Sustainable Brands ‘14 Preview: Arrow Electronics on CSR Metrics

By Bart King

In 2011, Colorado-based Arrow Electronics began a complete corporate rebranding, followed by a relaunch of the company’s corporate social responsibility (CSR) program.

Arrow is one of the largest suppliers of electronics components in the world with $21.4 billion in sales in 2013 and 460 locations in 58 countries around the world.

At the upcoming Sustainable Brands '14 San Diego conference (June 2-5), Rich Kylberg, Vice President of Global Marketing and Communications at Arrow, will discuss the convergence of the company’s rebranding and CSR program.

I caught up with him for a quick preview conversation about CSR metrics.

Bart King: Since the launch of your new CSR program in 2013, what’s different about the way things are being done at Arrow?

Rich Kylberg: Before we underwent this program, Arrow did not have a single person—out of 15,000 employees—who was responsible for corporate responsibility. CSR initiatives would happen sporadically, as someone had the good sense to recognize we need to do these things. But they would just kind of boil up with no real hope of scaling.

Now with Joe Verrengia coming on as the company’s first dedicated CSR manager, our efforts can gain traction in the marketplace, and we’re able to bring consistency and standards to what we’re trying to accomplish. We’re investing about the same amount of assets and resources as before, but the impact is exponentially more profound. Our efforts are shared around the world internally and they’re getting more attention externally, which brings us more opportunities to do interesting things – like our quadriplegic racecar, or the composition we commissioned from the Colorado Symphony Orchestra.

We’re no longer just another corporation doing a blood drive or writing a check and getting our picture taken with a big piece of cardboard. I’m not saying that’s a bad thing to do. I think it’s a great thing to do. But I think it’s suboptimal from a corporate point of view.

BK: Have CSR responsibilities been added to the responsibilities of any other employees?

RK: Not officially. But this year, we have recruited a volunteer team of employees across our business units to help us develop a common set of sustainability standards and practices across Arrow and in all of our locations. It’s a large undertaking not only because of our global reach, but because many of our acquisitions still function with great autonomy.

We attract employees who are naturally inclined towards CSR activities. It’s in our corporate mission. If we didn’t do it, people would be left scratching their heads.

BK: How are CSR metrics important to the restart of Arrow’s CSR program?

RK: Arrow had a suboptimal CSR program in the past, and ultimately there were inadequate metrics. There was CSR activity, but you had to take a leap of faith regarding the impact.

A lot of the activity was at the level of the business unit or individual. The company wasn’t recording and capturing all of the good things it was doing. So it was easy for things to fall by the wayside. When we hit the recession in 2007-08, people had to tighten belts. It wasn’t a problem of CSR that it got cut. Rather, it wasn’t being measured and understood, so people couldn’t attach it to any tangible benefits.

So, in order to protect our CSR efforts in the future, we’re putting into place metrics to closely examine whether initiatives are exceeding or failing. Obviously, if they’re not working, we want to back off them, and if they’re succeeding, we want to put more investment into them.

The benefits of CSR activity are not always brand awareness or improved employee morale. CSR initiatives can support practically any aspect of corporate activity. If you understand that going into it, you can measure the results coming out of it.

BK: So how are you measuring the impact of your new program?

RK: When we established the program in early 2013, we wanted a set of metrics that would inform the selection of projects and evaluate their success. Currently what we’re using is a balanced scorecard approach. We looked at examples and advice from a variety of sources, such as the Boston College Center for Corporate Citizenship, before creating our own scorecard.

The math is pretty simple. It’s 100 points across ten categories. We evaluate our incoming requests through the scorecard and then as we develop deeper partnerships, we use the criteria to make sure we’re hitting the mark. As this matures, if everything we’re doing isn’t getting an 80 or above—a B average or above—it raises the question: “Why are we doing it?” Then we can work with partners to improve the relationship and the score.

Ultimately the score can be used to change directions. But right now we want to use it in a more encouraging way. We can say: Here’s how we evaluate our relationship. How can we do better with you?

BK: What is “balanced” about the scorecarding system?

RK: It covers a wide range of measurements. We’re not just looking at one measurement of ROI for the relationship—such as the number of media hits, or a measurable expansion of a related business. The measurement is varied: Is there employee engagement? Is there an executive champion? Is there a tangible innovation result? Does it involve electronics or not?

Not all of our projects involve electronics, but we know they are transformative, so we look for that. After all, electronics is our business. The scorecard covers a broad waterfront of what we’re looking for. That’s why it’s called balanced.

BK: How subjective is the use of these questions?

RK: The metrics are subjective in the sense that a variety of participants can score CSR opportunities or initiatives differently, based on their perspectives. But if we answer the questions honestly, we’re all going to fall into a certain range.

The questions include: How does this apply to Arrow and our CSR goals? How closely is this relationship and opportunity aligned with the brand? How much innovation are we achieving in this relationship? (Because that’s what we’re really looking for.) We also ask whether or not there’s an executive champion for the relationship, because we all know that’s really important for success. Those are the types of elements we’re looking for, and we grade them on a scale of 1 to 10.

The total score is what’s labeled the “engagement rating” in our CSR report.

BK: How have partners and prospective partners responded to the scorecarding system?

RK: We share the scorecard criteria with existing and prospective CSR partners so everyone can clearly see the criteria by which we consider partnerships. Organizations that we already sponsored were quick to adopt and apply the criteria from their own perspectives.

Arrow’s CEO has been on the board of the Denver Zoo for several years. Since we established the formal CSR program and the scorecard, the zoo shared with us its plan to become the most sustainable zoo in the U.S. So we immediately applied our sponsorship to the zoo’s new program of establishing recycling stations.

This year, our sponsorship is expanded to support the zoo’s waste-to-energy facility, which is expected to go online by the end of the year. This biomass gasification system will curtail significant landfilling of waste and save money in energy and trash hauling costs, while generating clean power to meet 20 percent of the zoo’s energy needs.

We’re also beginning to ask our partners to have their own evaluation and reporting processes, so we’re not just getting a letter at the end of the year saying, “Thank you for your contribution.” Instead we’re receiving feedback on progress, innovation and results.

BK: You mentioned a quadriplegic racecar. Can you tell me more about that?

RK: We wanted to demonstrate the engineering chops of Arrow Electronics. So we pulled together engineers from all parts of the organization to modify a racecar to be driven by a quadriplegic. The project has become quite interesting from a business perspective for Arrow, but it started out with a CSR sensitivity: Can we do something to make this world a better place perhaps for people with physical disabilities?

Our engineers achieved something that had never been done before. We did it with a hospital and foundations that are clearly more knowledgable about the medical aspects. But when it comes to the technology, knowledge and maybe even the courage to embark on the project—that’s where Arrow came in.

https://www.youtube.com/watch?v=F4vqcNabEL4

BK: What kind of business opportunities have come out of the project?

RK: The project is getting attention in the press. As awareness expands, we’ve had current and potential customers reaching out to ask us to help with other projects. They’re recognizing Arrow has the capabilities for that kind of project, as well as the heart.

So it’s starts out with noble intent—I’d call that CSR. We didn't know if it would work when we started. But we knew if it could, we would do something positive in the world.

So we took the risk and pulled it off. As a result we’ve expanded Arrow’s business materially and our employees’ internal appreciation for positive motives in CSR.

Bart King is the principal of New Growth Communications, a network of affiliated content producers and strategists serving clients in the emerging green economy. He also is an associate editor for Sustainable Brands. Follow him on Google+.