CHIEF LEGAL OFFICERS ON THE INTERSECTION OF PRO BONO … · • Pro Bono Institute, “Corporate...

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CHIEF LEGAL OFFICERS ON THE INTERSECTION OF PRO BONO AND CORPORATE SOCIAL RESPONSIBILITY

ACC Annual Meeting October 18, 2:30 - 4:00 pm

In-House Pro Bono

• Corporate Pro Bono, “Why Do Pro Bono,” 2015. A PowerPoint summary of the benefits of pro bono to the employee, the company, and the community. http://www.cpbo.org/whydoprobono

• Thomson Reuters, “The Rise of In-House Pro Bono,” 2015. An op-ed by Eve Runyon outlining the history of in-house pro bono, as well as the case for in-house pro bono. http://legalexecutiveinstitute.com/the-rise-of-in-house-pro-bono/

• Corporate Pro Bono, “The Business Case for In-House Pro Bono,” 2013. An essay outlining business reasons for developing in-house pro bono programs. http://www.cpbo.org/businesscase

• Corporate Counsel, “Stepping Stones to More In-House Pro Bono,” 2012. An article spotlighting the incredible pace at which pro bono culture has developed within the in-house community, outlining some of the challenges and solutions to developing in-house pro bono. http://www.cpbo.org/document/stepping-stones-to-more-in-house-pro-bono/

Corporate Social Responsibility (CSR)

IO Sustainability, LLC, “Project ROI: Defining the Competitive and Financial Advantages ofCorporate Responsibility and Sustainability,” 2015. A report analyzing existing research anddata to asses CSR’s value to society and to businesses, and outlining a roadmap for how tobest improve the effectiveness and authenticity of a CSR approach.

Center for Corporate Citizenship, “Research Reinforces Corporate Citizenship Value,” 2012.An article about the balance between values and financial performance and how corporatecitizenship adds to both.

Stanford Social Innovation Review, “Catalytic Philanthropy,” 2009. An argument for theneed for catalytic philanthropy, which differs from traditional philanthropy in its laser-likefocus on solving an issue.

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Association of Corporate Counsel, “A Field Guide to Corporate Social Responsibility for In-House Counsel,” 2008. A history of CSR, beginning with the AP Smith case decision in1953, and a guide for in-house counsel on the legal doctrine that impacts CSR.

Integration of Pro Bono and CSR

Center for Corporate Citizenship, “Building Corporate Citizenship Connection CreatesLasting Value,” 2012. An overview of commerce with “compassion” and an example of howCSR at the entity level may include pro bono in the legal department.

Practicing Law Institute, “Current State of Pro Bono in Legal Departments,” 2012. Adiscussion of the status of in-house pro bono, including integration with CSR Efforts.

Pro Bono Institute, “Letter from Esther: What CSR Teaches Us About Pro Bono,” 2012. Adiscussion of the best and most important aspects of CSR that are trending in the legalcommunity and how they relate to legal pro bono.

Pro Bono Institute, “Breaking the Corporate Philanthropy Code: How to Leverage Your In-House Pro Bono Work Through Your Company’s Charitable Giving Programs,” 2002. Aperspective from Joan Steinberg, Director of Community Affairs at Morgan Stanley,recommending a coordinated approach between a company’s pro bono efforts and corporatecommunity relations or charitable giving departments.

Examples

• DLA Piper, “DLA Piper, AIG and TrustLaw Launch Report on Cross-Jurisdictional Statutory Compensation for Survivors of Human Trafficking,” 2016. An announcement that DLA Piper, AIG, and TrustLaw published a report assessing statutory compensation schemed for survivors of human trafficking in 20 jurisdictions around the world. https://www.dlapiper.com/en/singapore/news/2016/05/dla-piper-aig-and-trustlaw-launch-report/

• Law Sites, “Legal Services Corp., Microsoft and Pro Bono Net Team Up to Create Legal-Aid Portals,” 2016. An article discussing Legal Services Corporation, Microsoft Corporation, and Pro Bono Net’s use of technology to expand access to justice. http://www.lawsitesblog.com/2016/04/legal-services-corp-microsoft-pro-bono-net-team-create-legal-aid-portals.html

• Pro Bono Institute, “Guest Blog: Legal Pro Bono at Salesforce,” 2016. A guest blog about Salesforce’s 1-1-1 model of integrated philanthropy and how it led into a formal legal pro bono program. http://cpbo.org//guestblog:salesforce.

• Pro Bono Institute, “In-House Pro Bono Meets CSR Efforts to Increase Impact,” 2016. An article with examples of how CSR efforts and pro bono activities by legal departments are coordinated and integrated for the benefit of the organizations and their communities. http://www.cpbo.org/document/in-house-pro-bono-meets-csr-efforts-to-increase-impact/.

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• Pro Bono Institute, “Global CSR + Pro Bono,” 2015. An outline of the ways in which variousIBM projects exemplify the complementary nature of global CSR efforts and pro bonoprograms. http://thepbeye.probonoinst.org/2015/09/08/global-csr-pro-bono/

• Pro Bono Institute, “Partnership Develops Tools to Aid Judges in South Asia,” 2015. Anoverview of the partnership between Salesforce, Salesforce Foundation, and Baker &McKenzie that worked to draft a regional toolkit to deal with terrorism in South Asia. http://cpbo.org/salesforce-partnership

• Pro Bono Institute, “2014 Partner Award Winner: American International Group, Inc. inpartnership with the Iraqi Refugee Assistance Project,” 2014. An announcement highlightingthe partnership between AIG and the Iraqi Refugee Assistance Project and how it works toassist refugees in the Middle East whose lives are in imminent danger due to their work withthe U.S. http://www.cpbo.org/2014PartnerAward

• Pro Bono Institute, “2014 Laurie D. Zelon Pro Bono Award: Brad Smith and the Departmentof Legal and Corporate Affairs at Microsoft Corporation,” 2014. An announcement that BradSmith and the Department of Legal and Corporate Affairs at Microsoft Corporation receivedPBI’s 2014 Zelon Award for their pro bono efforts, much of which has been dedicated toassisting young immigrants. http://www.cpbo.org/2014ZelonAward

• Hillsboro Tribune, “Volunteer Drawn to Aid Grant Program,” 2013. An article detailing waysin which Intel’s Matching Grant Program affects communities such as Hillsboro Oregon.http://portlandtribune.com/ht/117-hillsboro-tribune-news/158260-volunteer-drawn-to-aid-grant-program

• Causecast, “Business Backing Vets: Merck Gives Pro-Bono Aid to Homeless Heroes,” 2012.A feature on Merck’s support of Community Hope, Inc., which includes funding and pro bonolegal services. http://www.causecast.com/blog/businesses-backing-vets-merck-gives-pro-bono-aid-to-homeless-heroes

• Metropolitan Corporate Counsel, “Doing Well By Doing Good – A Microsoft Hallmark,”2012. An interview with David A. Heiner, Vice President and Deputy General Counsel ofMicrosoft Corporation, about Microsoft’s commitment to CSR and pro bono in particular.

• NY Daily Record, “Pro Bono Spotlight: Allstate Foundation Supports Domestic ViolenceSurvivors,” 2012. An article about Allstate’s financial support of organizations assistingvictims of domestic violence, as well as, the pro bono legal services its legal departmentprovides to such victims and others.

• Practicing Law Institute, “Corporate Social Responsibility and Pro Bono,” 2012. A discussionof the importance of tying pro bono to CSR and the details of LexisNexis’s approach to both.

• Pro Bono Institute, “Corporate Pro Bono Honors the Ford Motor Company, Dykema GossettPLLC, Legal Aid and Defenders Association, Inc., and Michigan Community Resources forInnovative Community Partnership,” 2012. A press release announcing Ford Motor, Dykema

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Gossett PLLC, Legal Aid and Defenders Association, Inc, and Michigan Community Resources as the recipients of the CPBO Pro Bono Partner Award for pro bono projects in which Ford aligned its pro bono program and CSR initiative. http://www.cpbo.org/ford-partnership

• U.S. Chamber of Commerce Foundation, “How Allstate Helped Create a National Network Against Domestic Abuse,” 2012. An interview with Vicky Dinges, Vice President of Public Social Responsibilities at Allstate, concerning Allstate’s support of domestic violence survivors. https://www.uschamberfoundation.org/blog/post/how-allstate-helped-create-national-network-against-domestic-abuse/31755

• Inside Counsel, “Intel Builds Momentum with Pro Bono Work,” 2011. An article on Intel Corporation’s skills-based volunteer program that grew to include a pro bono program in the legal department.

