Sustainable Innovation

Business benefits of measuring social impact of products

Consumers are acutely aware of the provenance of the goods they purchase. They have greater access to product information than ever before, and are empowered to make more responsible purchase decisions. There is now evidence that a majority are also willing to pay more for them. A study by marketing research group Nielsen found that 55% of online consumers across 60 countries would pay a premium for ‘green’ or socially responsible goods. Clearly therefore, there is now an opportunity for businesses to develop products and services that have demonstrable ecological or social benefits.

As consumers, we are accustomed to seeing ‘eco-labels’ on products and services. In contrast to the range of methodologies used to assess a product’s environmental impact, there is still a scarcity of tools and metrics to estimate the social impact of these products. A cross-industry social impact assessment method for products has not existed, even though many companies have implemented important social initiatives across their supply chains and operations.

Attempts to develop metrics for social impacts have often resulted in instruments that can be applied to a company as a whole, but are not easily translatable for the products within an industrial context and the daily practices of product developers and marketers. The main reason for this is that measurements of how a product affects society and individuals are difficult to quantify. For example, to prove that a product contributes to the wellbeing of end-users, a company would need consumer research to assess their increase in perceived wellbeing when using the product. The task is further complicated by the sheer volume of real-time product information that can now be accessed in different formats, and the social complexities of a globalised world in which the balance of economic prosperity is rapidly shifting.

Recently, the Roundtable for Product Social Metrics a group of European industry leaders including Ahold, AkzoNobel, BASF, BMW Group, DSM, L’Oréal, Marks & Spencer and sustainability consultants PRé Sustainability published the Handbook for Product Social Impact Assessment. The Handbook is the result of two years of close collaboration and is the first practical methodology tested and accepted by a group of major businesses for assessing a product’s social impact throughout its lifecycle. It has been formulated based on international standards and consultations with researchers, industry hubs, development organisations and NGOs.

The Roundtable has tested the methodology in 6 different pilots, assessing a variety of their products ranging from protective coatings and personal care products, to office chair components and automotive parts. The findings from these initial pilots, in particular insights into often complex value chains, were used to further refine the methodology. Three key stakeholder groups are taken into consideration: workers, consumers and local communities.

Stakeholder Groups Handbook PSIA
Stakeholder Groups taken into account in Handbook Product Social Impact Assessment

The assessment gives practical guidance for capturing social performance data. The resulting dashboard shows the performance in all life cycle stages, from raw materials extraction up till disposal. The pilots showed that the methodology can provide a clear framework by which companies can analyse lifecycle data.

Roundtable partners DSM, l’Oréal and AkzoNobel piloted the product social impact assessment approach on two products: a serum and a hand cream. Both products contain ingredients from AkzoNobel and DSM. They looked at the impact of the product on end-users as well as farmers’ wages and job security.

Personal care product used to pilot methodology

The assessment helped to highlight specific product differentiators that otherwise might not have featured so prominently on a product developer’s radar such as workers condition’s and local community impact. Other potential benefits arising from using the methodology are identifying new product ideas, identifying and mitigating supply chain risks and improving employee engagement. This approach has the potential to be beneficial for all companies that wish to innovate based on social impact performance metrics that take into account the whole value chain.

Extract of article The Guardian October 28th – by Jacobine Das Gupta (DSM) and Charles Duclaux (L’Oréal).


Best Practices – Framework

Companies. For the upcoming Best Practices, I have started to interview large French companies. Many of them are listed at the CAC40. I choose the frontrunners according to peers and industry groups.

Questions. The interviews have an explorative character, following 4 questions :

  1. What are CR objectives of your company ? How are they implemented ?
  2. Is CR is a Source of Innovation in your company ? What are examples ?
  3. Does the actual Economic Crisis impacts your Sustainable activities ?
  4. What is your outlook for the near future ?

Does CR create value ? : Is CR already seen as an opportunity to create a competitive advantage ? Does it mean ‘Value Creation’ to the company ?

3 layer model porter and kramer 06

Interpretation of the Model of Porter and Kramer, 2006 (1), also described by D. Franklin (2)

Porter and Kramer describe 3 layers of Corporate Responsibility. The 3rd, ‘ Emphasis on Opportunity’,  is the most trendy. It represents companies where CSR (or CR) is being used to create competitive advantage.

1. Traditional Corporate Philanthropy : Corporate Charity, Giving Back to the Community;

2. Risk Management : Stakeholder Dialogues, Transparent Reporting, Codes of conducts, Compliance, Avoiding Negative Publicity;

3. Emphasis on Opportunity :  Creating a Competitive Advantage ; Creation Innovation, Incorporation of CR as company strategy.

Sources : 1. ‘Strategy & Society : The link between competative advantage and corporate social responsibility’, by M. Porter and M. Kramer in Harvard Business Review, 12/06, and  2. ‘Just Good Business’, by D. Franklin, in The Economist 19/01/08.