How blockchain is making CSR more transparent
AS BLOCKCHAIN technology becomes more familiar and is further established, an abundance of ideas surrounding its potential applications are beginning to arise.
A variety of different market sectors, from banking to agriculture, are showing increasing interest in the technology, investing resources and efforts in order to develop new uses for it.
As a decentralized database where the data recorded is true, unforgeable and long-lasting, blockchain promises transparency, authenticity, and security; which is what makes it so desirable.
While blockchain is a fairly new technology, many experts have likened its potential impact to be much like the advent of the internet.
CSR and blockchain
The terms “transparency”, “authenticity”, and “security” are also terms which are most demanded within the scope of Corporate Social Responsibility (CSR).
CSR is the idea that with many multinational corporations having more power and wealth than some nations, they therefore, have the power to enact social change.
The need for companies to consider their economic, legal, environmental and social care for the wider community is becoming an increasing expectation of the people of today.
But while many businesses make attempts to engage in CSR projects, many of these efforts fail. While these large corporations are quick to publicize their CSR efforts, they aren’t so open to sharing their failures.
In order to create a more transparent system out of the current capitalist environment, blockchain is being leveraged to facilitate CSR projects.
One such company who is doing exactly this is Incitement, an agency for social impact projects who aim to challenge the current, old-fashioned way of carrying out CSR projects.
At a Cubechain event on the varying applications of blockchain held in Kuala Lumpur on Saturday, Nicole Lin, director of operations at Incitement described the benefits of using the technology in CSR projects.
Greater financial transparency
The problem with many CSR projects is the ability to prove the money raised was spent where it said it would be. A reported 95.4 percent of charitable donations never reach their intended beneficiaries.
This shocking statistic can be attributed to industry-wide issues in the humanitarian industry- a lack of financial transparency, reliability, impact measurement and reporting, incentives and ROI, and governance.
Incitement aims to address these issues by introducing a whole new ecosystem of “smart humanitarianism” which focuses on incentives, behavior, and governance.
“There’s a lack of trust in the public towards organizations. Having financial transparency and being able to see where every single dollar has gone- that is where the blockchain and a distributed ledger is a great application to solving this issue,” explained Lin.
“How do we know that this large amount of money is being spent effectively and being managed well? The answer is smart contracts”.
According to Lin, with the use of smart contracts, you are able to program where the funds are dispersed as specified.
“A brand can have a conversation with the cause and say okay this is the budget, we’re going to spend 10,000 on buying lightbulbs with this vendor, for this amount, at this time, and then put it in the smart contract for it to be executed. This reduces the risk of any mismanagement. You have some kind of reassurance that the funds are going where they intended to go,” explained Lin.
Another way to improve the reliability of organizations CSR efforts is to use incentives to encourage a successful project.
“We get people who are directly involved in the projects to validate the impact reports. So once we put it out there in a simple voting mechanism where participants can vote “Yes this is true, they have created an impact – or not. If it’s a yes and they have created a successful project they will be awarded performance fees,” Lin explained.
“We also ask the beneficiaries themselves – the people of the receiving end of the impact. They can take pictures, live-stream, and report data which is fed right back into the impact report, increasing the reliability and the accuracy of the impact report,” she added.
The ROI of CSR
According to Lin, by nature businesses are for profit, and as such, they want a return on investment (ROI) for their efforts. So what is the ROI for brands doing CSR initiatives? This boils down to the five “Rs” says Lin.
The customers of today are increasingly conscious of whether you are ethical or socially responsible- and they are willing to pay more for your goods or services if you are an ethical brand.
Having known to be an ethical brand versus a scandalous one can significantly impact your bottom line. Thus making efforts for the social good will be in your favor.
Millennials, in particular, will care about the social impact of your company- and these are the people who are going to overtake top positions. So by showing that you are a socially-responsible brand, it will encourage people to want to work for the company.
A lot of brands use CSR to engage their employees, involving them in purposeful and meaningful activities. This has shown to reduce staff turnover as employees are more involved in their company and thus enjoy who they are working for. This also shows in their efforts in work, through increased productivity.
According to Lim, when you work on something that is purposeful and bigger than ourselves, people tend to come together and unite. Whether it’s with your vendors, organizations, the government -relationships can deliver returns whether it’s related to partnerships or through networking.