• Pro Bono Institute, “CPBO Spotlight On: Verizon Communications,” 2011. A spotlight on the Verizon legal department’s pro bono program and how it complements the company’s CSR efforts. http://cpbo.org/PBEye-Verizon-Spotlight

• Pro Bono Institute, “Guest Blog: BNY Mellon’s Pro Bono Program,” 2011. A guest blog by Deborah Kaye, Managing Director and Senior Managing Counsel at The Bank of New York Mellon and Chair of its Global Pro Bono Program, about the addition of pro bono legal services to the organization’s larger CSR efforts. http://thepbeye.probonoinst.org/2011/12/22/guest-blog-bny-mellons-pro-bono-program/

• Pro Bono Institute, “The Intersection of Pro Bono and Corporate Social Responsibility,” 2011. A blog post featuring legal departments who partner with their foundations to co-host Clinic in a Box® programs. http://cpbo.org/pro-bono.csr

• Corporate Pro Bono, “Gap Legal Department Serves Foundation Grantees,” 2010. A report that Gap partnered with The Gap Foundation, to co-host a Clinic in a Box® program and assist nonprofit organizations supported by The Gap Foundation. http://www.cpbo.org/document/gap-legal-department-serves-foundation-grantees/

• Inside Counsel, “Doing Right: Gap Inc. Focuses Its Legal Skills on Supporting Children in the Community,” 2010. An article regarding Gap’s effort to build a pro bono program in line with the mission of The Gap Foundation.

• Inside Counsel, “GE Plays a Key Role in the Pro Bono Partnership,” 2010. Highlights of GE’s role in forming the Pro Bono Partnership and providing pro bono services for others in need.

• Inside Counsel, “Verizon Launches Pro Bono Program,” 2010. An announcement of Verizon’s new pro bono program, detailing how it got started and the focus of its efforts. http://www.insidecounsel.com/2010/05/01/verizon-launches-pro-bono-program

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• PR Newswire, “Walmart Announces Pro Bono Legal Services Program,” 2010. Anannouncement that the Walmart legal department initiated a pro bono program, along with adonation from the Walmart Foundation to Legal Aid of Arkansas and the Arkansas Access toJustice Commission, to increase its impact on local communities in need.

• Probono.net, “Merck and Lowenstein Sandler: Partners in VLJ’s Pro Bono BankruptcyProgram,” 2010. An account of Merck’s collaboration with the Merck Company Foundationto support the Volunteer Lawyers for Justice bankruptcy program with funding and pro bonolegal services. http://www.probono.net/nationalareasearch/item.347336

• Goldman Sachs “10,000 Small Businesses: About the Program – United States,” Informationabout Goldman Sachs innovative CSR initiative – 10,000 Small Businesses – in whichemployees provide skills based pro bono, including legal pro bono, to small businesses incities across the U.S. http://www.goldmansachs.com/citizenship/10000-small-businesses/US/index.html#

• Goldman Sachs “10,000 Small Businesses Graduates its First Class in New Orleans,” Anannouncement regarding the graduating class from 10,000 Small Businesses, in which smallbusiness were mentored and received pro bono legal services from Goldman Sachsemployees. http://www.goldmansachs.com/citizenship/10000-small-businesses/US/news-and-events/1st-nola-grads.html

Why Do Pro Bono

June 2015

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Benefits the Employee

Pro bono work offers benefits to lawyers and other

legal staff by:

• Enhancing job fulfillmento Brings great personal and professional satisfaction

• Helping employees hone skills and improve productivity

• Offering a variety of experiences that cannot be duplicated elsewhere

o Both litigation and transactional opportunities exist

• Reminding lawyers why they became lawyers

• Enabling lawyers to fulfill their ethical obligations

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Benefits the Company

Pro bono work offers value to legal departments and

companies by:

• Providing opportunities for all members of a legal department to work together

• Building morale and promoting teamwork

• Rejuvenating the legal departmento Provides for new opportunities and challenges

• Promoting a company’s reputation in the communityo Enhances public relations

• Affording the legal department the opportunity to add value to a company’s corporate social responsibility efforts

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Benefits the Community

Pro bono work offers value to the communities where we live and work by:

• Assisting low-income and otherwise disadvantaged individuals and families, and the organizations that serve themo 80% of the legal needs of low income people go unmet

• Focusing on a variety of needs that, when addressed, help stabilize communities, including:o Education

o Immigration

o Family relations

o Housing

o Community economic development

o Growth of small businesses

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Pro Bono ResourcesEve L. Runyon Director, Corporate Pro Bono

(202) 729-6699 (202) 296-0303 fax

[email protected]

CPBO offers a number of resources on its website (www.cpbo.org), including the following:

o The Business Case for In-House Pro Bono: www.cpbo.org/businesscase

o Pro Bono Development Guide: How to Start an In-House Pro Bono Program: www.cpbo.org/getstarted

o Best Practices Profiles: http://www.cpbo.org/resources/best-practice-profiles/

o Guide to Multijurisdictional Practice Rules: http://www.cpbo.org/mjpguide

o Professional Liability Insurance for In-House Pro Bono: www.cpbo.org/insurance

o Pro bono opportunities and ideas:

• CPBO Clinic in a Box® Program: http://www.cpbo.org/initiatives/clinic-in-a-box/

• Pro Bono Marketplace of Ideas: www.cpbo.org/Marketplace

o Benchmarking in-house pro bono:

• 2012 Benchmarking Survey Report: http://www.cpbo.org/benchmarking2012

• The Corporate Pro Bono Challenge® Initiative: http://www.cpbo.org/cpbo-challenge/

o Corporate Pro Bono

• Who We Are: http://www.cpbo.org/about-us/

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mailto:[email protected]://www.cpbo.org/http://www.cpbo.org/businesscasehttp://www.cpbo.org/getstartedhttp://www.cpbo.org/resources/best-practice-profiles/http://www.cpbo.org/mjpguidehttp://www.cpbo.org/insurancehttp://www.cpbo.org/initiatives/clinic-in-a-box/http://www.cpbo.org/Marketplacehttp:///http://www.cpbo.org/benchmarking2012http://www.cpbo.org/cpbo-challenge/http://www.cpbo.org/about-us/

Why Do Pro Bono

Corporate Pro Bono (CPBO) is a global partnership project of the Association of Corporate Counsel and the

Pro Bono Institute. Through on-line services (www.cpbo.org), technical assistance to the in-house community,

and educational outreach, CPBO seeks to encourage and support the participation of in-house counsel in pro

bono legal services. For more information, please visit us at www.cpbo.org, or contact Eve Runyon, Director of

Corporate Pro Bono, at [email protected] or 202.729.6699.

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Developed by Corporate Pro Bono

A global partnership project of the Pro Bono Institute and the Association of Corporate Counsel

www.cpbo.org

Copyright 2015 Pro Bono Institute

CPBO® is a registered trademark of the Pro Bono Institute

http://www.cpbo.org/mailto:[email protected]://www.probonoinst.org/http://www.acc.com/http://www.cpbo.org/

The Rise of In-House Pro Bono Eve Runyon July 30, 2015

For many years, formal pro bono programs were the bailiwick of attorneys in private practice. In-house counsel volunteered on their own, but not until the 1980s and 1990s did legal departments launch formal pro bono programs. Even then, there were not many. In 2000, the Association of Corporate Counsel (ACC) and the Pro Bono Institute (PBI) formed Corporate Pro Bono (CPBO) to support and promote pro bono in the in-house community. Since then, interest in in-house pro bono has

flourished, and, with CPBO’s assistance, legal departments have found solutions to many of the challenges to in-house pro bono. Now, hundreds of legal departments of all sizes and many ACC chapters are engaged in pro bono, with more and more launching pro bono programs.

Case for In-House Pro Bono

The rise of in-house pro bono can be attributed to a number of factors: the distressing gap between those desperately in need of legal assistance and the available resources (a number of studies have found that 80% of low-income persons with a serious legal problem are unable to secure legal help); the ethical obligation to provide service that is at the core of every lawyer’s professional identity; the desire to use one’s skills and expertise to make the world a better place.

Organizing pro bono programs for lawyers in legal departments can also enhance critical aspects of department operations. Pro bono engagements offer legal staff the opportunity to broaden and vary their workload, interact with different people inside and outside of the legal department, and make use of their legal skills for positive impact in the community, which can increase employee engagement, support team-building and improve morale.

