SDG Reporting & CSR Software (Part 1)

In 2015, the United Nations published a collection of 17 “sustainable development goals”, or SDGs. The goal is simple enough: transform for the better the world in which we live. And ever since, the list of SDG reporting questions has grown:

How should companies track, organize and communicate SDG metrics?
Should we be reporting statistics and activities, or reach for outcomes and impact? (or is that somebody else’s job?)
How do our CSR programs align with the United Nations’ SDGs?
We’ve got CSR software – does it offer SDG reporting?
How will stakeholders – such as investors and nonprofits – consume the SDG data we report today?
How should we expect SDG reporting to evolve tomorrow?

At CSR Matters, we hear lots of questions like these. At the root of many is the capacity of CSR software to report SDG-related CSR program activities. So we thought this an opportune time to help CSR professionals learn more about the software used to manage CSR programs. After all, these are the very programs that should (theoretically) produce outputs that help us reach those UN-generated SDG milestones. So here we are, topic in hand:

What are the SDG reporting capabilities of current CSR software … for the companies, for partners such as nonprofits, and for stakeholders such as investors?

Admittedly, there is a lot of territory to cover … so much so that we cannot hope to cover everything in one post. Therefore, this is a two-part series. In Part 1 we will look at industry trends, needs and opportunities for software to support SDG reporting. And, we will take a look at key concepts such as CSR, ESGs, and SDGs so that we can get a sense of what sort of SDG reporting is even possible. In Part 2, we will dig into the particulars of leading CSR software solutions, and assess how software vendors are turning ‘what’s possible’ into ‘what’s available’. And we will take a peek at what the future may hold. Hope that’s clear. Buckle up and read on!

First, a quick review of what we are tracking

“Corporate Social Responsibility” is still a relatively immature corporate discipline, and a broad one at that. In short, CSR refers to corporate self-regulatory behavior towards the people and communities around which the company operates, carried out through four functions:

Philanthropy
Employee Engagement
Sustainability
Governance

Those four CSR “horsemen” are what we want to track, analyze and report on through the use of CSR software. And they are reflective of – and found within – the 17 SDGs. For example, CSR Sustainability initiatives might be mapped to SDG 6 (Clean Water), 7 (Affordable and Clean Energy) or 9 (Industry, Innovation and Infrastructure). CSR Employee Engagement to SDG 3 (Good Health and Well-being), 4 (Quality Education) or 5 (Gender Equality). And CSR Philanthropy programs could be designed to fund any of the 17 SDGs. The relationships between CSR functions and SDGs go deeper and cover many more issues. But hopefully you get the point. The two are closely related … hence the need for many CSR stakeholders to better understand how current CSR SaaS software facilitates SDG tracking and measurement.

A quick nod to KPMG

Before looking at the current state of SDG reporting, I should also mention The KPMG Survey of Corporate Responsibility Reporting. Presenting its 10th survey since 1993, the 2017 KPMG Survey reviewed corporate responsibility (CR) and sustainability reporting (often referred to as ‘Annual CSR Reports’) from 4,900 companies in 49 countries. The report assembles data the old-fashioned way – from reviews of independently published company reports.

The KPMG Survey is a must read. For example, you can glean from the report the increasing importance that stock exchanges around the world are putting on integrated (financial + non-financial metrics) reporting, which translates into the rising importance of ESGs (environmental, social and governance objectives) to investors. In particular, Jose Luis Blasco, KMPG’s Global Head for Sustainability Services, wants every reader to take away three conclusions from the 2017 survey:

Expect greater regulatory guidelines around ESG disclosure, as voluntary guidelines are being replaced with mandatory reporting requirements in many parts of the world.
Integrated reporting is the new normal, with three-quarters of the world’s largest 150 companies now including non-financial information in their annual reports.
The focus of reporting will become impact, not just activities or raw statistics.

Good insights to help guide us as we navigate the topic at hand.

SDG reporting – current state

Talking with a range of stakeholders – from company CSR professionals to nonprofits to CSR software execs – CSR software is making lots of progress. But it has not yet achieved what some would describe as the ‘Holy Grail’ of SDG reporting, where CSR program activity data feeds algorithms that measure performance against global SDG goals. We have a ways to go. Think of this as a data challenge – inputs and outputs. What we have today is this:

CSR software (left) collects inputs – sustainability achievements, giving transactions, employee engagement activities – and stores them in the cloud (right) so that companies can analyze and report. The objective for companies is to influence behaviors (top center), by telling their CSR stories in order to win customers, attract talent, and more. And this shouldn’t surprise us. This software, and other manual data collection processes, have been the fuel behind corporate Annual CSR Reports for years.

