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Saturday August 2nd 2008

Comment: How business intelligence can help develop and monitor your CSR strategy

Archived article dated Saturday August 2nd 2008

Issues such as animal testing of beauty products and the use of sweat shops for clothing manufacture have always been important considerations for retailers.

By Richard Neale

However, over the past few years, a combined focus from consumers, governments, NGOs and the media has raised corporate social responsibility (CSR) to the top of the retail agenda. From EU legislation on vehicle emissions to the growth of the green consumer, retailers face a change to the trading environment that will increasingly influence every sphere of decision making, from buying through the supply chain to store location. Large supermarkets all have highly publicised CSR strategies that are increasingly embedded in business processes, but it is now time for the middle tier organisations to follow suit. As yet however there is no legislation demanding the labelling of goods and services to show the carbon emitted during production, distribution and consumption, but it is surely only a matter of time. Two reports from the respected Stockholm Environment Institute last week revealed that the UK has been living under a delusion over its claim to be cutting greenhouse gases. Furthermore, a retailer's CSR strategy will increasingly affect its financial value. From the reduction in landfill costs to improving Corporate Responsibility ratings on financial markets, the delivery of an effective CSR strategy can and will have a significant impact on retail success over the coming decade.

Whilst the majority of retailers are aware of the need to create sustainable retail strategies, they are all at a different position upon the CSR spectrum. However, they all have one consistent challenge: how best to measure and monitor performance against the CSR strategy. Today many retailers rely on third party consulting firms to put together the annual CSR performance reports. But this approach is not only costly; it also is far from timely. Given the growing importance of CSR to both reputation and the bottom line, retailers need to have far more access to this information throughout the year. Furthermore, CSR related performance needs to be disseminated and shared with a range of stakeholders on a regular basis.

Retailers need to develop highly integrated business intelligence (BI) solutions that measure and report on emerging CSR strategies. From the creation of a valid data model, through the acquisition of information from diverse data sources, to the design of highly tailored reporting solutions, an integrated strategy will prove increasingly essential to monitor and share CSR performance. However, retailers typically do not collect or analyse the information required to assess CSR performance and, as a result, find it extremely difficult to understand key issues such as how many miles are driven by trucks; how much rubbish is being sent to landfill; how much is recycled. Whilst some data is held in core operational systems, key elements are also held by discrete parts of the business in Access databases, Excel spreadsheets and point solutions. Before organisations can begin to create an integrated data mart to support CSR performance measurement, organisations need to first identify these relevant data sources and create an appropriate data model. This model must be based upon agreed measures of performance across the business to ensure Key Performance Indicators (KPIs) are consistent. Without a baseline performance figure, organisations will not be able to validate improvements over time. Therefore it is essential that the data model design includes the ability to track back to the source of data at any time to verify claims in performance improvements. This will become essential as and when government legislation is introduced, to provide both audit trail and accountability.

Information granularity will also enable retail executives to respond rapidly to any problems in the

CSR delivery process by drilling down to the data source in response to a red traffic light on the KPI dashboard, for example. Since the CSR strategy affects every aspect of retail operations, it is a complex process to identify relevant data sources and load them into a data mart using the correct tools. An initial gap analysis will identify readily available sources of information, enabling retailers to initially concentrate on the areas that offer the biggest win. This is typically sustainable energy costs, waste and packaging, with information already being tracked for cost reasons through the supply chain.

Indeed, with a highly integrated BI infrastructure, retailers can begin to address key issues within their CSR strategy - such as the growing focus on carbon labelling of products. While there is still no clear standard for tracking and defining carbon footprint, retailers are under growing pressure to understand and measure a range of issues from the emissions to food miles and the whole carbon cost of a product, including the impact of consumer use. From the supply chain and transportation to decisions on packaging, retailers need to add a complex new tier of information to the decision making process. Many retailers are already using Activity Based Costing (ABC) solutions within the business and adapting them to include activity based emissions measurement can provide rapid insight to support this decision making process. By creating an integrated approach to emission and cost management, retailers can model and measure the impact of carbon reduction initiatives and investments quickly and easily. This enables rapid insight into which activities and processes have the most impact on greenhouse gas emissions and what the impact of investment to reduce these emissions on product cost and profitability will be for example. Running an ABC solution with an activity based emissions measurement solution in parallel can deliver considerable benefits across the retail decision making process.

An essential component of the CSR strategy is ensuring performance and improvement is shared with key stakeholders, from employees and consumers to NGOs and the financial markets. Retailers need to develop tailored reporting solutions, from monthly reports to dashboards, based on consistent, repeatable process to ensure widespread understanding of the diverse strands of CSR activity, sharing the right information for the right stakeholders from the customer and internal staff to the corporate level and NGOs.

Richard Neale is Product Marketing Director at Business Objects, an SAP company

Tagged as: csr | business objects | sap

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