Stepping Up As Strategic Advisor

As roles evolve, CROs become ‘stewards of strategic decisions’

By Holly Roland 

Today’s companies are challenged to find socially responsible, sustainable ways of doing business that benefit their employees, communities and the environment—while simultaneously enriching their shareholders. And businesses across a variety of industries are proving that it can be done.

At the 2007 U.N. Global Compact Summit, Goldman Sachs reported that companies in the energy, mining, steel, food, beverages and media sectors considered leaders in environmental, social and governance  policies lead the pack in stock performance by 25 percent on average. And, according to a recent Economist study, strong corporate sustainability policies lead to reduced costs and new market opportunities.

These kinds of positive financial outcomes are found in companies where corporate social responsibility (CSR) and environmental policies support the financial objectives of the business and are aligned with its core values and brand. When these are in sync, corporate responsibility officers (CROs) can get the executive support required to incorporate CSR policies into everyday processes–rather than treating them as separate initiatives–and transform how the business operates.
But first, CROs need to move beyond CSR reporting and approach CSR from a business perspective by evaluating hard data on risks and opportunities, influencing the board and executive management to implement appropriate CSR policies and reporting outcomes to build momentum.

Three Stages in CRO Roles
Based on its experience working with thousands of companies, SAP has identified three stages in CRO roles as defined by their level of influence and activities: transaction manager, business partner and strategic advisor. For most CROs, becoming a strategic advisor is a gradual, evolutionary process.

Moving from Transaction Manager to Business Partner
The first step is to evolve from a transaction manager–someone who typically looks at CSR practices in piecemeal–to a business partner who works with internal and external stakeholders to determine corporate responsibility policy and gain board and executive approval.

To make this transition, CROs need to fully understand company values and financial objectives; align social and environmental goals with these values and financial objectives to drive corporate actions and plans; and work with department heads to incorporate initiatives into everyday business processes.

For example, if a company uses hazardous chemicals in its manufacturing plant, the CRO may develop an initiative to ensure the safety of employees and the local community. The CRO can work with compliance management and manufacturing to encourage the addition of the appropriate controls into everyday processes and use software to govern the handling of those chemicals. By incorporating automated controls into operational processes, the business can ensure safety standards compliance.

CROs can also use technology to automate daily monitoring and reporting tasks, as manual processes simply can’t scale as CRO initiatives expand. Software can automate the data capturing and CSR reporting process—eliminating hundreds of hours of manual work.

Moving from Business Partner to Strategic Advisor
Evolving from a business partner to a strategic advisor requires that CROs approach social and environmental initiatives with a greater focus on reducing costs and increasing revenue. The business opportunities can be huge.

DuPont, for example, has cut costs by $2 billion since 1990 by increasing energy efficiency while simultaneously reducing greenhouse gas emissions by two-thirds. And General Electric’s new, environmentally focused product line—Ecomagination—added $12 billion to the bottom line in 2006.

But with every opportunity comes risk. By incorporating risk analysis into the CSR evaluation process, CROs can proactively identify and manage risks to company valuations, as well as identify revenue opportunities. The key is to introduce collaborative, software-driven risk management practices that promote the timeliness and accuracy of risk-adjusted information for use in business planning.

To be effective, the software must be deployed as part of a consolidated GRC initiative that uses a common GRC foundation to support integrated risk management and business controls. With this in place, CROs can automatically identify and monitor top sustainability risks, enable lines-of-business executives to effectively mitigate CSR risks, and present risk in the context of corporate responsibility strategy and performance. In effect, the CRO becomes one of the stewards of strategic decisions for the organization.

CROs also need to drive dynamic strategy management and planning, which requires solutions that combine integrated risk management and governance processes with analytical applications.

Working alongside the CEO and the CFO, the CRO helps set, monitor and report on enterprise objectives; coordinate analysis; design response plans; and minimize enterprise risk. At this stage, one-way communication becomes a thing of the past—and collaboration takes center stage.

Technology: The Critical Enabler
As this discussion suggests, it’s not possible to implement sustainable, companywide CRO initiatives without the right supporting technology. The challenge is securing funding to invest in the right software.
That is why CROs need to collaborate closely with departments that have budgets for such investments and provide clear business cases that explain the potential benefits to the company when they establish sustainable processes that support corporate responsibility policies and initiatives.

Holly Roland, Vice President of Marketing Solutions for SAP's GRC business unit, has more than 15 years’  experience in financial accounting and reporting, regulatory compliance, business analytics, and enterprise software marketing and development.