Pro bono engagement also provides professional development opportunities for lawyers and legal staff to hone skills that are applicable to their work for the company, including negotiation, leadership of a team effort, and working effectively with partnering organizations. Plus, the involvement of a company’s legal department in pro bono service adds value and breadth to the company’s corporate social responsibility profile and activities, as well as improves the quality of life and stability of clients and the community at large, creating a better business climate.

Breadth of In-House Pro Bono

Engagement in pro bono for in-house counsel, whether through a pro bono project organized by their legal department, hosted by an ACC chapter, or coordinated by a local services provider, may include a wide range of topics, and involve everything from representing low-income individuals and the organizations that serve them, to children, victims of domestic violence, refugees, veterans, the elderly, and more. A few examples:

Attorneys at The Pep Boys-Manny, Moe & Jack work with organizations in Philadelphia to assist clients in obtaining their birth certificates, which enables them to receive benefits, obtain medical care, or find a job.

Exelon Corporation lawyers have teamed with Sidley Austin in Chicago on a complex death penalty appeal.

In-house counsel from Barclays, Citigroup, and Goldman Sachs have advised small business owners in New York, working with a local legal services organization.

Moving Forward

In-house pro bono has come a long way in 15 years, but the need for more pro bono services remains great. A broad range of opportunities exist that meet the needs and interests of legal departments and ACC chapters. In addition, there is a wealth of resources available to in-house counsel interested in pro bono work.

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THE BUSINESS CASE FOR IN-HOUSE PRO BONO

Esther F. Lardent

During the past decade, the number of formal, organized pro bono efforts at in-house legal

departments and the participation of in-house lawyers and legal staff in pro bono matters have

increased dramatically. Led by a growing number of general counsel strongly committed to pro

bono service and potentiated by the work of Corporate Pro Bono (CPBO), a global partnership

project of the Association of Corporate Counsel (ACC) and the Pro Bono Institute (PBI) that

provides tailored information, guidance, training, and support to in-house legal departments and

ACC Chapters, in-house pro bono is becoming an accepted, valued, and well-integrated aspect of

in-house practice.

Legal department lawyers, like lawyers in other practice settings, take on pro bono matters

despite hectic work schedules for a variety of reasons: the distressing gap between those

desperately in need of legal assistance and the available resources (a number of studies have

found that 80 percent of low-income persons with a serious legal problem are unable to secure

legal help); the ethical obligation to provide service that is at the core of every lawyer’s

professional identity; the desire to use one’s skills and expertise to make the world a better place.

In-house legal departments – and their legal staff – do not provide volunteer legal services to

enhance their professional stature, skills, or business goals. However, properly structured,

implemented, and aligned pro bono programs can, in fact, enhance critical aspects of the

operations of companies and their legal departments. The pro bono business case for law firms

has been established. Major law firms now realize that pro bono service can and does enhance

important firm functions and goals. While the business case for pro bono service at in-house

legal departments is different from that at major firms, it is equally clear and compelling.

Recruitment and Retention

There is substantial competition for in-house lawyers who have the requisite skills to add value

to legal departments. Most legal departments recruit experienced laterals rather than recent law

school graduates, but pro bono is a factor for both groups. In particular, the growing number of

talented law firm associates and partners who have been active pro bono participants while at

their firms will be attracted to legal departments that afford them the ability to continue to take

on pro bono assignments. In addition, many potential hires in the legal department view a

commitment to pro bono as an important indicator that the company – and its legal department –

value their employees as individuals and evidence a broader commitment to society. One study

(Kelly Services, 2009) found that 85 percent of job seekers around the world and across all ages

“are more likely to want to work for a company that is considered ethically and socially

responsible.”

While some in-house lawyers seek advancement – and aspire to become general counsels – many

in-house attorneys have more limited advancement opportunities. To avoid losing able, seasoned

lawyers, law departments must create a workplace environment that continues to stimulate and

mailto:[email protected]://www.cpbo.org/

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satisfy experienced and knowledgeable staff. Pro bono engagements offer the opportunity to

broaden and vary work, interact with different people inside and outside of the legal department,

and work in another environment that makes use of legal skills. The departure of a valued

attorney is a major financial loss, with total costs – interruption of service, search and transition

expenses, etc. – typically exceeding the annual salary of the employee. Pro bono service, for

some lawyers, can be important factor in promoting retention.

Employee Engagement

Many companies and legal departments measure engagement as an expression of an employee's

attachment to his or her job that influences the employee’s eagerness to succeed in the

workplace. Engaged employees are more excited about and involved in their work, and therefore

act in ways that further the interests of their company. They care about the future of their

company and feel strong emotional bonds to their employer, which can result in higher

productivity and performance, increase retention levels, and lower absenteeism.

There are a number of factors that are believed to increase employee engagement, including

organizational culture and an employee’s perception of company values, recognition and rewards

that incentivize staff, and quality relationships with managers and peers. Many in-house

departments structure their pro bono programs to support these drivers, which contributes to an

employee’s overall sense of motivation and loyalty to the company. Engaged employees are

brand ambassadors for the company. Pro bono is one way legal departments can support

employee engagement, demonstrate the company’s value to its employees, recognize employees

for their contribution to the community, and promote positive teaming within the department, as

well as cross-functionally.

Corporate Social Responsibility/Corporate Citizenship

Corporations are increasingly recognizing the importance and value of corporate social

responsibility – actions that ensure that companies are good and responsible citizens of the

communities in which their employees live and work. Corporate social responsibility (CSR) has

been defined by the World Economic Forum’s Global Corporate Citizenship Initiative as:

[T]he contribution that a company makes in society through its core business activities,

its social investment and philanthropy programs, and its engagement in public policy.

That contribution is determined by the manner in which a company manages its

economic, social, and environmental impacts and also manages its relationships with

different stakeholders, including shareholders, employees, customers, business partners,

governments, communities, and future generations.

The involvement of a company’s legal department in pro bono service adds value and breadth to

that company’s CSR profile and activities. Pro bono service enhances the quality of life and

stability of residents and the community at large, making an important contribution and creating

a better business climate. It provides a specialized and highly desirable outlet for employee

voluntarism and, often, complements the company’s charitable giving and other philanthropic

activities. It should come as no surprise that the pro bono work undertaken by legal departments


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is increasingly cited and applauded in corporations’ annual corporate social responsibility

reports.

Professional Development

As large law firms have discovered, pro bono engagements provide critically important

professional development opportunities not only for younger lawyers but also for more

experienced counsel. Pro bono work enables lawyers to maintain their proficiency in areas such

as litigation that are no longer a routine part of their daily work. It also provides the opportunity

for lawyers and legal staff to hone skills that are immediately applicable to their work for the

company, including negotiation, leadership of a team effort, working effectively with partnering

organizations, etc.

Integration with the Company, the Community, and the Profession

Pro bono work enables members of the legal department to address a sense of isolation – from

other members of their profession, from the company as a whole, from their communities – that

may arise in the in-house environment. Work on a pro bono matter or project, particularly one

undertaken in conjunction with a local pro bono organization or NGO, promotes interaction with

other lawyers. At some corporations, legal departments are taking on pro bono projects that add

a legal dimension to already existing corporate volunteer and/or philanthropic efforts. For

example, the legal department at a company that focuses its charitable giving and volunteer

service on enhancing children’s educational opportunities may provide legal assistance to low-

income families seeking to improve the education available to their developmentally disabled

children. A legal department at a company whose volunteers provide housing and food for the

poor and homeless could use their legal skills to help those targeted by the company to become

eligible for food stamps and to secure safe and affordable homes. In doing so, the legal

department not only improves the outcomes for those whom the company is striving to help, it

also demonstrates to its internal clients the value of the department’s legal skills.

Similarly, pro bono work helps the legal department, and, through its counsel, the company as a

whole to better understand the communities where it is doing business and to help ensure that the

company is viewed as a good citizen and a good neighbor in its communities.

Improved Teamwork and Morale

Studies have consistently demonstrated the value of voluntarism in improving morale and

productivity by reinforcing a sense of pride, common values and vision, and deepening personal

relationships. Pro bono projects enable members of the legal department who may otherwise

have little or no contact to work together toward a common goal. Signature pro bono projects,

that is those targeted to a particular area of the law or client population, can involve lawyers and

non-lawyers at varying levels of seniority and across offices and areas of specialization. A

number of companies that have experienced financial, legal, or reputational difficulties have

found that a shared pro bono culture can play an important role in maintaining a positive outlook

and a shared sense of responsibility and pride in the company.


