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A deeper shade of green

The new corporate responsibility is about measuring results


Despite the best of intentions, corporate social responsibility (CSR) — the corporate do-good work also known as sustainability, corporate citizenship, and triple-bottom line — has been scoffed at as “green washing,” or simply marketing to make an organization look like it’s doing right by society and the environment.

In today’s business world, it’s not enough to say you’re reducing energy and waste, hiring a more diverse group of employees, and giving back to the community. You need to prove it — and sustain it — to gain trust and build loyalty. Citizens, including customers and increasingly investors, are looking for concrete efforts and verifiable results before determining where to put their money.

A company that does nothing, or not enough with regard to CSR, is considered higher risk. Ignoring community, environmental, and social concerns can quickly erode the value of a business — especially when the public figures it out

What’s more, a company that does nothing, or not enough with regard to CSR, is considered higher risk, with potentially wide-sweeping consequences. Ignoring community, environmental, and social concerns can quickly erode the value of a business — especially when the public figures it out. Volkswagen’s emissions-testing scandal is just one example of how a company’s brand (and stock price) can suffer when it doesn’t do the right thing. This from a company that has won “green” car awards in the past.

Losing confidence is considered less of a threat for credit unions, which have a mandate to support community development, and serve people above profit. Since 2008, Canadian credit unions have contributed more than $293 million to communities across the country, according to the 2015 Credit Union and Community and Economic Impact Report, published by Credit Union Central of Canada. In 2014, credit unions returned $162 million in profits to their 5.3 million members, a five per cent increase from the year before. But is that enough?

The credit union advantage

The credit union system is considered to have an advantage over its big-bank competitors because of its structure, which includes a greater willingness to come together to promote values-based financial services and offer innovative products. Over the years, credit unions have been among first to offer services such as open mortgages, alternatives to payday lending products, and social impact bonds,according to the impact report.

Credit unions are also making headlines with initiatives such as ensuring employees are being paid a living wage in their communities (Read “Pay it forward” for more on living wage employers), as well as backing impact loans for affordable housing developments, and microfinance lending for small businesses in the developing world.

Still, credit unions are coming under competitive threat as other corporations, including Canada’s big banks, wise up to the importance of CSR to both save money and reduce risk. “Credit unions have a natural advantage, but they have to take advantage of it … they have to exploit it,” says Coro Strandberg, a CSR consultant and principal of Vancouver-based Strandberg Consulting.

Strandberg says more businesses, including the big banks, are investing heavily in becoming sustainability leaders in their industries and building stronger relationships with their stakeholders, including customers, employees, and communities.

Now is a “critical time,” according to Strandberg, for credit unions to boost their social contract with stakeholders to not lose the momentum. That means not only launching new programs and initiatives to advance CSR principles and practices, but also proving their social and environmental impact.

“More credit unions are building this into their corporate strategy and setting targets and metrics to show their social and environmental progress,” says Strandberg.

“The race is on for companies … to be able to tell the story of their impact in a way that is authentic, credible, and transparent, and which is measured and third-party verified as being accurate and truthful…”
—Coro Standberg

“The race is on for companies, credit unions or otherwise, to be able to tell the story of their impact in a way that is authentic, credible, and transparent, and which is measured and third-party verified as being accurate and truthful — as much as financial results are,” Strandberg adds.

Some credit unions are responding to this market shift in areas beyond just environmental improvements and community donations. Many are empowering communities, employees, and the credit union system in general with initiatives that cover areas such as social finance, corporate governance, and impact investing. Here are just some of the more recent initiatives from a handful of Canada’s credit unions.

Socially responsible returns

Mennonite Savings and Credit Union (MSCU) (20,198 members, $947.2 million in assets), based in Ontario, announced in early 2016 that it was the first Canadian financial institution to show that all its GICs qualify as socially responsible investments (SRI), which are products that both make money and deliver social good.

Previously, the SRI approach to investing has only been associated with mutual funds and market investments, according to MSCU chief executive officer Brent Zorgdrager.

“Members can have the confidence that the lending we are doing with the funds their GICs provide has met the criteria for sustainability and the environment,” says Zorgdrager.