SDG reporting – the goal

The problem is that this only gets us half way to the goal … or Grail. We haven’t connected inputs to associated outcomes, which then become outputs to regional and global data collection systems that want to measure global progress towards achieving the 17 Sustainable Development Goals. That ‘system architecture’ feels more like multiple integrated systems sharing data than a singular application. And looks something like this:

And I use the term “Grail” again because it begs an important question:

Is it even possible to turn local CSR activity inputs into community impact outputs that roll up into global SDG measurement systems that will influence individual and societal behaviors to change the world for the better?

Hold that thought.

Bad news: The CSR software market remains fragmented

If you work in the area of plant and facilities management or supply chain management, you know that as a “CSR function”, the discipline of sustainability is very adept in terms of tracking activities, measuring outcomes, and reporting, closing feedback loops that lead to greater efficiencies across multiple company disciplines. We cannot say the same about the other four functions of CSR. Manufacturing and supply chain management are, to state the obvious, sophisticated. Efficiency drives everything. If your job is to figure out how to build more widgets or deliver more services using less energy and fewer resources, then you understand why “sustainability”, “manufacturing”, and “supply chain management” go hand-in-hand. And we haven’t even talked about EH&S (environmental health and safety) regulatory environments that have long impacted facilities management. To further appreciate the maturity of sustainability reporting, consider that the Dow Jones has published the Dow Jones Sustainability Index since 1999. Investor demands will continue to drive greater efficiency, greater sustainability. But what we have achieved in terms of reporting – even SDG reporting – with regard to sustainability has not been achieved for philanthropy or employee engagement or governance. In fact, some observers point out that the “CSR industry” may be sufficiently fragmented that it is hard to even call it “an industry”. Companies rely on entirely different departments and skill sets to manage disciplines as different as manufacturing, legal compliance, HR and charitable giving. So how can we pull all of this together, call it “CSR” and refer to it as “an industry”? Well … good point. Let’s recognize, then, that we should not expect a one-size-fits all, single vendor software solution to track a discipline as broad and diverse as CSR. Furthermore, understanding this informs how we as CSR professionals face the challenges of applying CSR software comprehensively to SDG reporting. So let’s look at core issue of this article a bit differently. Let’s ask this question:

What SHOULD we expect CSR software to report?

Philanthropy and employee engagement, with some sustainability thrown in!

CSR software cut its teeth, so to speak, on corporate philanthropy. Automating employee workplace giving, corporate gift matching, and grant making, CSR software vendors emerged on the scene around 2000. Companies such as CyberGrants, CreateHope and KindMark brought SaaS architecture to automate manual outsourced CSR program management that was handled by United Ways and matching gift vendors like AmeriGives and JK Group. Since then, too many vendors have come and gone to remember, but the CSR software industry as a whole has steadily evolved.

Consider, for example, employee engagement. Once measured in terms of volunteer activities logged in a database or by matching a volunteer opportunity with a warm body to do the work, today, employee engagement has become big business to big business. Talent acquisition and retention is everything. Employee engagement programs not only track participation, but they provide data that helps measure the relationship between employee involvement in corporate initiatives and the desire of employees to work for particular companies. For example, when you think of employee engagement programs, are you thinking about SDG 3 (Good Health and Well-being), SDG 11 (Sustainable Cities and Communities) or SDG 13 (Climate Action)? Others? Cone Communications continues to do great work explaining the importance of CSR to employee retention. As we will discuss further in Part 2 of this series, companies such as WeSpire are focused on turning employee engagement inputs into employee retention outcomes. And now thanks to a recent Forbes article, we apparently have a new term in our CSR lexicon – “sustainable employees” – that describes the desired outcome from employee engagement programs. But the current state of CSR software does not focus solely on two of the four CSR horsemen. Employee engagement is a very powerful tool with broad reach. As Dustin Joost, head of Sales for YourCause, reminded me when we spoke for this article, companies want to use CSR software to expose employees to the full mission and culture of the company. In many cases, that brings us back to the topic of sustainability. While rank and file employees may not be in a position to impact supply chain management or manufacturing carbon footprints, engagement programs managed via CSR software often invite employees into sustainability or environmental initiatives that reinforce the company’s brand. This is progress. If we think about SDG reporting capacity, then we want CSR software that helps us track, measure and report across 3 of the 4 CSR horsemen. That doesn’t mean that every company needs all three, but the broader the CSR software’s capabilities, the better able to serve the market.

