Capgemini Consulting’s Responsible Performance Management practice reflects a fundamental shift in boardroom reporting. Increasingly, a healthy company is not just denoted by strong profits and growing revenues. Businesses also set ambitions to succeed against non-fiscal measures such as corporate responsibility, ethics, health and safety and environmental sustainability. However, these ambitions are not always matched by the expertise required to identify, gather and report on these often complex metrics. In this, the first of a series of blogs from our Responsible Performance Team, Senior Consultant Audrey Rigonnaud explains the challenges of embedding a broad range of responsible metrics in a business.
There was a time when financial performance was enough to assess the sustainable health of an organisation.
A year-after-year increase in the bottom line and a well-managed balance sheet were the leading indicators of a successful company. But the past few years have demonstrated how one-dimensional thinking could lead to reward behaviour that is at odds with natural and human laws. The 2008-2009 financial crises reminded us that banks are not “too big to fail”: their race for financial profits put the global economy and the banks’ interests at risk, and impacted the global job market leading to social crises.
Does this mean the focus on finance over?
As environmental and social issues were emerging across the globe, the idea that companies have a role to play suddenly became obvious, and today it is a fact. Social and Environmental pressures are growing. Companies are increasingly scrutinised by society, the media, shareholders, Governments or regulatory bodies, and this has an impact on profit and shareholder value. In 2013, two major electronic companies were caught exploiting child labour in mines and environmental pollution, accused of “trashing” tropical forests and coral reefs. They had to publicly justify their policy and give evidence of improving the situation.
Although firms have adapted to this new paradigm by putting in place policies for Corporate Responsibility and Sustainability (CR&S), they often struggle to structure and embed them, especially when it comes to measuring them and linking them to corporate objectives.
Companies should think about managing their performance in 3 dimensions (3D).
Thinking in 3 dimensions means seeing each decision made in your organisation as a part of a whole, inter-relating with the rest of the society, generating internal and external costs but also creating benefits. Thinking in 3 dimensions means acknowledging that an organisation has an impact on society and the environment, but can also benefit from them. Let’s take a simple example: how does our love of new gadgets and companies’ willingness to sell them to us provide regular upgrades, impact society and the environment?
Imagine what your organisation can achieve or avoid by managing its ECONOMIC, SOCIAL and ENVIRONMENTAL performance!
As something which is not counted is something which does not count, indicators and reporting are at the heart of responsible performance management. Well defined KPIs help drive behaviour to reach business goals. Setting the right Economic, Social and Environmental KPIs and defining the right reporting is a good start to embed a responsible performance framework in your organisation.
It is often argued that there is no common standard to compare results of CR&S with peers, that CR&S prerogatives are not compatible with short-term results, that data are not comparable from a one business unit to another or that this cannot be consolidated at a corporate level…
Take the plunge and be prepared to make mistakes! Few KPI are perfect from the start, all performance frameworks need to develop and mature with the organisation. What really matters is to start.
It’s now time to move the boundaries further.
Traditionally each of the three dimensions presents its bottom line in a silo where the social, economic and environmental results are presented independently, where the parameters are not linked with each other or not aligned with the corporate goals.
With a 3D approach you can get a holistic view of your business and make better decisions for your extended enterprise. Let’s imagine you link each KPI to an outcome, a risk and/or an opportunity; that you know the dependencies between each dimension; imagine that your CR&S performance framework is integrated to the corporate performance framework, following the same cycle and drumbeat…then you could make a truly holistic decision! Knowing which lever to pull and what the impact would be.
Let’s translate the above IT devices example into 3D. With a 3D approach, a new device would be designed and launched according to economic, social and environmental criteria – relevant for you and your key stakeholders; it will be made from recycled materials, produced by qualified adults paid at the right wage and the company would generate extra revenue by proposing valuable services such as chargeable but secure Cloud services. This would basically drive innovation…
In our next blog we will explain how a 3D approach to managing responsible performance can help drive cultural and behavioural change.
Guest Blogger Audrey Rigonnaud is a senior consultant in Performance & Change Management, with experience across Europe.
Audrey graduated in Management of Sustainable Development. She is passionate about Corporate Responsibility & Sustainability in business. Audrey has applied her CR&S knowledge to various projects in Financial Services and Industry, helping organisations to build more responsible practices.
Involved in the CR&S community, Audrey also belongs to a European think tank, where she helps analysing and predicting future trends in the corporately responsible and sustainable economy.