30 Apr. 2015 | Comments (0)
Operating in a regulated sector, utilities companies face unique challenges with regard to their giving strategy and measurement methodology. Duke Energy, Entergy, and PSE&G shared their perspectives on this during The Conference Board’s research working group, Measuring the Impact of Corporate Social Investments. You can download the full report from these sessions here.
Utilities operate in defined regional service areas and are highly regulated, which affects how they make charitable contributions in their operating communities. There are multiple factors at the federal and state levels that can influence corporate citizenship in this sector, including state expectations of philanthropic engagements, union requirements for paid time off for volunteering, and regulatory settlement funds that must be approved for program funding.
In addition, regulated utilities’ relationship with their customers is quite unique—customers do not have a choice of which utility company they use; they are a “captive audience” with their provider. Often, customers misperceive the source of funding for corporate social investments of utility companies, and they would prefer that those funds be spent on reducing their utility bills instead.
Some utilities noted that, to combat this incorrect perception, they explicitly state that their corporate social investments are shareholder-funded. Working group companies report that large and midsize utilities are evaluated on customer satisfaction through an annual JD Power survey, with one dimension specifically geared toward corporate citizenship. This presents an area of opportunity—and a challenge—to leverage philanthropy to impact customer satisfaction.
Impact on social investment strategies
Based on the above characteristics, utility companies tend to direct their funding to organizations and programs in their local communities/service areas, as opposed to national programs. From a strategic perspective, it is challenging for utilities to focus their giving to one or two core social issues or even to establish a signature program, since they are balancing the interests of their broad customer base as well as fulfilling their regulatory requirements. This results in a number of smaller investments across a variety of grantees that cannot be sacrificed; however, there may be opportunity to leverage a partnership with the American Red Cross, for instance, provided its in-state reputation is positive in the respective states. This is particularly useful for utilities that have companies in more than one state.
Measurement approaches and future plans
The utility companies reported that while measurement of outputs is fairly simple to capture with their social investments, measurement of longer-term outcomes and impacts is challenging to execute across multiple focus areas and with a broad strategy of social investments. It is difficult to demonstrate how they are “moving the needle” on a particular social issue area when their social investment budgets are spread thin across multiple areas and programs. All three working group utility companies noted that, in spite of these challenges, they continue to make progress in measurement by:
- Executing measurement on a project-specific basis, which allows for a deeper focus on the outcomes of a few specific partners or programs, as opposed to trying to roll up metrics across several disparate grant areas.
- Narrowing and/or better defining focus areas and targeted outcomes.
- Carefully vetting potential partners and programs on the front end to determine which ones already have proof of positive results that align with the companies’ desired outcomes.
- Revising grant applications and associated evaluation criteria to more systematically capture desired metrics at project initiation.
Given the nature of the utility sector, impact measurement may evolve at a slower pace than in other industries. However, based on the experience of the working group members, there is clearly some positive momentum around better defining a giving strategy that fits regulator and customer and business needs, and then aligning outcomes and partner criteria.
About The Conference Board’s Social Impact Measurement Portfolio
This case study is taken from Measuring the Impact of Corporate Social Investments, the report of a 14-company research working group that examined challenges related to impact measurement. It is one of a range of publications on the topic that The Conference Board has published in the past 12 months. The other publications, including Framing Social Impact Measurement, are available here.