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Enhanced Inside/Outside Counsel Relationships

The growing trend toward the development of joint pro bono ventures between and among legal

departments and their outside counsel enables each party to the relationship to leverage their

particular strengths and skills. It also provides an opportunity to work together “off the clock” in

a manner that strengthens mutual understanding and respect. This enables outside counsel to

gain a better understanding of the client legal department so they can better respond to its

commercial needs.

Diversity

While in no way a substitute for attracting, retaining, and managing a diverse workforce, pro

bono can intersect with and strengthen the department’s commitment to diversity. Some legal

departments and law firms, for example, have focused their pro bono activity on matters of

particular importance to families and communities of color. This focus affords an opportunity to

all employees, regardless of race, ethnicity, gender, etc., to gain a better understanding of the

issues and concerns facing these communities and individuals.

Reputation

Consumers, regulators, shareholders, employees – all of these groups view the actions and

initiatives of corporations in the larger context of corporate reputation. Studies indicate that

charitable giving, both dollars and in-kind, as well as a demonstrated commitment to improving

local communities are particularly convincing indicia of a “good” company. On a narrower

scale, legal publications that cover in-house counsel news are increasingly aware of and focused

on pro bono service. For example, Corporate Counsel magazine, in launching its annual awards

for best legal department, made pro bono service one important criterion for that award.

Conclusion

There is a growing recognition that a well-designed, institutionally supported legal pro bono

program can enhance and strengthen the communities in which corporations operate while, at the

same time, addressing key operating issues in a manner that strengthens the performance,

reputation, and effectiveness of in-house legal departments.

For more information about how your company can develop an effective in-house pro bono

program or enhance its existing program, please contact Corporate Pro Bono at (202) 729-6699

or visit our website at www.cpbo.org.

Developed by Corporate Pro Bono

A global partnership project of the Pro Bono Institute and the Association of Corporate Counsel

www.cpbo.org

Copyright 2013 Pro Bono Institute

CPBO®, PBI®, and Pro Bono Institute® are registered trademarks of the Pro Bono Institute

mailto:[email protected]://www.cpbo.org/http://www.cpbo.org/http://www.probonoinst.org/http://www.acc.com/http://www.cpbo.org/

STEPPING STONES TO MORE IN-HOUSE PRO BONO

Corporate Counsel Catherine Dunn February 21, 2012

Pro bono legal work was once the sole province of law firms. But no more. Now that terrain is increasingly being inhabited by in-house legal departments, too, according to Esther Lardent, president and CEO of the Pro Bono Institute. “What we’ve seen over the last decade is this amazing growth,” Lardent says. “It’s like a quiet revolution.”

Back in 2000, the Association of Corporate Counsel (ACC) approached the Pro Bono Institute, which has traditionally liaised with law firms, about teaming up. That led to the creation of a joint endeavor aimed at in-house counsel—the Corporate Pro Bono Project. They have since worked with 450 different legal departments, Lardent says (although not all of the departments have a formally designated pro bono program, she notes). And more than 100 legal departments have signed onto a voluntary pro bono pledge, called the Corporate Pro Bono Challenge.

Lardent chalks the change up to two major currents: the in-house legal profession has grown in stature, and more companies are emphasizing corporate social responsibility on the whole.

Whereas in-house practice was once perceived as something of a backwater, corporate counsel are now “the most powerful and respected people in the profession,” according to Lardent. Accordingly, in-house lawyers ask, “So, what can we do with that power?”

At the same time, companies are recognizing that being a “good citizen” carries sway with both shareholders and consumers. More and more U.S.-based companies are issuing annual corporate social responsibility (CSR) reports, and those in charge of CSR are often direct C-suite reports. “The idea that your reputation is creating good will is really, really important,” Lardent says.

Today, the average law department pro bono program is less than two years old. Aetna lays claim to the oldest organized pro bono program in a legal department, says Lardent. It has been running for more than 30 years.

Since pro bono has been so much a part of firm life, the migration of attorneys from firms to in-house positions has also proven transformative. Lardent cites Microsoft general counsel Brad Smith as the “poster child” of this pattern; he worked pro bono during law school and while at Covington & Burling, and then created Microsoft’s immigration law pro bono program.

The Corporate Pro Bono Project has played a key role, too, Lardent says, particularly by addressing head-on the common obstacles that arise in-house. Now, when they talk to legal departments, they already know the seven main challenges to conquer:

1. Time: Legal departments are often smaller than firms, and the in-house lawyers are already stretched on all the corporate work that needs doing. When pro bono is on the line, “there’s a nervousness about ‘How can we make that commitment and live up to it?’, ” Lardent explains.

Solution: Coming up with finite, time-limited, and predictable opportunities. A classic example is the clinic-in-a-box model, such as holding a legal “health check-up” for community nonprofits.

2. Malpractice insurance: Often, legal departments don’t have it because they may, for instance, be covered by the general principles of a company’s insurance policy. Even though malpractice claims in the pro bono field are rare, lawyers wouldn’t dream of doing the work without coverage and protection.

Solution: Introducing legal departments to options for inexpensive or free coverage.

3. Skill sets: In-house lawyers who are mid-career and highly specialized may be unfamiliar with the courts and area of practice—like family law—involved in pro bono work. “There’s a fear that you’re going to mess up,” Lardent says. “It’s like being a first year out of law school, but you’re not.”

Solution: Training, mentoring, and support that allow in-house counsel to move out of their comfort zones and into areas like immigration and housing law. Also, showing lawyers that the corporate law skills they already have can help nonprofits with transactional and business needs.

4. Appearance of conflicts: In-house lawyers don’t want to take a position in a pro bono case counter to the interests of their corporate client.

Solution: Identifying those conflicts from the outset, and establishing clear policies that allow in-house counsel to steer clear of them.

5. Location: Many legal departments are located on corporate campuses far from where the pro bono clients are. Driving from Silicon Valley to the office of a nonprofit in Oakland, for instance, could mean a lot of lost time in the car.

Solution: Using telephones, computers, and the Internet to consult with clients. “Virtual pro bono,” Lardent calls the approach.

6. Practice rules: With corporations’ offices spread around the country, in-house counsel may be licensed and in good standing—but not in the jurisdiction where their desk is. That could be fine on the corporate end, but by taking on pro bono cases in that area, “the worry is you’re going to be charged with unauthorized practice of law,” says Lardent.

Solution: This is one challenge “we haven’t quite solved yet,” Lardent says. But they’re on the road to a solution. ACC and the Pro Bono Institute are working to change the applicable rules state by state—Virginia just adopted a rule to allow in-house counsel in good standing to take on pro bono, even if they’re not licensed by the state. Interim solutions also include getting court approval and the written consent of pro bono clients, and focusing on work that doesn’t require that someone be a licensed attorney at all, such as in the field of veterans benefits.

7. Making global pro bono work: As companies expand overseas into new markets, in-house counsel are also asking how they can go global with pro bono. In addition to the challenges listed above, it can be hard to source international opportunities.

Solution: The Corporate Pro Bono Project has formed a task force to examine the issues involved. Some law departments do pro bono work in places like Nepal that’s oriented more toward legal research and policy development, rather than litigation.

In-house departments continue to offer creative solutions within the pro bono world, says Lardent. “I think we’re just beginning to see what they can bring to the table.”

social innovation lab

Defi ning the Competitive and Financial Advantages of Corporate Responsibility and Sustainability

By: Steve Rochlin, Richard Bliss, Stephen Jordan, Cheryl Yaffe Kiser

Project ROI Sponsors

(Lead Sponsor)

(Supporting Sponsor)

IO Sustainability and Babson College thank Verizon and Campbell Soup Company for their support of the project.

