Thomas Milburn argues that while benchmarking is a valuable exercise for driving responsible business practices, transformational change requires companies to go further.
Today companies face a proliferation of different schemes that publicly rate and compare their performance on different aspects corporate responsibility (CR). For the sake of argument, let’s call these public benchmarks (companies can of course benchmark their performance as a private internal exercise as well). Public benchmarks simultaneously pose a reputational opportunity and risk and the competition to do well in rankings can be fierce. Yet, the real value added through any benchmarking process is helping management compare performance against peers and best practice. The process can highlight critical gaps and help CR practitioners ensure that their company isn’t falling behind the pack. The exercise itself often helps to raise awareness and engage colleagues around CR issues.
However, benchmarking has diminishing returns over time. Inevitably, as a company makes progress against initial gaps, perhaps even becoming a leader amongst its peers, going through the same process will uncover less and less new information over time. The danger is that a false sense of security may set in and the company may start ‘resting on its laurels’.
In an article for the American Management Association, Booz & Company’s Paul Leinwand and Cesare Mainardi argue that not only does benchmarking encourage complacency, but that it also “encourages companies to build capabilities similar to those of the competition, reducing the chance that they will actually distinguish themselves by seeding new standards with new ideas.” The worst case scenario is that an entire industry becomes mediocre, with nobody challenging that norm.
The incremental approach that often results from benchmarking is insufficient for driving transformational change. It focuses on assessing where you are relative to others and doesn’t necessarily tell you where you need to go. That is not to say that incremental change isn’t needed, but for any company looking to differentiate itself as a responsible and sustainable business, it simply isn’t enough.
Corporate Citizenship recently interviewed André Veneman, director of sustainability at AkzoNobel, who talked about how the company is focused on future trends and fostering a culture of collaboration and innovation to make sure the company is resilient and successful in the future. This future-focused approach is far ahead of many of the company’s competitors, and could not have been reached through benchmarking alone.
To thrive today, companies need to simultaneously focus on incremental improvements and transformation change. Taking this approach means that benchmarking forms part of a larger picture of activity around CR progress, rather than being the main measure for performance. A recent briefing paper by Corporate Citizenship simplifies the crowded arena of public benchmarks or ratings and provides guidance on how companies should prioritise those schemes that add the most value to the business. By freeing up some resources this way, companies can focus on the other pieces of the puzzle, such as looking at future trends, collaborating internally and externally, and fostering a culture that spawns sustainability innovation.
In a constantly changing world, companies that want to differentiate themselves cannot use their peers’ performance as the only proxy for assessing their progress. Benchmarking is an effective tool, but perhaps it is best seen as providing a stable base from which to pursue more transformational change.
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