How to evaluate CSR impact: The importance of corporate social responsibility evaluation

If you knew a teenager in the early-2010s, there is a fair chance they had a pair of TOMS. The casual, trendy canvas shoes took the footwear market by storm in 2011, where its ‘one for one’ corporate social responsibility (CSR) scheme snowballed into celebrity endorsements and social media acclaim. By 2013, TOMS was making $250 million in sales, was sold in over 500 retailers across the United States, and had donated over 10 million shoes since its launch.¹ Today, TOMS is owned by its creditors, restructuring a debt of $300 million the company failed to pay back.¹ So, what happened?

Case Study: TOMS’ corporate social responsibility 

It turns out that the one-for-one model of shoe donation might do more harm than good to receiving communities. Critics claimed that donating shoes could disrupt local economies and failed to address the causes underlying poverty - consumers and influencers alike rapidly adopted this criticism.² To make matters worse, TOMS shoe design was easily copied by competitors, and many of them one-upped TOMS’s CSR initiatives. Skechers, for instance, began selling BOBS, which looked the same as TOMS, were cheaper, and donated two pairs of shoes for every shoe sold, to TOMS’s one donated shoe.¹ TOMS ended up pivoting away from the ‘one for one’ model in 2019.

TOMS’s story highlights the importance of evaluation in CSR strategy. It's easy to imagine an alternative world, where TOMS evaluated the impact of their ‘one for one’ model, and optimized it in anticipation of the public criticism and imitation by competitors. Instead, TOMS stayed the course. 

Impact Evaluation vs. Impact Optimization

Impact optimization isn’t an obscure idea: firms do it on a daily basis in areas like marketing, logistics, and strategy. The idea of continuing with the same marketing strategy for years on end, without incorporating any meaningful changes suggested by internal metrics or assessments, seems ludicrous.

However, this is common practice in many firms with regards to CSR. Three-quarters of companies already have some type of CSR evaluation protocol, however, these evaluation methods are often disconnected from the decision-making process when it comes to CSR initiative renewal.³ The monitoring and evaluation of CSR outcomes is disconnected from the decision-making process. Optimization refers to bridging this gap, re-establishing the connection between evaluation and action. 

Over half of firms rely on internal ideas to update their CSR initiatives³

More often than not, companies rely on the ideas or experience of the executive team to make changes to their CSR initiatives. While this approach may be pragmatic, it’s not sustainable. Firms can certainly design CSR initiatives on their own, but if firms don’t actually evaluate if these internally-designed initiatives are socially responsible, they run the risk of appearing inauthentic: the cardinal sin of CSR.

The current approach to CSR monitoring, where there exists no connection between evaluation and optimization/future decisions, just reinforces the idea that CSR is a public-opinion exercise. CSR activities are perceived as inauthentic because firms generate initiatives without evaluating and optimizing their impact. Optimizing impact has the dual benefit of allowing the firm to avoid the inauthenticity trap while improving the outcomes of their initiatives.  

Only 6% of companies evaluate their CSR programmes³

Ultimately, return on investment for CSR isn’t measured in social outcomes, it's measured by how CSR influences the perception of the firm. Since most firms are focused on utilizing CSR to retain and recruit the best staff, they tend to highlight the ‘sexy’ numbers associated with their CSR initiatives. The disinterestedness in CSR optimization arises from the belief that the primary goal of CSR is not the goals of the social initiative itself, but rather the perception of the firm investing in and completing the initiative.⁴

The attractive figures associated with CSR - like dollars donated or volunteer hours worked - can be generated without impact optimization. CSR evaluation, therefore, presently exists to track existing program outcomes, rather than improving outcomes. CSR impact tracking is thought of as an optics tool rather than a strategic leverage point.⁵ As a result, any sort of CSR impact measurement is done with a reporting outlook, rather than an evaluation outlook.