Copyright IO Sustainability, 2015

Project ROI: Defining the competitive and financial advantages of corporate responsibility and sustainability | 1

Table of Contents

About The Research Organizations........................................................................................................... 2

Acknowledgements ................................................................................................................................. 2

I. Executive Summary .......................................................................................................... 3

II. Introduction ..................................................................................................................... 6

Necessary, But Not Sufficient ............................................................................................................ 6

About Project ROI ............................................................................................................................. 7

Defining Corporate Responsibility ...................................................................................................... 8

III. ROI Findings – Firm Value, Share Price, and Risk ............................................................. 12

Company Value, Share Price, and Risk ROI Scorecard ........................................................................ 12

How Does CR Drive Market Valuation and Share Price? ..................................................................... 15

IV. ROI Findings – Sales and Reputation ............................................................................... 17

CR Sales and Reputation ROI Scorecard .......................................................................................... 17

How Does CR Management Drive Sales and Reputation Benefits? ..................................................... 18

V. ROI Findings – Human Resources .................................................................................... 19

CR Human Resources ROI Scorecard ............................................................................................... 19

How Does CR Drive Human Resource Benefits? ................................................................................ 21

VI. Defining CR’s Strategic Role ........................................................................................... 22

VII. Strategies and Tactics for Generating Value from CR ...................................................... 30

VIII. Achieving the Target: Diagnostic Tool ............................................................................ 42

Diagnostics for the Way the Company Fits CR Practices into its Business ........................................... 42

Diagnostics for the Company’s Commitment to CR Practices ............................................................. 43

Diagnostics for the Way the Company Manages CR Practices as an Asset .......................................... 44

Diagnostics for the Way the Company Makes Connections that Enable CR Practices to Drive ROI ......... 46

IX. A Look Ahead ................................................................................................................ 48

X. Bibliography ................................................................................................................... 49

2 | Project ROI: Defi ning the competitive and fi nancial advantages of corporate responsibility and sustainability

ABOUT THE RESEARCH ORGANIZATIONSAbout IO Sustainability

IO Sustainability, LLC is a research and advisory services fi rm. We focus on enhancing the discipline of Corporate Responsibility and Sustainability to build strategic approaches that deliver Impacts and Outcomes (IO) for an organization and its key stakeholders. IO’s mission is to develop tools and solutions that promote a sustainable future for our clients. We do this through a commitment to continuous learning, research, and stakeholder engagement, and our unique multi-disciplinary approach to strategy and project implementation. For more information visit www.iosustainability.com

About the Lewis Institute for Social Innovation at Babson College

The Lewis Institute illuminates pathways for students, faculty, staff, foundations, and corporate partners seeking social innovation solutions. By drawing upon Babson’s core methodology of Entrepre-neurial Thought & Action®, we activate unexpected and fruitful collaborations and integrative designs for action. The result is business prosperity and societal improvement. We extend our impact through the Babson Social Innovation Lab, an action tank powered by Toyota, that incubates people and ideas in the world of social innovation. The Institute resides at Babson College, the educator, convener, and thought leader for Entrepreneurship of All Kinds ®, and a dynamic living and learning laboratory, where students, faculty, and staff work together to address the real-world problems of business and society—while at the same time evolving our methods and advancing our programs. For more information visit http://www.babson.edu/Academics/centers/the-lewis-institute/Pages/home.aspx

About the Authors

Steve Rochlin is co-founder and Co-CEO of IO SustainabilityRichard Bliss is the Barefoot Family Endowed Chair, Associate Professor of Finance at Babson CollegeStephen Jordan is co-founder and Co-CEO of IO SustainabilityCheryl Yaffe Kiser is Executive Director of the Lewis Institute for Social Innovation at Babson College

AcknowledgementsThe authors wish to thank the following for making this research and its companion report possible.

First, the vision of our lead sponsor, Verizon, brought Project ROI into being. In particular, Rose Stuckey Kirk, Chris Lloyd, and Emily Bosland of Verizon were always willing to share their perspectives and experiences including Verizon’s own method of measuring their corporate responsibility (CR) programs’ ROI using a metrics-based model. This has been invaluable in grounding the research and helping to explore fruitful ideas and avenues. They have been excellent partners through the process.

Dave Stangis and Niki King of Campbell Soup Company have provided equally valuable insight and partnership. Their support, along with Verizon’s, made the project a reality. We benefi ted greatly as well from the insights provided by Bob Morrissey and Mike Senackerib from the Campbell Soup Company executive leadership team.

The tireless and passionate commitment of the IO Sustainability and Babson College research teams was also vital for the project’s development. We express our heartfelt gratitude to IO’s Laura Ashbaugh, Sam Charner, Stephen Davis, and Charlie Goldburg and to Babson’s Lukas Donado for their invaluable contributions. Thanks as well to IO’s Amanda Pekar, Eric Hahn, and Ian Morell. Finally IO’s Roxana Jordan and Babson’s Emily Weiner served as unsung heroes for their management oversight. We also thank the individuals from companies that participated as interview subjects. We will, as promised, respect their confi dentiality.

social innovation lab


I. EXECUTIVE SUMMARYCorporate Responsibility (CR) practices have great potential to deliver financial returns on investment (ROI) as well as related business and competitive benefits. But it’s not enough to engage in CR activities, one must manage them well. Companies should view their combined CR practices as value-creating assets. With proper design and sufficient investment, a company’s “CR Assets” can support returns related to:

• Share price and market value

• Sales and revenue

• Reputation and brand

• Human resources

• Risk and license to operate

The potential ROI from CR for large, publicly traded companies, includes the following:

CR’s potential value for market value, share price, and risk reductionIncrease market value by up to:4-6%

Over a 15 year period, increase shareholder value by:USD $1.28 billion

Increase valuation for companies with strong stakeholder relationships:40-80%

Reduce the cost of equity by:1%

Reduce share price volatility:2-10%

Avoid market losses from crises: USD $378 million

Reduce systematic risk by: 4%

Reduce the cost of debt by:40% or more

CR’s potential value for marketing, sales, and brand/reputation

Increase revenue by up to: 20% Increase price premium by up to: 20%

Increase customer commitment in:A core segment of 1-20%The total segment of 60%

Establish CR brand and reputation value as: 11% of the total value of the company

Avoid revenue losses of up to: 7% of the firm’s market value

CR’s potential value for Human ResourcesReduce the company’s staff turnover rate by up to:50%

Save per additional retained employee: 90-200% of the employee’s annual salary

Improvements in CR performance has the same effect on retention as an increase in annual salary of: $3,700/year

Workers willingness to accept variability in pay: 5% pay cut

Increase productivity by up to:13%

Increase employee engagement up to: 7.5%


While high quality products and services, effective marketing and sales practices, well-calibrated strategies and business models, and excellent management and operational practices remain the most important drivers of ROI, strong CR practices can both:

• Augment business performance to deliver additional ROI and

• Make up for certain defi ciencies in business performance to preserve, protect, and even grow fi nancial ROI.

From a strategic standpoint, the management and practice of CR can serve one or more of the following business-value generating missions:

Strategic, business-value creating goal Potential target range

a) Boost how shareholders view performance to enhance share price and market value

Increasing share price as much as 6%

b) Reduce risks and protect the company’s license to operate Protecting as much as 10% of the fi rm’s value

c) Nurture, grow, and protect CR-related brand and reputation value Nurturing as much as 11% of the fi rm’s value

d) Enhance competitive positioning with, and deepen the engagement of, customers

Increasing revenues as much as 20%

e) Enhance the commitment and engagement of employees Reducing turnover as much as 50%

f) Some combination of the above

It is not enough to simply fund or manage environmental, social, and governance programs, one must differentiate good CR management practices from less effective ones.

Companies that make a strong commitment to CR tend to generate ROI. This means:

• Articulating a commitment to clear environmental, social, and governance goals

• Aligning CR management practices with business strategy and mission

• Establishing quantifi able management metrics

• Seeking authentic stakeholder buy-in and engagement

In contrast companies perceived as not fully committed to CR are less likely to generate ROI. Such companies may engage in philanthropy and select environmental and social practices, but exhibit a disconnect between these practices and core operations.

Paradoxically, while deep alignment and commitment tends to pay off for a company’s overall CR profi le, for any specifi c CR activity – from philanthropy, to environment, to human rights in the supply chain, and others – companies tend to benefi t by following the “Goldilocks” approach. Customers, employees, and shareholders look for the company to engage in just the right amount of activity. They may fi nancially “punish” the company for doing too much or too little. This stakeholder pattern is situational and depends not just on the company’s individual context, but on industry and general business patterns of behavior.


