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2 Posts authored by: Hamish Gray Employee

As I mentioned in a recent post, Corporate Social Responsibility (CSR) – also referred to as corporate citizenship or sustainability – has morphed from the right thing to do several years ago to a business imperative today. This shift is driving new thinking in corporate governance models to ensure CSR strategies are aligned to industry trends, stakeholder requirements, and business success. Being in-line with, or even a step ahead of, this integration of CSR in corporate governance will save you and your company some grief. But how do you get there? And once you “get there”, how do you maintain momentum? At Keysight, we used our company formation as the impetus to embark on a 6-step journey to evolve our CSR program model to help get us “there” and position ourselves for continuous progress.

 

Importance of the Journey

Before I delve into the steps Keysight took to evolve our CSR program, I’d like to share how I was recently reminded about the importance of this journey. In a 2018 Annual Letter to CEOs, Larry Fink, Chairman and CEO of BlackRock, referenced the increasing importance of CSR in institutional investment decisions and corporate engagement strategies. “Society is demanding that companies, both public and private, serve a social purpose,” Mr. Fink wrote. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”1

 

That is a powerful statement. One that underscores how the investment community is signaling a move beyond just financial performance as an indicator of business value, to include societal impact and sustainable operations. As Mr. Fink stated, “a company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth.”

 

This is not an isolated example. F. William McNabb III, Chairman and CEO of The Vanguard Group, Inc., noted last year in an open letter to directors of public companies worldwide that they “believe it is incumbent on all market participants—investors, boards, and management alike—to embrace the disclosure of sustainability risks that bear on a company’s long-term value creation prospects.”2

 

I couldn’t agree more! These messages are spot-on with the trends Keysight has experienced with our investment community as well as our customers and rating agencies as they request increasingly comprehensive social responsibility data. This reality, coinciding with our company formation, marked an opportune time to consider evolving our CSR program model to address these trends, and align it with our new brand and business strategy.

 

Six Steps to an Evolved CSR Program Model

Upon formation, Keysight had robust CSR programs with monitoring, reporting and functional accountability already in place. Many companies do, even if they don’t know it collectively. Keysight’s opportunity was to do a six-step, top-to-bottom review and assessment of our CSR program model and governance, to fine tune it and ensure ongoing success. Following was our journey:

 

  1. Defined Material CSR Topics – The base of any program starts with key stakeholder needs. So, as most new CSR organizations do, we first conducted a materiality assessment. This helped us identify and prioritize the topics most important to our investors, customers, employees, and the community, building on the trends we were seeing from these stakeholders. While the result did not note any significant difference from our previous approach, it helped ensure we were starting with a solid foundation based on issues important to our key stakeholders.
  2. Aligned Material Topics to Company Values – The purpose of this step was to align our stakeholders needs with our company’s core DNA. By reviewing the material CSR topics from the last step against our core company values, we ensured that the program tenets would be supported across the organization and deep within our employee base, all of whom have a part to play in our CSR success.
  3. Created/Modified CSR Vision – It is important for any program to have a vision statement, a beacon of sorts, that drives behavior and connects the program goal to the business strategy. At Keysight, we connected our top-level beacon, to “build a better planet,” with our business purpose of “accelerating innovation to connect and secure the world” all while “employing a global business framework of ethical, environmentally sustainable and socially responsible operations.” This comprehensive statement allows us to quickly frame the program tenets while testing that our efforts in this space support the program direction. If a CSR program or policy doesn’t support this vision, then why would we do it?
  4. Aligned Goals to Business Objectives – Along with supporting the broader global community, CSR programs must help the company meet its business commitments. As such, the goals of our CSR program were directly mapped to our business objectives in revenue growth, profitability and shareholder value creation. This step was critical to ensuring the company and the world is made better by our efforts, and also helped solidify the strategic nature of CSR in delivering business results.
  5. Developed Foundational Program Strategy – To achieve the vision and deliver to program goals, we defined a strategy that supports our business objectives while positively impacting the planet through a set of foundational pillars. Our six foundational CSR pillars provide a structure to which all programs are aligned and measured for company and global community benefit. They also compartmentalize a very wide-ranging set of functions to identify management accountability, helping to drive a governance structure … which was our final step!
  6. Engaged Governance Team – To drive accountabilities companywide and address emerging trends, we implemented a cross-functional governance team. With me as the executive sponsor and a set of executive colleagues as our steering committee, we ensured alignment at the root functional levels of the company. From there, a core team, led by a central program management team, manages the strategic planning and function-specific initiatives. The core team then relies on an extended support team within their respective functions to deliver to plan. This matrixed structure establishes ongoing alignment with executive leadership, puts in place a core accountability team to address cross-functional impacts and opportunities, and provides access to extended contacts across the company to meet program deliverables and goals.

 

Where to Next?

Evolve! Did I mention this is a journey? The end of the process is really just the beginning. The adventure continues. While we put much effort into these steps to get us to a point that addresses the emerging corporate governance reality, we will continue to review our programs and make progress while adjusting appropriately to meet changing needs.

 

Regardless of if your organization has long-entrenched programs or is new to CSR, you may find that our journey could also help your business develop and implement an evolved program model that is well-aligned to emerging trends and your corporate strategy. And of course, all while helping improve the planet!

 

Please feel free to share in comments how your company is addressing the evolving requirements and trends in this space. What has worked, not worked for your organization?

