of companies believe they have sufficient information to satisfy customer concerns, an amazing 76 percent say they don’t understand customer CSR concerns well.

Moving beyond compliance to growth and differentiation
Although new CSR-related demands may seem daunting and costly, many senior executives see them as an investment and a means to sustained growth. In fact, 68 percent of the business leaders we surveyed state they are using CSR to create new revenue streams, 54 percent say their CSR strategies provide a competitive advantage, and 85 percent said these initiatives reduce costs.

Likewise, in IBM’s 2008 CEO study, a full 69 percent of leaders of private and public organizations worldwide expect CSR to have a positive impact, and they are making their largest investment increases in this area among all the topics surveyed.

As CIOs begin to play a major role in CSR, they will have an opportunity to drive improvements throughout the business and create efficiencies throughout the supply chain. In addition, CIOs will need to look at the infrastructure they are directly responsible for and its impact.

Green data center initiatives can reduce energy consumption — and deliver cost savings — while still supporting IT growth. Collaboration tools that unite a mobile workforce and minimize unnecessary travel can greatly reduce a company’s environmental impact while also spurring innovation. Efforts to increase energy, water and waste efficiencies across the supply chain will require CIO cooperation.

The good news is that as CIOs drive solutions to environmental issues they will gain insights that can be applied to broader CSR strategies.

Building relationships by moving from containment to engagement
Another key aspect of CIO involvement in CSR will be to provide a platform for collaboration among various stakeholders to increase awareness and trust.

This platform can also facilitate the innovations needed to design and implement new products, processes and policies that can advance environmental and social responsibility. CIOs should play a major role in how organizations interact and collaborate with stakeholders and customers. They can build the channels and processes to integrate, analyze and exploit the information culled from extensive collaboration.

Collaboration across the supply chain is already growing, but one area of collaboration is often overlooked by organizations: employees. Employees are eager to be part of the solution — to implement practices that reduce any negative environmental or social impact of their organizations, and to come up with the new products or services their company might introduce. CIOs will be instrumental in creating an environment for companywide engagement and collaboration.

Conclusion
CSR is a growth opportunity, and CIOs can play a critical role in aligning IT with this core business strategy by providing the platforms and integration necessary to enable it.

As organizations move from visibility to transparency and insight, CIOs will be called on to develop and implement an information strategy designed to create greater information sharing with multiple stakeholders. In addition, IT will play a critical role in increasing the level of engagement with employees, customers and other key constituents by providing robust collaboration, reporting and feedback mechanisms that support dispersed stakeholders.

Eric Riddleberger is Communications Sector Strategy & Change Practice Leader and Global Business Strategy Leader for IBM.

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