To enhance the potential for CR to deliver value, companies will benefit from adopting the management framework of:

1. Fit: Make CR commitments that fit your company’s core attributes and your key stakeholders’ expectations.

2. Commit: Make a genuine commitment to address CR issues.

3. Manage: Think of, develop, and manage your portfolio of CR practices as a valuable intangible asset.

4. Connect: Build key stakeholder awareness, trust, engagement, and affinity.

These findings suggest that it is time to move away from the debate over whether CR in the abstract creates or destroys value. Companies and their managers are able to exert some measure of both choice and control over the business-related benefits that their CR management will deliver. Like other investments, some CR initiatives will pan out and others won’t. The implication for companies is to develop business-aligned and integrated CR strategies. This includes applying to CR some of the same management disciplines as any other business function.

The authors intend to continue our investigation of how CR drives financial and societal value, and develop ways the systems companies can use to improve the results from their CR investments and strategies.


II. INTRODUCTION

For years a debate has raged – do corporate environmental, social, and governance (“ESG”) practices drive or distract from tangible fi nancial, competitive, and wider business performance? With the support of Lead Sponsor Verizon and Supporting Sponsor the Campbell Soup Company, the Project ROI team of IO Sustainability and Babson College has conducted extensive research to answer this question. In the process the team has identifi ed important lessons learned regarding the key strategies and tactics likely to deliver returns from CR.

Our fi nding: CR practices have great potential to deliver fi nancial returns on investment (ROI) and related business and competitive benefi ts. However, it is not enough to engage in CR activities per se, one must do them well. As with every aspect of business management, some types of CR investments succeed and others fail. Companies should view their combined CR practices as a valuable collection of assets or an asset base. With proper design and suffi cient investment, a company’s “CR Assets” can support returns related to:

• Share price and market value

• Sales

• Reputation and brand

• Human resources

• Risk and license to operate

Companies that commit to building CR approaches that utilize systematic business analytics and tools can adopt strategies and tactics that should increase the potential to generate fi nancial and wider business value. These approaches can and should reinforce objectives to deliver tangible benefi ts for society.

Necessary, but not suffi cient

Environmental, social, and governance programs may contribute to overall profi tability and business success, but they are dependent on the overall business context. CR practices cannot replace the quality and attractiveness of products and services. Sound CR practices cannot make up for strategic and managerial defi ciencies in other business disciplines like strategy, fi nance, marketing, manufacturing, HR, or R&D (although they may mute the downside impacts from errors in judgment and crises).

However, the fi ndings suggest that well-designed and managed CR practices help drive and support value in a number of ways. Given the outcomes that CR potentially generates, companies should embrace CR practices as a valuable contributor to competitive fi nancial and business performance.1

1 Lacey, Kennett-Hensel, & Manolis, 2014; Porter & Kramer, 2006


About Project ROI

Verizon and the Campbell Soup Company launched Project ROI to support their efforts to continuously improve their ESG performance and to tangibly measure the benefits to business of environmental, social, and governance programs. They supported the research of IO Sustainability and Babson College, who undertook the work under the condition that the research team would share findings based on wherever the research led.

Project ROI’s objective is to assess the business case for CR for the benefit of senior executives, boards of directors, and even Wall Street. The research has asked what, if any, potential ROI can CR deliver? We have then assessed:

• What are the strategies, tactics, and practices likely to create ROI?

• What lessons should executives and managers take regarding their approach to and measurement of CR practices?

Our approach relied on analyzing existing research from credible analysts and institutions. The vast majority of our sources have come from academic and peer reviewed sources. In total we have investigated over 300 studies.

We have supplemented our research with interviews of executives and CR practitioners and from our experience advising, studying, and training hundreds of companies across industries.

The existing body of research tends to focus mostly on the experience of large, publicly traded companies. There are several reasons for this:

(1) Transparency of financial results makes it relatively easier to measure the relationship between CR and financial performance.

(2) Many of the benefits of CR are related to balance sheet improvements, particularly relevant to publicly-traded companies.

(3) Privately held companies do not necessarily have as much pressure to deliver profitability on a quarterly basis.

However, the research we have reviewed is diverse and in the opinion of the authors often does apply to large privately held firms. We would project, as well, that the research has certain relevance for small and medium enterprises. This is an area that requires deeper investigation.

It is important to note that asking what returns CR brings to society is a crucial question. While our research concentrates on the business case, it is important to underscore a key finding: companies that commit to CR approaches that genuinely and authentically aim to optimize their impact and to generate positive benefits for society, stand the best chance of delivering financial and business value.


Defi ning Corporate Responsibility

We use four terms interchangeably: “ESG” (environment, social, and governance); “Corporate Responsibility” or “CR”; “Sustainability”; and “Corporate Social Responsibility” or “CSR.” The fact that no single term suffi ces to explain the practice and that every term possesses multiple (and sometimes competing) defi nitions creates challenges for the fi elds of both research and practice.

For the purposes of this report the above terms refer to a company’s efforts to:

• Reduce the corporate footprint. This discipline refers to management efforts to reduce the fi rm’s detrimental impacts on environmental, social, economic, and governance performance indicators within its surrounding community, value chain, or broader eco-system. It includes direct corporate action as well as those behaviors of the company’s wider value chain whose CR performance it infl uences through the policies, decisions, and incentives it creates.

• Enhance positive solutions that improve environmental, social, economic, and governance conditions. Sometimes referred to as the corporate “handprint,” this refers to a spectrum of practices ranging from pre-competitive investments designed to improve social and economic conditions in a new market, to research and development designed to meet CR needs more seamlessly, to philanthropy and other forms of community engagement and development.

• Transparently disclose and report on CR performance.

• Determine the company’s accountability for CR performance in dialogue with stakeholders.2

Companies struggle to design a coherent and consistent process to manage and implement CR practices.3 IO Sustainability’s research and hands-on experience fi nds that companies typically divide CR practices across four work-streams as captured in fi gure 1.

2 The researchers recognize that there are many different attributes and complexities inherent in the broader fi eld encom-passed by CR, ESG, Sustainability, and CSR and future iterations of Project ROI will continue to explore these issues in increasing granularity over time.

3 Rangan, Chase, & Karim, 2015

Project ROI: Defi ning the competitive and fi nancial advantages of corporate responsibility and sustainability | 9

Figure 1: The roles and structures of CR operations

The paradox companies face is that the left two columns – “Compliance” and “Engagement” – possess relatively clear structures, processes, procedures, policies, and management cycles. However, their business case and potential for ROI are hard to defi ne.

In contrast, the “Competitive Positioning” and “Innovation & Transformation” work streams can possess more straightforward business cases. Examples that relate to these areas from Verizon and Campbell Soup include the following:

• Verizon’s Corporate Responsibility group and Wireless Business partnered with external stakeholders to design “The Coupe”, a mobile phone created specifi cally to address the unique needs of the disability and senior communities. The product launched in 2008 and sold 400,000 units, remained on back order for months, and moved to a second generation with “The Knack”, which quickly sold 100,000 units. In addition, Verizon Wireless also created a senior calling plan, which brought in 100,000 new customers. Verizon Wireless spending by the senior segment increased by 100 percent from 2007 to 2008.4

• Currently Verizon is pursuing a strategy of deploying technology solutions to incubate innovative approaches that target social issues in underserved communities that might not otherwise be addressed by the business itself.

COMPLIANCE

Major functions• Technical assessment,

auditing, reporting and improvement of regulatory and voluntary systems

Examples• Emissions• Legal and ethical conduct• Safety

ENGAGEMENT

Major functions• Code and standard

adoptions; communications, stakeholder management, partnership, program design, reporting

Examples• Giving and volunteer • Engagement• Reporting• SRI, ratings, standards

COMPETITIVE POSITIONING

Major functions• Share value programming,

pilot products, social innovation, supplier development, green production

Examples• Cost savings• Pilot products• Pilot R&D• Cause campaign

INNOVATION & TRANSFORMATION

Major functions• Stragetic planning, R&D

and product development, business process redesign

Examples• Products foster

sustainability• “Net positive” footprint

4 Boston College Center for Corporate Citizenship & McKinsey & Company, 2009


This approach provides R&D and market intelligence to the business in the form of outcomes and analysis. For example, Verizon Innovative Learning Schools (VILS) provide professional development to educators in schools to help them better leverage the power of mobile technology. Verizon uses a rigorous measurement process to assess the social impact that mobile technology—when used appropriately—has in the classroom. The initial results are positive.

