Many would agree that Intel has a world-class corporate social responsibility (CSR) program. But like every other company, this sustainability leader often struggles with measuring and monetizing its CSR program to bolster the business case.
Just because you can't always monetize your sustainability program, however, does not mean it isn't creating strategic value, according to Suzanne Fallender, Intel's director of CSR strategy and communications. To continue guiding the company on its sustainability journey, Intel set a series of long-term goals last week with the release of its annual CSR report, including cutting its direct greenhouse gas emissions by 10 percent per chip.
She spoke recently with the MIT Sloan Management Review about the challenges of breaking out costs and payoffs of sustainability efforts and how the company is using targeted websites to provide year-round real-time reporting of CSR activities. Fallender also discusses why Intel sees value in helping create long-term demand for renewable energy.
Below is an edited excerpt from the interview:
Nina Kruschwitz: How would you articulate the business case for sustainability right now?
Suzanne Fallender: One of the things we look at is the different ways sustainability creates value, and that can differ by action or program. But really, it creates value in four ways for us: one is risk management; two is operational excellence and cost savings; three is brand value; and four is revenue and new market opportunities.
As a manufacturer, most of our business case is made in terms of our license to operate. Being able to have strong relationships at the local and national levels with different stakeholder groups is critical, given the pace of innovation and how fast we bring up new factories online. The fact that we do have a strong environmental and sustainability reputation helps in that trust-building.
Kruschwitz: How do you measure these sorts of things in relation to making the business case?
Fallender: That's one of the projects we've been engaging with corporate finance on, because some of this is very difficult to measure.
We've done a lot of measurement around the reduction of our footprint, and some of the things that we've measured which make a very clear case are our investments in energy efficiency within our factories and operations. We can identify how much we've invested in new controls or systems, or, say, how much we've spent to upgrade to new, more efficient boiler systems.
We know, based on those projects, how much we've saved in annual energy costs. Since 2001, we've invested more than $45 million in 1,500 projects. We can quantify that that has saved us in energy 790 million kilowatt hours in energy costs -- about $23 million a year. Those are the easier things to measure.
Some things are harder to quantify. For example, we are the largest purchaser of green power in the U.S., according to the EPA. We know that we're paying a premium for our power when we buy renewable energy credits, but we know that there are some qualitative and longer-term benefits that come along with that as well, such as spurring some long-term demand in the market for renewables that will help bring that cost down over time.
Just because you can't always measure or monetize it doesn't mean you can't talk about the strategic value it creates. We're investing in areas to quantify what we can, and we're working with corporate finance to develop some tools to help us be more systematic in our measurement approach.
Kruschwitz: What kinds of incentives does Intel provide to get employees engaged?
Fallender: We've integrated it into employee and executive compensation. We did that in 2008 for the first time. We had been talking with some outside groups about ways to link to compensation. We'd seen other companies just link their CEO pay or the pay of their top executives. We had a variable compensation plan called the Employee Bonus plan, essentially a profit-sharing plan. It has three main components: absolute financial performance, relative financial performance and operational goals. It's in that operational goals component where we integrated the sustainability metrics.
The metrics have changed slightly each year based on what change we needed to drive. But we think it's very important that it's included -- for frontline employees all the way up to the CEO.
This article is adapted from "Integrating Sustainability Into Strategy, Governance and Employee Engagement," by Nina Kruschwitz, which was published by MIT Sloan Management Review in April 2012. This interview is part of MIT SMR's research and content theme, Sustainability & Innovation. The complete interview is available at http://mitsmr.com/LECWT8.
Copyright © Massachusetts Institute of Technology, 2012. All rights reserved.