Responsible business: tracking the walk or cherishing the talk?

What are the most important elements for companies if they are serious about contributing to a better society? I think these are considering it strategically and working on trust. Zooming in on the latter, how to build trust? I see two main ways: track and monitor, and engage in dialogue, And in fact, we are likely to need both.

A flood of reports shows that there is a growing case for “responsible” or “purpose driven” business. There is a growing belief, ‘even’ amongst millennials, that the private sector can in fact transition towards embracing these paradigms.

From intention to performance

Here I want to mention two aspects that will crucially influence the way how a company will in reality be able to contribute to a better world:

  • Strategic outlook: to which extent is its main driver to create an as large as possible overlap between Value for the Company, Value for its Employees and Value for Society. They all matter, and ideally to an equal extent: one does not exist without the other, they feed into and depend on each other.
  • Building Trust: creating a “contract” between the company (say its Board), its internal stakeholders (employees) and the rest of society.

In the remainder of this blog I want to talk about the second aspect. 

Building trust with written or social contracts?

How can a company build trust in delivering on its promises? Roughly there are two main ways:

  • A written (one might call it ‘commercial’) contract: set (socially relevant) targets for performance, track, monitor and report on them. Show that you can deliver, and use that as a basis towards especially external stakeholders to acknowledge you Walk the Talk. Advantages are that there are many metrics available, they can usually be well measured, compared, benchmarked even. Disadvantages however are that it encourages to set targets only on things that can (easily) be measured, which do not necessarily represent the most important changes, the world may evolve faster than old targets can be met and a focus on mere numbers can encourage some form of manipulation or incomplete perception.
  • A social contract: based on an initial collection of numbers and ‘stories’ the company engages in a continuous transparent dialogue with its stakeholders, internal and external. Metrics and how the company scores on these can serve as input for that dialogue, they are however not the endpoint. By means of joint interpretation of facts and experiences by internal and external stakeholders, all assess how the company is doing. Advantages are there will be more room for adaptation to a rapidly evolving society, like abandoning numbers that have lost their meaning, it allows more space for personal experiences entering the equation and all in all it represents more of a “breathing” process. Disadvantages can be found on the other side of this coin: it will be more difficult to tell exactly whether a company made good on its promises, and how they perform compared to others. You can’t compare stories and dialogue as easily as numbers. This can give the impression of losing objectiveness.

Numbers, dialogue or both?

So which one should we prefer? Building trust by establishing measurable facts (which are likely to tell only part of the story), or by engaging in open dialogue (which is more difficult to track and compare)?

Or is it, as so often is the case, a matter of combining the best of both worlds? Put some effort in determining meaningful measurable metrics, but only as one part of a continuous dialogue with internal and external stakeholders, and a willingness to let the balance between the two, and the exact contents, evolve. In other words, in a good way combine the guidance of numbers with the dynamics of dialogue.

It is not difficult to see which of the three scenario’s I prefer myself. But it would be even more interesting to find out what everyone else is thinking. Feel invited to share your opinions.

 

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The National Lottery Community Fund are invested in helping civil society organisations to develop their resilience so that they are in a stronger position to pursue their goals.

One way of developing that strength is to build financial resilience through generating unrestricted income.  Social Investment – the offer of repayable finance for organisations delivering a social purpose, from an investor who is looking for both social and financial return – can help.  It is especially useful for civil society organisations who struggle to access high street loans and, for those who are looking for investors who share their values.

Social investment can also be structured so that it is useful for commissioners and civil society organisations who are working together on early action and innovation around complex social issues; it can help by covering costs until preventative outcomes have been achieved, which in turn release funds – that may otherwise be locked up in acute care services – to repay the social investors for the preventative intervention they have financed.Since the Fund’s work in social investment began in 2010 they have commissioned a number of evaluations and research studies.

These include some in-depth, long-term evaluations which will generate a number of reports between now and 2023. You will find the reports here: https://www.tnlcommunityfund.org.uk/insights/social-investment-publications