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Defining CSR (and why we need to) – How Language Builds New Sectors

July 1, 2011

Definitions. Not the sexiest topic, I know. But they can be pretty darn important, especially when you’re building something new. The role that definitions and terminology play in building new sectors and new business models has been on my mind a lot recently- for several reasons.

For starters, I work for a social enterprise. Ergo, I find myself in an emerging sector that’s awash with competing terminology, jargon, business models, and practices. Furthermore, the social enterprise I work for – Investing In Communities – is introducing something entirely new to the worlds of real estate and philanthropy. As a result, IIC has been challenged to articulate an unfamiliar model to very different stakeholders: nonprofits, real estate professionals, individuals, and businesses. These are not groups that tend to, as they say, speak the same language.” The language we choose to communicate our model impacts crucial first impressions.  Just like any start-up, we can’t afford to have first impressions be wrong impressions. So we continue to think critically about our terminology, and the essential role it plays in defining and growing IIC.

Second, I recently had the opportunity to attend the Impact Investing Summit here in Chicago. There, I found that Impact Investing, like social enterprise, also lacks clarity with regards to the diverse investment models, standards, and practices that exist (if you’re curious to learn about SII, check out this great video of Antony Bugg-Levine, Managing Director of The Rockefeller Foundation). Unified language has yet to emerge that categorizes these activities and communicates them effectively to stakeholders, such as investors or social ventures seeking funding. I expected the conference to resolve some of my own confusion about the multitude of activities currently lumped into the “SII” sector, but instead I learned that the experts all agreed on one thing: the sector is too broad, too diverse to be talked about as a monolithic entity. Doing so is unproductive, and ignores the distinct needs, challenges, and opportunities faced by different branches of the SII sector.

Distinct SII categories and investment vehicles must be clearly defined. Those definitions must in turn be tied to specific standards and measurement practices if social impact investing is to go mainstream. Investors need to know what they’re backing (what’s the blend of expected social and financial return? What’s the payback period?), investors need to know what they actually get (what was the social impact and financial return?), and social ventures – nonprofit or for-profit – need to know what financing options are out there. None of this will happen without uniform Definitions across the sector. As legal and policy infrastructure is built to support SII, some convergence of language will naturally occur. But in the meantime, broadly understood, consistent, and clear terminology is needed to communicate effectively with stakeholders. Imagine if all SII participants – VC firms, foundations, banks, financial advisors, etc – created unique terminology to describe their own particular activity. Well, you can probably see how that might inhibit broad understanding and widespread adoption.

Finally, the third reason I’m writing this ode to Websters -and the true catalyst for this piece – is this blog post by Ethical Corporation founder Toby Webb. The post struck me because, while I agreed strongly with the spirit of the argument, I find its logical implications troubling. The author argues that CSR terminology is irrelevant. Therefore,  consistent and shared definitions are unnecessary. Creating shared definitions within CSR is unnecessary, he reasons, because what matters is implementation not description – what matters is doing it, not naming it.

Well yes, but also….no. If we don’t know what “it” constitutes then determining whether companies’ CSR activities are actually as sustainable, humane, and socially just as claimed becomes time consuming and costly. Here lies the value of definitions – they demand clear standards.  Standards can be translated into to official certifications or designations, which in turn are tied to measured outcomes. So for example, when someone tries to sell me a “green” building I don’t need to ask where the materials comes from, what the embodied energy is or what the projected efficiency is – I can simply ask, “LEED Gold or Silver?”

In all likelihood, CSR is here to stay. The way companies are talking about CSR, it’s the new business as usual. But – and here I am in complete agreement with the author – talk is cheap. At the end of the day, achieving outcomes and raising the CSR bar is what matters. But without unified terminology across the sector, broad-based measurement, verification and comparison of outcomes across companies is inhibited. Stakeholders will struggle to assess the substance of CSR programs and the validity of corporate claims – and that only undermines the value of legitimate CSR programs. Furthermore, with the fast growth of SII, companies will increasingly face shrewd social investors who want to dig beyond glossy PR “fluff” in search of quantifiable impact. If we are to take CSR seriously as consumers, shareholders, and practitioners, then – as with social enterprise and impact investing – we need to consider the value of definitions and the role they play in building a sector.

But what do you think?

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