We could combine spread and spend and arrive at what we call the responsibility matrix. The matrix charts companies based on the combination of their spend (as a percentage of average profits of the past three years) and the spread (responsible business) score.
Pace setters: These are companies that spend relatively large amounts and have relatively high responsible business scores. These companies have responsible business at the core of their long-term vision with good execution.
Smart utilisers: These companies spend relatively less but have higher scores. They get the best bang for their buck. They spend judiciously and are often able to extract economies of scale and also utilise their experience to the hilt.
Low efficiency: These companies spend relatively less and also have lower responsible business scores. As the name suggests, these companies are still finding their feet. They are still putting their frameworks in place and are struggling to comply with norms. They may take a while to ramp up.
Starting out: These companies spend relatively less and also have lower responsible business scores. As the name suggests, these companies are still finding their feet. They are still putting their frameworks in place and are struggling to comply with norms. They may take a while to ramp up.
There are 21 smart utilisers, 25 pace setters, 21 low efficiency and 25 companies starting out.
The Resposible Matrix
The key advantage of looking at the responsibility matrix is that it enables companies to see where they are placed and plan for how they wish to move on the matrix.
The responsibility matrix led us to another interesting construct. We call this distance to responsible. The regulation requires companies to spend a minimum of 2% of net profits. Any lower spend percentage is not seen favourably. On our rating scale, a company can score a maximum of 100 points. Thus, a company with a spent of 2% and a score of 100 points would be the best performing company (responsible). We constructed a measure of distance to optimal that tells a company as to how far away it is from the optimal.
The Distance to Responsibility
Thus, companies can get a sense of how much they need to do to reach the responsible point. We show the top five companies of this year’s study and see how far away they are (with the largest and shortest distances) from optimal responsible level. For companies to improve their performance on distance metric they need to either bring their spend percentage closer to 2% or improve their score or do both.
Distance to Responsibility
|Shortest Distance||Infosys Ltd.||12|
|Mahindra & Mahindra Ltd.||13|
The distance is measured as distance between two co-ordinates as where X0 and Y0 are optimal spend percentage and score respective; and X1 and Y1 are actual spend percentage and score respectively. A company with a spend of 0% and a score of zero has a distance of 100. A company with a spend of 2% and score of 50 has a distance of 50.
(*) The distance values are same due to rounding off