Green transparency
Mennonite Savings and Credit Union is the first Canadian financial institution to show that all its GICs qualify as socially responsible investments

MSCU’s program and criteria for investment is validated by Sustainalytics, a third-party CSR research and rating company. That includes ensuring borrowers aren’t involved practices that have negative impacts on the environment or human rights, for example. One of MSCU’s products is the Oikocredit Global Impact GIC, which helps finance cooperatives and small and medium-sized enterprises in developing countries through a Netherlands-based cooperative society called Oikocredit. MSCU says it — not members — take on the risk if the loans go bad.

“We are willing to leverage and risk some of our balance sheet to allow our members access to a product that they wouldn’t otherwise be able to access,” says Zorgdrager. “There is a market demand,” he adds. “It’s not just something cute or Pollyanna-like.”

More than 150 new members have joined MSCU, specifically to purchase Oikocredit GICs, since the product was launched in February 2015, Zorgdrager says. And Vancity (499,474 members, $19.1 billion in assets) announced in December that it too would begin investing a portion of its Shared World fixed-term deposits into Oikocredit products.

William Azaroff, Vancity’s vice president of Community Investment, says this is expected to be the first of many similar initiatives where the credit union takes money from its own balance sheet to support impact investments.

Mony Mom in her grocery store. She has a loan of US $375 from microfinance institution Angkor Mikroheranhvatho Kampuchea Co. Ltd., which uses Oikocredit’s loans to further develop its portfolio in the agricultural sector.

“This isn’t the same as lending an organization money,” says Azaroff. “It’s about putting our excess liquidity into an organization we’ve vetted deeply and has similar goals around microfinance that we have.”

Oikocredit Canada national director Eugene Ellmen said his organization is in active discussions with other Canadian credit unions to offer the same product for its members. He also hopes the Oikocredit model will inspire credit unions to offer similar investment products — ones that help organizations in their own communities.

“I think there would be a lot of demand for products like that,” Ellmen says, while noting credit unions must also clear a number of regulatory hurdles to provide this type of investment product. “There are a lot of community contribution programs out there now, and that’s a great thing, but there’s not a lot of investment products for credit unions to offer to their investors outside of their wealth management products like SRI mutual funds. We’re really in new territory here.”

CSR baked in business

Many credit unions prefer to describe CSR not as a strategy but instead part of the organization structure, including its overall governance.

“It’s a behaviour, not a principle,” says Vern Albush, director of CSR at Edmonton-based Servus Credit Union (375,815 members, $14 billion in assets). “CSR has significantly evolved to the point that it now should be a concern of every board of directors, every member of the executive team … and every role in the organization.”

Servus, which formed in 2008–09 from a merger of three credit unions, used that opportunity to “reset what CSR was going to be,” says Albush. It then developed a 10-year strategy that covers five key areas: governance, members, community, employees, and environment.

“Everything starts and ends with governance,” says Albush. “Too often programs get started with flair and do some amazing things, but then there’s a shift in personnel or change in direction in a department and the program ends. We wanted something that transcends leadership.”

Un-risky business
Baking CSR into the an organization also helps to reduce reputational, operational, financial, and socio-political risks

Baking CSR into the an organization — whether it’s a credit union, a bank, or a resource company — also helps to reduce reputational, operational, financial, and socio-political risks, Albush says.

“People are saying, ‘If we are doing the right things with our members regarding society and the environment, that should shelter us when it comes to public policy change that can drastically impact our organization,’” says Albush.

Empower communities

For credit unions, it’s not enough to just hand over a cheque to the community and call it CSR. More credit unions today are offering programs that empower community members to improve their financial well-being. That includes everything from no-fee banking accounts and interest-free loans for the disadvantaged to matching programs that help alleviate poverty. Winnipeg-based Assiniboine Credit Union (112,915 members, $3.9 billion in assets) recently won the 2015 National Credit Union Social Responsibility Award for its Asset Building Program, where every dollar saved by participating members is matched three-to-one by non-profit community partners.

Participants must enrol in a financial literacy program as part of the process to qualify, and can use the money to start a business, buy a home or even for basic needs like household appliances or glasses for their kids — anything that helps them improve their lot in life.