What else do we need?

If we have looked at the breadth of SDGs to which CSR software should be attuned, what about the depth? In software architecture terms, what about the ability to turn CSR program activities into outcomes and impact? And what about the ability of a company to feed CSR activity data into one or more data collection and analysis systems that help stakeholders both assess our collective SDG impact and compare individual company performance? Remember my “Hold that thought” comment? Well, here we are again. And the answer is that the industry isn’t ready for this. But as we will learn in Part 2 of this article, there is some movement in this direction. For now, consider the Dow Jones Sustainability Indices or The KPMG Survey. The inputs to these “measurement tools” (for lack of a better description) are generally manual, survey driven, and often self-generated by companies. But what if more and more of those inputs came from third-party software whose job it was to capture inputs and translate them into the correct impact-measuring output that feeds the measurement tools? We’d have something then, wouldn’t we? With CSR programs focusing on employee engagement, in many cases activities are being conducted in partnership with nonprofit and NGO organizations whose job it is to do the impact measurement. The employees are a resource to a bigger initiative. We still need inputs connected to outcomes that are both measurable and mapped to SDGs. That means that we are talking about more systems, more moving parts, more complexity. Fortunately, there are efforts underway to tackle this, such as Blackbaud’s SDG mapping and collaboration with SDG Funders. What next?

Because employee engagement has become big business to big business, perhaps we focus there. Employee engagement may offer the necessary economic incentives to turn CSR software inputs into SDG outcomes.

On the bright side, we have software and systems that are capturing inputs. And we have other systems that are reporting outcomes that can influence societal behaviors. We just need to “connect the two”. What is needed is further standardization of how companies – and their third party software providers – report their specific CSR program metrics. This will improve the reliability of data gathering and the quality of analysis (from step 2 to 3 in the diagram above).And in turn, analytics could begin to tell us how to better influence social behaviors (step 4). I know I am over simplifying this a bit, but hopefully you get the picture. Without such standardization, we cannot move beyond what we find in The KPMG Survey. Excellent information, trends, and more. But we need to do more to connect the CSR-SDG ecosphere in order to (more efficiently?) close the feedback loop to encourage behavioral changes.

Good news: New guidance for corporate SDG reporting

Before we wrap this up, we should take a look at one other recent development in SDG reporting – a new reporting guide from GRI. Last month, Global Reporting Initiative released a new publication, Integrating the SDGs into Corporate Reporting: A Practical Guide. In this document, GRI hopes to help companies to prioritize selected SDG targets into their own business operations. The Guide does not create a new reporting framework. Instead, its goal is to provide tools to businesses of all sizes to help them address the information needs of governments, investors and other stakeholders. And to improve accountability. The Guide should help us gather and organize better activities, better inputs (for steps 1 and 2). By the way, with so much of the SDG reporting conversation focused on the largest global companies, it is encouraging that GRI is paying attention to the needs of companies of all sizes.

Bringing it home … and Part 2

I’ve written a lot of posts, and never had so much to “bring home” … so here goes. My first objective with this article was to lay out the relationship between global SDGs and company-specific CSR programs. Next, I wanted to impress upon readers a certain complexity in how we get from (a) CSR program activities and metrics to (b) measuring outcomes to (c) influencing social behavior and (d) positively influencing any individual SDG goal. In fact, in our current state, there are wide system gaps that are filled by manual data collection and analysis processes. That is not bad, not a criticism. It is just where we are … for the present. I also wanted to touch on the fragmentation within the CSR industry, and share some of the disparity between the level of sophistication that has arisen around sustainability measurement and reporting when compared to other CSR functions. A fourth objective was to encourage CSR professionals to think about your own CSR software needs and capacities. I wanted to examine what sort of SDG reporting is possible today. And perhaps you are encouraged to dig into The KPMG Survey or the GRI Guide, if you haven’t already done so. Finally, I wanted to make sure that I set the groundwork for Part 2 of this series. In Part 2, I will look at examples of current CSR software, plus a couple of recent developments, in order to help you gauge both current capacity and future direction. As always, if we can help you wrestle with a CSR-related problem – whether you are a company running CSR programs, a vendor providing CSR-related services, or a nonprofit needing a CSR fundraising strategy, CSR Matters is standing by to help. Please give us a shout.