 

Sources:

1 "Larry Fink’s Annual Letter to CEOs: A Sense of Purpose," Larry Fink, Chairman and Chief Executive Officer BlackRock, January, 2018
2 "An open letter to directors of public companies worldwide", F. William McNabb III, Chairman and Chief Executive Officer of The Vanguard Group, Inc. Aug 31, 2017

Corporate Social Responsibility (CSR) – also referred to as corporate citizenship or sustainability – has morphed from the right thing to do several years ago to a business imperative today, requiring detailed monitoring, reporting, and accountability to support various stakeholder requirements. This shift, and the ongoing global transformation, requires diligence to ensure corporate CSR strategies are aligned to industry progress in this area while supporting global communities and business commitments.

 

As an individual who grew up with, and continues to have, a strong sense of community and volunteerism across the socio-economic spectrum, I am thrilled with these developments in the business environment. And as a business leader, I have seen first-hand how social responsibility results in a multi-faceted win for communities, individuals and corporations alike. Just one example is the recent devastating wildfires in Santa Rosa, California where Keysight is headquartered.

 

Keysight Strong sticker rolls during the Santra Rosa fire crisisSupported by our CEO, Ron Nersesian, executive staff, and existing CSR-related programs, Keysight was able to quickly offer affected employees emotional support through our employee assistance program, facilitate site emergency response, health and safety information, and provide funding of $1000 to displaced employees and $10,000 for those who lost homes to help in their personal recovery. Donations of clothing, necessities and funds from our global employee community were funneled to a Santa Rosa relief center we had set up to distribute them not only to Keysight employees and their extended families, but anyone in the local community that needed assistance. It was the right thing to do, we had the programs in place to support it, and I was proud to be a part of Keysight’s contribution. If you are interested in learning more about this, Keysight’s Brand Manager recently published details about the company’s response to the Tubbs fire crisis on another post.

 

As a CSR executive sponsor, however, I have experienced the challenges many corporations face to address the ever-evolving standards and industry guidance in this broad, cross-functional space. Instituting an effective CSR program model that supports the company and global community while ensuring it continues to meet today’s, and tomorrow’s, stakeholder requirements takes significant commitment to balance company resources, programs and obligations.

 

The Right Thing to Do is Now Required 

For more than 75 years – as part of Hewlett-Packard, then Agilent, and now a separate company – Keysight has acknowledged its responsibility to help address global social and environmental challenges. Beyond just being the right thing to do, it is part of our company DNA going back to HP founders Bill Hewlett and Dave Packard.

 

Long before companies were required to monitor, track and report on such activities, Bill and Dave built a strong brand culture – referred to as “The HP Way” – that included company sponsored philanthropic, education, community and sustainability programs. They didn’t do this because they had to, they did it because they knew it made good business sense! In the words of Bill Hewlett, the HP Way “is a core ideology … which includes a deep respect for the individual, a dedication to affordable quality and reliability, a commitment to community responsibility, and a view that the company exists to make technical contributions for the advancement and welfare of humanity.”

 

Flash forward more than 75 years, and this core value continues in our company DNA today. However, the broader CSR landscape has changed dramatically. While the main tenets remain intact, supporting programs in this area are now business success imperatives. Here's why:

  • I regularly review environmental, social and governance (ESG) industry ratings and reports to gauge Keysight’s effectiveness. Our investors are doing the same. As a Barclays report stated, “many responsible investors believe that ESG criteria are material to future business success and, ultimately, to financial performance.”1
  • Customers need us, as their supplier, to help meet their own CSR commitments and growth strategies. According to Accenture, corporations work with suppliers "to turn supply chain sustainability into a driver of competitive advantage."2
  • Beyond that, today’s highly desirable, skilled workforce wants to work for sustainable and ethical companies. The 2016 Cone Communications Millennial Employee Engagement Study noted that 76 percent of millennials consider a company’s social and environmental commitments when deciding where to work, and 64% won’t take a job if a company doesn’t have strong CSR values.3
     

Any corporation, Keysight included, cannot be successful without positive relationships with investors, customers and their workforce. Thus, the CSR space has become a business imperative that creates sustainable business value while driving competitive differentiation. Again, the recent Santa Rosa wildfire response is a great example.

 

From a business perspective, the unintended, but positive consequence of the company’s response was our employees recognizing that Keysight has, and will, support them and their communities in times of need. As a result, Keysight employees worldwide responded by doubling-down on their day-to-day jobs, and in some cases taking on more responsibility in the short term, to make sure the company recovered as quickly as possible and continued to meet customer and market commitments. Such events illustrate how critical CSR programs are to the success of local communities, employees and companies. It just makes business sense.

 

As with any business-critical program, periodical reviews, rightsizing and evolving of corporate CSR programs are necessary to navigate emerging industry standards and guidance in this space. At Keysight, we used our company formation as the impetus to embark on a 6-step journey through which our CSR program model evolves, as we align it with industry trends, and our new brand and business strategy. More on this journey in my upcoming posts.

 

In the meantime, feel free to share how CSR has shaped and supported your business success.

 

Sources: 

1 "Sustainable investing and bond returns," Barclays Report

2 "Why a sustainable supply chain is good business," Accenture

3 “2016 Cone Communications Millennial Employee Engagement Study,” Cone Communications