Building communities
Assiniboine’s Asset Building Program triples each $1 saved by participating members. To date, $1.2 million saved has been matched by another $2.9 million

Assiniboine has also developed the Recognition Counts!™ program (a partnership between the credit union, SEED Winnipeg, and provincial and federal governments), which offers five-year micro-loans of up to $10,000 for skilled immigrants, such as nurses and dentists, who need support in order to get trained and accredited to practice their profession in Canada.

Brendan Reimer, strategic partner, values-based banking at Assiniboine, says 156 loans totalling $1.3 million have been approved as part of the program in the three years leading up to August 2015. Of those, at least 20 loans have already been repaid, 80 borrowers have completed training and education, and 50 have landed jobs in their field such as nursing, engineering, dentistry, and accounting. The professionals come from countries such as the Philippines, Nigeria, India, Ethiopia, Sri Lanka, and Egypt.

“This project can completely change peoples’ lives and the lives of their children,” says Reimer.

More credit unions are also boosting so-called impact loans, which is lending for projects that advance social good such as cooperatives, social enterprises, and affordable housing projects. At Vancity, for instance, 44 per cent of its lending (about $379 million) was in the category of impact loans in 2014, and the credit union’s goal is to boost that percentage in the years ahead.

Make it measureable

Credit unions are under increased pressure to track and measure their CSR efforts to underscore their values-based business models. Libro Credit Union (95,818 members, $2.9 billion in assets) recently commissioned Strandberg Consulting to develop a Social Purpose Assessment checklist tool that will help credit unions define a social purpose approach to CSR.

Liz Arkinstall, community engagement manager at Libro, says the credit union wanted a benchmark of where it is today, and a roadmap to help it generate more positive impact in future.

“We also wanted a checklist to help prioritize social purpose investments and wanted a CSR model that could engage the entire credit union and owners, not just its grants and grant recipients,” says Arkinstall.

This type of measurement system is key as credit unions continue to compete fiercely against the major banks, which are also boosting their CSR principles and practices, and with much bigger budgets.

Says Strandberg, “The heat is on for metrics where companies can say what type of social impact is has generated beyond feel-good marketing stories.”

A measure of CSR
Some of Strandberg’s tips for managing, measuring, and reporting CSR
1. Make measurable progress
2. Involve stakeholders in measuring performance
3. Communicate

Like Strandberg, Kevin Dorse, manager of advocacy at the Canadian Credit Union Association, believes that credit unions do have an advantage, particularly because of their history and backbone of social commitment.

“It all comes down to authenticity,” he says. “What are credit unions doing that is generally different from what banks are doing, and how they’re setting themselves apart? We need to tell our stories better so that our stakeholders — and the general public — have a better idea of what credit unions are doing that is important and transformational.” ◊


corporate social responsibilty
Rosalia Alicia Sanchez Valecia is a farmer and entrepreneur who benefits from a credit union that supports micro and small enterprises in the State of Oaxaca, Mexico.

Leading green: 3 CSR trends to watch for

1. Mandatory CSR

CSR is largely considered a voluntary activity. However, some countries are moving to make it mandatory for companies to give back to society. An example is India’s Companies Act 2013, which requires public and private companies of a certain size put together a CSR committee to oversee the investment of at least two per cent of pretax profit and put it towards social causes.

If it doesn’t, the company has to disclose why. The European Parliament also has a directive for large public companies to report “relevant and useful information” on their policies and main risks relating to areas such as the environment, social and employee programs, anti-corruption and bribery issues, and diversity among their board of directors.

2. B-Corps

Toronto-based DUCA Financial Services Credit Union (50,000 members, $2.2 billion in assets) says it’s the first Canadian credit union (or retail financial institution, for that matter) to be certified as a B-Corp. The certification comes from the B-Lab in Pennsylvania, which works with socially minded entrepreneurs worldwide to assess company performances against leading social, environmental, accountability, sustainability, and transparency standards.

3. Living wage employers

A number of Canadian credit unions have attained certification (or are in progress), committing to pay employees a salary that meets cost of living requirements in their area.

Read “Pay it forward” for more about credit unions in Canada who are certified living wage employers. ♦