• The average increase in standardized math scores for VILS schools students is 6.97%, compared to the non-VILS average increase of 4.23%. 99% of teachers responding reported some positive effect on student behavior and attitudes. Verizon’s business units are using this data to develop new opportunities for the business.5

• In 2010, Campbell rolled out its 2020 goal to reduce its environmental footprint by half. While efforts are taking place at all of the company’s facilities globally, the Napoleon, Ohio, facility set the standard for the company’s green efforts as the facility makes more than two-thirds of Campbell’s beverage volume and over a third of soup volume in North America. In addition, about a fi fth of company-wide electricity consumption occurs at Napoleon. To help offset the resource needs of such a high-production facility, major renewable energy projects were implemented. In 2012, the plant transitioned to natural gas and currently recycles 95 percent of materials. In addition, two projects – a 60 acre, 24,000 panel solar fi eld, which is the largest in the United States supplying solar energy to a single private facility, and a new biodigester that converts fruit-and-vegetable waste into methane to fuel two generators – are projected to fi ll 40 percent of Napoleon’s electric demand. Campbell spent no money to install the solar system and locked in a price for 20 years at a rate that is the equivalent to or less than what the company was paying. Based on Department of Energy projections, the solar array will reduce Napoleon’s electricity costs $4 million and eliminate 250,000 metric tons of greenhouse gas over the purchase agreement’s 20-year period.

• In FY2013, Campbell launched an extensive re-lighting project at its processing plant in Dixon, California. The company replaced more than 1,800 halide lighting fi xtures with more effi cient LED wall packs, fl ood, and pole lighting. The project is expected to save 180,088 kilowatt hours annually and remove 270,000 pounds of carbon dioxide, 450 grams of sulfur dioxide, and 1 million grams of nitrogen oxide from the air EPA estimates put this reduction

5 FSG, forthcoming 2015


at the equivalent of the carbon that would be sequestered by 104 acres of U.S. forest in one year, saving 14,245 gallons of gasoline, or removing 26 cars from the road. Campbell continues to invest in environmental compliance and sustainability initiatives, with that amount exceeding $17 million in FY2014. These investments have paid off, yielding savings of more than $77 million since 2009.6

One can assess the ROI for each of these examples using analytical tools commonly employed by managers. Yet, companies often find it difficult to embed these approaches in a clear system of strategic goals and objectives, management responsibility, and processes. It is even more difficult to weave all four work streams into a coherent whole.

Project ROI looks at the whole picture with particular focus on the Compliance and Engagement work streams. These represent the most difficult business cases to plan and measure. They are also necessary for companies to credibly execute strategies for the latter work streams.

6 Interview with Niki King, The Campbell Soup Company, 2014


III. ROI FINDINGS – FIRM VALUE, SHARE PRICE, AND RISKMeta-analyses of hundreds of studies fi nd a positive relationship between CR performance and fi nancial performance.7 Furthermore, there is growing evidence that CR management goes beyond correlation and has a causal relationship with fi nancial performance.8

Overall, the market rewards leading CR performers more than laggards and those that dabble.9 Research typically measures the distinction between top tier, middle-tier, and bottom-tier performers by utilizing rating and assessment systems. Many different rating and assessment systems have been developed, however a common one referenced in the literature is the KLD ratings now owned and managed by MSCI. These kind of CR ratings score companies across a range of ESG performance indicators and topics. The results allow researchers to categorize samples of companies and distinguish the level of CR commitment and quality of CR performance.

The quality, management, business integration, and communication of a company’s CR approach affect market value. Collectively these have the potential to infl uence the way investors weigh contextual factors and reward companies for good CR management or punish them for bad.

The upshot:

Companies can use their CR approach to enhance market value. However, engaging in CR activities in and of themselves do not guarantee a positive ROI.

Company Value, Share Price, and Risk ROI Scorecard

Large, publicly traded companies that adopt effective CR approaches have the potential to generate the following returns on investment.

7 Margolis & Walsh, 2001; Orlitzsky, 2003; Peloza, 20098 Flammer, 2013; Rodgers, Choy, & Guiral, 20139 Barnett & Salomon, 2012; Brammer & Millington 2008; Eccles, Ioannou, & Serafeim 2011; Tang, Hull, & Rothenberg, 2012;

Wang & Choi, 2013


Enhanced market performance driven by a company’s total CR profile

The potential value CR can generate:

• Leading CR performers have the potential to outdo laggards by as much as 4% - 6%.10 Examples:

• Over a 15 year period (1991-2006) for a company in the S&P 500 Index this translates to on average: $1.28 billion in additional shareholder wealth (an average of $85M/year) for a cumulative return of 133%11

• Over a 17 year period (1993-2010) an investment of $1 in high performing CR firms grew to $22.60. The same $1 invested in low performing CR firms grew to only $15.40 in the same period12

• For a large corporation with an average market value of approximately $48 billion, one unit increase in a CR rating would result in approximately $17 million more in profits on average in subsequent years, a 4% increase in financial returns13

• From between 2009-2012 an investment of $1 in:

• A CR leader grew to $1.13

• An average performer grew to $1.07

• A laggard stayed at par14

• A one-standard deviation increase in CR performance is associated with a 5.08% increase in mean equity value15

Enhanced market performance driven by a specific CR practice


• Strong environmental practices, for example:

• From 2004-2007 leaders in carbon reducing outperformed laggards by 3%, with a cumulative total return of 81.85% compared to 72.67%16

• Strong stakeholder relationship management practices, for example:

• Investors valued mining companies with strong stakeholder relationships 46%-86% higher than those with average or weak relationships.17 Firms that treat stakeholders well excel in market valuation18

• Effective philanthropy correlates with superior financial market valuations19

10 Eccles, Ioannou, & Serafeim, 2011; Koh, Qian & Wang, 2014; Luo & Bhattacharya, 2006; Park & Moon, 2011; Perez de Toledo & Bocatto, 201411 For the average company in the S&P500 Index. Source: Park & Moon, 201112 Eccles, Ioannou, & Serafeim, 201113 Luo & Bhattacharya, 200614 Perez de Toledo & Bocatto, 2014 15 Koh, Qian, & Wang, 201416 Innovest Strategic Value Advisors, 200717 Henisz, Dorobantu, & Nartey, 201318 Wang & Choi, 201319 Brammer & Millington, 2008; Jacobs, Singhal, & Subramanian, 2010; Lev, Petrovits, & Radhakrishnan, 201020 Derwall & Verwijmeren, 200721 El Ghoul, Guedhami, Kwok, & Mishra, 2011; Sharfman & Fernando, 2008 (focusing on the effects of environmental performance)22 Chava, 2011

Reduction in the cost of equity


• Good corporate governance and CR practices can reduce the rate of return required by the company’s ordinary shareholders in order for that investor to bear the risk of holding that company’s shares by up to 1%20

• Firms with a better CR performance tend to have a lower cost of equity capital21

• Investors expect higher returns – up to 1.4% annually – on stocks facing more environmental concerns than their peers22

Table 1: CR Firm Value ROI Scorecard


Reduced share price risk and volatility driven by a company’s CR approachReduced share price risk


• A one-standard deviation increase in CR performance from the average can cut fi rm-specifi c risk by 10% compared to its industry peer group.23

• Firms with strong CR reputations experience no meaningful declines in share price compared to their industry peer group during crises, whereas fi rms with weak CR reputations declined by 2.4% - 3%, a market capitalization loss of $378 million per fi rm.24

Reduced systematic risk


• Strong CR performance reduces systematic risk. CR can reduce the average ß (“Beta” – a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole) by up to 4%.25

• Better environmental risk management reduces ß.26

Reduced cost of debt


• Superior environmental performance compared to peer group yields lower cost of debt by 40-45 basis points (bp).27

• Moving from the bottom to top governance quartile doubles the probability of an investment-grade credit rating. An investment grade credit rating reduces the cost of debt by 8% or 800 bp versus a speculative rating, leading to a reduction of $38.4 million in annual interest expense compared to the median speculative grade fi rm.28 Firms with below average CR pay 7 to 18 bp more than better CR performers on comparable debt instruments.29

• Higher levels of CR performance are rewarded with lower bond yield spreads. Contributing factors that reduce credit spreads include: • Community involvement (reducing spreads by 43.4% or ~ 40 bp for a AA-rated bond);• Product safety and quality (reducing spreads by 30.3%);• Increased employee dissatisfaction can increase credit spreads up to 88%.30

• Firms facing higher stakeholder environmental concerns than their peers pay higher interest rates on bank loans. Up to 25 bp in one study, or $1.5 million annually for the average sample loan,31 and up to 64 bp in another study.32

23 Luo & Bhattacharya, 200924 Schnietz & Epstein, 200525 Albuquerque, Durnev, & Koskinen, 201426 Sharfman & Fernando, 200827 Schneider, 201128 Ashbaugh-Skaife, Collins, & LaFond, 200629 Goss & Roberts, 201130 Oikonomou, Brooks, & Pavelin, 201131 Chava, 201432 Bauer & Hann, 2010


How does CR drive market valuation and share price?

