How does corporate social responsibility create value?

Discussions About Combining Corporate Social Responsibility and Business Strategy

Doing well has always been the priority of business. Corporate citizenship is evolving into a long-term commitment that aligns philanthropic strategies with business goals to boost profitability. So where does doing well fit into your business strategy? How do you measure your results? Here’s how you can make your company’s social contributions pay off.

In your highly competitive business world the nonprofit sector provides a way to express your humanitarian values, philanthropic values, address community problems, and to promote various social causes. It is often through coming together in nonprofit activities and organizations that employees can exercise their constitutional rights, beliefs, and values.

 Nonprofits can play a unique role as an intermediary between employees and their place of work. And investing in nonprofits can help companies create sustainable business strategies.

Top 10 Goals of Corporate Citizenship Programs

  1. Enhance corporate image
  2. Develop trust in the company
  3. Develop local talent
  4. Support programs with specific goals/impact
  5. Improve ability to recruit
  6. Protect current investment
  7. Retain executives and employees
  8. Broaden tax base
  9. Strengthen supplier base
  10. Expand customer base

Volunteerism Helps Your Business
Companies that encourage and support their employees’ efforts to become involved in the community accomplish two goals. They motivate employees who appreciate the company’s efforts and they strengthen the company’s good reputation. The right social entrepreneurial venture or volunteering project at work can significantly contribute to employee quality of life and the future success of a business.

It makes good business sense to align social entrepreneurial activities and business strategies. Studies have shown that over 80 percent of employees feel a greater sense of pride, commitment, and dedication to a company that is involved in social cause issues and philanthropic endeavors. “Volunteering just makes people feel good about themselves, and a person with healthy self-esteem is a much better employee,” says Arthur Blaustein, author of Make a Difference: America’s Guide to Volunteering and Community Service.

John Throop, executive director of the Richmond, Virginia-based Association for Volunteer Administration, says the value of volunteering for a small business and its employees is threefold. First, volunteering helps a business establish visibility in the community. Second, it helps employees link their search for significance in life to their workplace, Finally, it is a great way for employees to learn or test new skills.

Corporate Giving on the Rise
Giving by corporate foundations rose to a record $3.6 billion in 2005, according to Key Facts on Corporate Foundations, a report released by the New York City-based Foundation Center. A majority of surveyed foundation leaders project continued growth in 2006, although a substantial minority anticipates reduced giving.

The report’s key findings include:

  • Nearly 2,600 corporate foundations gave an estimated $3.6 billion in 2005, up 5.8 percent from $3.4 billion in 2004.
  • Corporate foundations lag behind independent and community foundations by rate of growth in giving.
  • Corporate foundations accounted for 11% of all foundation giving, second only to independent foundations—but down from 17% in 1987.
  • More than half of corporate foundations surveyed expect to increase giving in 2006, while roughly one-third anticipate reductions.

Among funding priorities, corporate foundations targeted half of their giving to education (26%) and public affairs/social benefit (24%), including support for community development, federated funds and other philanthropy, public affairs, and civil rights.

Options for a Corporate Giving
There are five ways for corporate giving. They are corporate foundations, corporate giving programs, community foundations, in-kind donations, and matching gifts. Corporate foundations are a separate, legal foundation that gets its grant-making funds primarily from the corporation itself. Corporate giving is a grant-making program established and administered within a profit-making company, the program’s budget is part of the company’s overall budgeting process. Community foundations are a publicly supported nonprofit intermediary that collects and disburse funds from multiple donors, including individuals and donors. In-kind donations include donations of equipment, supplies, and other materials for use by nonprofits. The donor may take a tax incentive for up to twice the product cost for inventory contributed to nonprofits. Finally, companies coordinate and encourage employee volunteerism through various mechanisms, including paid time off and they also may match employee donations to nonprofits with corporate funds.

Focus on The Measurables
It is difficult to put numbers against certain philanthropic goals like improving corporate reputation. But, social cause initiative produce strong intangibles that can benefit your company. First is higher employee morale, which in turn helps attract and retain employees. Second is pride in association among shareholders, managers and employees. Finally, consider the bank of goodwill that exists in the community when citizens and leaders see you as a company that cares.

To get a handle on the intangible benefits and how they link to bottom-line performance, consider the following approaches:

 – Identify Measurables. Typically, several different departments contribute to the same social cause program. For example, if you are investing public relations money, one of the measurables will be free media. Or if human resources is investing money into the program, you will want to measure the program’s effect on recruitment and retention.

 – Treat Citizenship as a Business Function. You will need to ask how much is this program costing, and what you are getting for it. Although social cause initiatives are less complex than processes within the manufacturing industry, activity-based costing (ABC) can be a valuable tool for identifying hidden philanthropic costs.

 – A Good Reputation is Good Risk Management. Evaluating corporate image can be difficult. While your social cause initiatives may directly impact recruitment and retention efforts, how the public views your company can be an even stronger resource, especially when misfortune strikes. This kind of goodwill can be money in the bank when there is a crisis or faces pushback on future business activities.

 – Check the Community’s Pulse. A community’s health can be measured in part by factors like employment levels, new job creation, and the number of suppliers in compliance. The stronger the local economy, the better the business environment. In the long run, fueling healthy retail, entertainment and lifestyle offerings increases your company’s ability to attract a better labor pool.

 – Consider Outside Help. Finally, consider hiring an outside consultant to determine if you met your objectives. If you say you are going to create a new brand, or a new product, aligned with a nonprofit, you will want to find out whether you have accomplished that goal. An independent third-party consultant can help you.

It is important to be conservative and incremental in the investment and to look for measurables in all the social cause activities for your company. Begin small and develop your program as measurable returns are realized. Consider all your social cause programs as results-driven for complementing your business strategy. Strategic philanthropy is like new product development.

You will need to do your product design, then your field-testing. Only after concentrated work will it eventually all fall into place. And when it does, corporate citizenship that combines business strategy with social causes, underscores the concept of businesses doing well by doing good.

Case Study: Ben & Jerry’s Blending Business Strategy and Social Values

Ben & Jerry’s is founded on and dedicated to a sustainable corporate concept of linked prosperity. The company is know to have a progressive, nonpartisan social mission that seeks to meet human needs and eliminate injustices in local, national and international communities by integrating these concerns into its day-to-day business activities. They focus on children and families, the environment and sustainable agriculture on family farms. Their mission is to make, distribute and sell the finest quality all natural ice cream and euphoric concoctions with a continued commitment to incorporating wholesome, natural ingredients and promoting business practices that respect the Earth and the Environment.

Company’s Mission Statement
Ben & Jerry’s is founded on and dedicated to a sustainable corporate concept of linked prosperity.

Their mission consists of three interrelated parts:

 – Product Mission. To make, distribute & sell the finest quality all natural ice cream & euphoric concoctions with a continued commitment to incorporating wholesome, natural ingredients and promoting business practices that respect the Earth and the Environment.

 – Economic Mission. To operate the Company on a sustainable financial basis of profitable growth, increasing value for our stakeholders & expanding opportunities for development and career growth for our employees.

 – Social Mission. To operate the company in a way that actively recognizes the central role that business plays in society by initiating innovative ways to improve the quality of life locally, nationally & internationally.

Central To The Mission Of Ben & Jerry’s is the belief that all three parts must thrive equally in a manner that commands deep respect for individuals in and outside the company and supports the communities of which they are a part. They believe in using the power of day-to-day business decisions to help drive social change. The company has created a business that follows a code of ethics, beliefs, and values on packaging, sourcing of raw materials, reduction of energy in operations, and sustainable agriculture.

SOURCE: Roadmap To Entrepreneurial Success