THE BLOG
02/27/2014 08:00 pm ET Updated Apr 29, 2014

Why Traditional CSR Is Not Enough

My colleague, Sue Tobias, and I have been talking a lot recently about how companies investing in CSR are more concerned about ROI than ever before. We see it in the market. We see it with our clients. We think there are a number of factors driving this concern.

• First, the sheer magnitude of money being invested in social impact efforts demands accountability. Companies today are spending close to $2 billion in cause marketing and another $14Bn in corporate philanthropy (IEG, Giving USA). Some companies, like Walmart, are investing hundreds of millions of dollars in sustainability and CSR. As a result, questions arise from multiple sides -- shareholders, CEOs, CMOs and CFOs -- everyone is demanding answers about value and return.

• Second, it has become acceptable to expect an economic return from "doing good." No one criticizes Toyota for building a for-profit Prius. Few disapprove of Chipotle's "Food with Integrity" campaign. New philanthro-phenomena like social entrepreneurship and micro-lending have made it acceptable to blend the worlds of capitalism and charity. And companies are realizing that social impact can be a huge product differentiator and sales engine.

• Third, companies are asking about the value of CSR because consumers are asking about the value of CSR. Since the late 1990s, many researchers have written about a growing class of "socially conscious consumers." This group, according to Nielsen, represents two-thirds (66 percent) of consumers around the world, that say they prefer to buy products and services from companies that have implemented programs to give back. And nearly half (46 percent) of all consumers say they are willing to pay extra for products and services from these companies.

But here's something even more compelling: the consumers that don't proudly proclaim their attachment to social causes may care even more than those who do! According to the legendary marketing professor, Philip Kotler, in his latest book Marketing 3.0, "consumers are now not only looking for products and services that satisfy their needs but also searching for experiences and business models that touch their spiritual side." Kotler explains that "supplying meaning is the future value proposition of marketing."

So what's a company to do if it wants to capture these consumers?

Five Steps to Developing A Social Value Proposition for your Brand/Company

Companies should not assume that any one CSR program, campaign or commitment will drive consumer behavior without doing the proper research. In fact, these investments may provide little to no consumer value if they don't tap into consumer known and latent behavioral drivers. Our research suggests that there are five key steps companies can take to measure and improve their Social Value Propositions.

1) Identify the primary business metric you want to move. Begin by determining the consumer behavior you aim to influence. One of our clients wanted to improve "brand trust" among consumers who intermittently visited their stores. Another client wanted to increase their share of wallet among a strategic segment. Think of Social Value Proposition research as a regression -- setting the right dependent variable will ensure that the independent variables are accurately derived.

2) Make consumers your primary "stakeholder." Many CCOs and CMOs focus on the loudest set of stakeholders (social activists, NGOs, academics and CSR experts). Our research showed that many of the factors that were most important to traditional CSR stakeholders -- things like LEED certification, charity, animal welfare, employee volunteering -- were not significant to consumers. Companies need to identify the universe of "good" that they can produce, and then test potential value propositions with consumers to identify the subset of "good" those consumers actually value. If we don't analyze what consumers want, we can't know. This point applies to B2B companies as much as B2C companies.

3) Understand the relationship between social and more traditional value drivers. Our research analyzed social value drivers along with traditional value drivers to understand their overall significance as well as the relationships between the two. Companies that simply test social value drivers will likely get skewed results.

4) Measure the performance of current strategies in delivering social value drivers. Developing a Social Value Proposition strategy is an outcomes-driven approach designed to focus companies on the benefits that consumers want rather than the strategies that companies hope consumers will value. As such, once social value drivers have been derived, companies should test the performance of their existing sustainability/CSR/cause-marketing/philanthropy programs to see how good they are at delivering these benefits. This may force some tough decisions, but it will ultimately arm you with a true measure of value by which to determine social investments.

5) If not already done, integrate the work across the Communications, CSR, Marketing and Consumer Insights teams. In order to properly identify social value drivers and then design and execute new strategies, companies will need to collaborate in ways they never have before, leveraging the expertise of each function to deliver a truly business changing program.

Companies that deliver strong Social Value Propositions will be positioned to unlock business performance and affect positive social change. In a world with no shortage of social problems and business pressures, there is tremendous opportunity for companies to make a real impact. In fact, it's the ultimate win/win.