“No investor has ever asked us about our Corporate Responsibility practices.”33

The C-Suite executive quoted above appears to reflect a common experience. Another senior executive adds, “When we brief investors on our CR practices, they never have follow up questions or comments.”34

Recent research suggests this may change as analysts are beginning to make decisions and recommendations based in part on evaluations of CR performance.35 Yet it seems puzzling that active CR management drives up share price when few investors seem to express concerns or interest.

Deriving market and share price value from CR does not require investors to initiate queries about a company’s CR performance. Instead, sound CR management practices appear to influence investors in three ways:

1) Integrating CR and intangible assets

Investors appear to respond positively to firms that integrate their approach to CR with the investment and management of intangible assets such as talent, brand and reputation, and innovation.36

2) CR as a proxy for strong, well-managed companies with bright futures

Investors appear to treat CR as an intangible asset and proxy signaling firm strength,37 such as:

• A sign that the firm’s future prospects are bright.38

• An indicator of strong performance across:

• Good management. In particular shareholders perceive that CR serves as a proxy for – and may drive -- improved operating performance including improvements in labor productivity and sales growth, suggesting CR improves employee satisfaction and appeals to customers.39

• Competitive differentiation. Any firm can imitate a specific CR program. But companies that commit to high CR performance are acquiring competencies and resources that are hard to copy or imitate and that can create a sustainable competitive advantage.40

• Employee engagement.41

• Organizational culture.42

• Innovation.43

3) Reducing financial and other forms of risk

Investors may perceive that CR serves as “insurance-like” protection of intangible assets when

33 Interview with C-Suite executive, 201434 Interview with senior executive, 201535 Ioannou & Serafeim, 201436 Luo & Bhattacharya, 2006; Surroca, Tribó, & Waddock, 2010 37 Lys, Naughton, & Wang, 2013, and 201438 Lys, Naughton, & Wang, 2013, and 201439 Flammer, 2013; Wang & Choi, 201340 Perez de Toledo & Bocatto, 2014; Wang & Choi, 201341 Surroca, Tribó, & Waddock, 2010; Brammer & Millington, 200842 Surroca, Tribó, & Waddock, 201043 Surroca, Tribó, & Waddock, 2010


events challenge the integrity of the fi rm.44

It is interesting to note that CR brings no value enhancement for fi rms in “socially contested” industries (e.g., tobacco, gambling, alcoholic beverages, and fi rearms).45

44 Godfrey, Merrill, & Hansen, 2009; Koh, Qian, & Wang, 201445 Koh, Qian, & Wang, 2014


IV. ROI FINDINGS – SALES AND REPUTATION“CSR is shown to be a necessary and sufficient mechanism for stronger customer relationships….” CSR is not only something that a company should engage in based on principled grounds but also something that a company must practice for strategic reasons as their customers demand it and place relational value on it.”46

Sound CR management has the potential to increase revenues up to 20% and to enhance the firm’s brand and reputational value by 11%. To achieve these results, companies must set a goal and apply targeted marketing strategies and tactics.

CR Sales and Reputation ROI ScorecardCompanies that adopt effective CR approaches have the potential to generate the following returns on investment.

Revenue from increased sales Revenue from price premiums

The potential value CR can generate:• Sales revenue can increase up to 20%.47

• Every $1 in corporate philanthropic contributions can generate $6 in increased sales revenue (within limits).48

The potential value CR can generate:• Price premiums can increase up to 20%.49

Increased customer satisfaction and loyalty

Insurance: reduced consumer defection from product and other crises

The potential value CR can generate:• CR can affect variations in customer satisfaction

by 10% or more.• While CR can motivate the purchasing behaviors

of up to 60% of customers,50 the true core ready to open their wallet is in the 1-20% range.51

• This core segment may base their affinity on CR practices and they will promote the products whose CR they believe in.

• Involving customers directly in CR activities increases their trust for your company while decreasing trust in your competitors.52

The potential value CR can generate:• The estimated risk protection a well-

managed CR program tied to reputation and integrity can deliver is estimated at 4% to 7% of the company’s total value.53

46 Lacey, Kennett-Hensel, & Manolis, 201447 Hainmueller & Hiscox, 2011b; Hainmueller & Hiscox, 2011c; Hainmueller & Hiscox, 2012a; Hainmueller & Hiscox, 2012b;

Hainmueller & Hiscox, 2014; Tully & Winer, 2013 48 Lev, Petrovits, & Radhakrishnan, 201049 Ferreira, Gonçalves Avila, & Dias de Faria, 2010; Hainmueller & Hiscox 2011a; Hainmueller & Hiscox, 2011b; Hainmueller &

Hiscox, 2011c; Mueller Loose & Remaud, 2013; Trudel & Cotte, 2009; Tully & Winer, 201350 Tully & Winer, 201351 Du, Bhattacharya, & Sen, 2011; Lacey, Kennett-Hensel, & Manolis, 2014; Tuppen, 200452 Du, Bhattacharya, & Sen, 201153 Janney & Gove, 2011; Peloza, 2006; Klein & Dawar, 2004; Koh, Qian, & Wang, 2014

Table 2: CR Sales and Reputation ROI Scorecard


CR Brand and Reputation Value

The potential value CR management can generate:

• 7% to 11% of a company’s value comes from the fi rm’s CR brand and/or reputation.54

How does CR management drive Sales and Reputation Benefi ts?

The quality, management, business integration, leadership, and communications of your company’s CR approach affect sales and reputation outcomes. If properly aware and engaged, customers will increase their commitment to and engagement with the company.

Any combination of the following can drive sales and reputation value. Section VII on strategies and tactics provides more detail on these approaches:

• Building awareness

• Refl ecting the customer’s own values

• Creating a pathway from guilt to pride

• Differentiation

• Engaging customers directly in CR activities

• Enhancing the following reputation drivers:

– Perceptions of a company’s citizenship

– Governance

– Workplace practices

54 Boston College Center for Corporate Citizenship and the Reputation Institute, 2008; Fombrun, 2003; Gidwani, 2013


V. ROI FINDINGS – HUMAN RESOURCES

“…[C]orporate social responsibility…has quickly become a crucial part of any large company’s long-term strategy – not just in marketing, but in recruiting, too: …employees now want more from their employer than a paycheck. They want a sense of pride and fulfillment from their work, a purpose and importantly a companies whose values match their own.”55

Research finds that strong CR performance increases the commitment, affinity, and engagement of employees. This in turn enhances job performance, increases productivity, reduces turnover, lowers absenteeism, and even reduces the incidence of employee corruption.56

In addition, employee engagement links to CR in a virtuous cycle. Together they reinforce one another and enhance financial performance, sales revenue, brand and reputation value, and innovative capability.

The presence of environmental and social programs alone do not guarantee HR benefits. Companies must design effective and strategically targeted CR approaches to generate value for HR.

CR Human Resources ROI Scorecard

Companies that adopt effective CR approaches have the potential to generate the following returns on investment.

Table 3: CR Human Resources ROI Scorecard

Enhanced productivity Reduce turnover and increased recruitment


• Productivity can increase up to 13%.57


• Reduces the average turnover rate over time by 25% to 50%.58

• Reduces the annual quit rate by 3% - 3.5%.59

• This can save replacement costs up to 90% to 200% of an employee’s annual salary for each position that stays.60

• Improving CR performance has the same effect on retention as an increase in annual salary of $3,700/year.61

• Firms higher in corporate social performance (CSP) are perceived as more attractive employers than firms lower in CSP. Prospective applicants’ job pursuit, probability to interview, and probability to accept a job offer are positively associated with a firm’s CSP.62

55 Meister, 201256 Burbano, 201457 Tonin & Vlassopoulos, 201458 Ipsos Mori, 2008; Vitaliano, 2010; Wong, 201159 Vitaliano, 201060 Direct replacement costs can reach as high as 50%-60% of an employee’s annual salary, with total costs associated with

turnover ranging from 90% to 200% of annual salary (Allen, 2010)61 Vitaliano, 201062 Greening & Turban, 2000


Reduced compensation Employee engagement

The potential value CR

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