When a successful business tilts towards societal needs, everyone benefits
Gone are the days when social investment was a mere add-on
The Chief Executives for Corporate Purpose (CECP) global exchange is an international grouping of companies that aims to advance the role business plays in society. There are now 14 country members of the exchange, collectively representing half the world’s population and nearly two-thirds of global GDP.
The formation of this group, and the traction it has gained, is indicative of how the role of business in society has become an industry in itself. There are a plethora of frameworks, codes and standards that coerce business towards greater transparency and societal responsibility. The GRI Standards, the IIRC, King IV and FTSE4Good refer to concepts such as materiality, stakeholder-centricity, value addition via the Six Capitals Model, and more. The annual effort and resources dedicated to integrated reporting are immense.
In spite of this, we are still seeing corporate failures, bloated executive pay, destruction of value and neglect of social and environmental responsibilities. Why does this still occur?
In part, this could be attributed to short-term investor performance horizons, inappropriate reward structures, directors who don’t hold executives to account, and at times blatant fraud and greed. My view is that the codes, standards and focus on responsible business are making a positive difference, but that the difference and pace of change are too little and too slow to make the necessary impact on the socioeconomic pressures we face.
The societal challenges of today are large and complex — globally, and most definitely here in SA. Business recognises that a disruptive and unstable socioeconomic environment is not conducive to good business, and while some companies are resigned to this situation others are adopting a more outwardly focused, visionary response. Such response can take on a number of forms. The most obvious and yet hugely significant contribution is realised when the core business exists or orientates itself to addressing societal needs.
When business is chasing profits, and by doing so is making a positive effect, scalability is only limited by the pace of growth. The greater the success of the business, the more society benefits. This is shared value in its true sense. Corporate social investment (CSI) funding is in itself limited and small relative to the demand for social support.
Through strategic alignment — using CSI expenditure to advance the shared-value case for the entire business — so much more can be achieved. The shared-value proposition works well when the core business links neatly to societal benefit. It doesn’t always. And shared value alone will inevitably neglect certain developmental spaces. So there remains a critical role for business to address causes and issues that fall outside of their direct value chain or their immediate interest.
An effective way of doing this is through a corporate voice — corporates advocating for a particular issue or cause. In the past companies were reticent of being openly critical of the government, but this is changing. In SA at present, the stakes for business in securing a stable political environment and policy certainty are so high that there is almost no choice but to speak out, individually, through a sector body or big business grouping. Our CEOs can be powerful advocates for change if they choose to be.
For example, at a CECP conference I attended in 2018 David Miliband, president and CEO of the International Rescue Committee, which deals with global refugee crises, challenged the corporate audience in New York to stand up and say “refugees are our workers, they are our neighbours, they are our family”. Such actions cost very little, but can make a big effect for vulnerable groups, particularly when they are exposed to a hostile political agenda.
Business can also act collectively and collaboratively with the government and other stakeholders to effect change. We have seen the establishment of the Joint Education Trust and the Business Trust, collective business contributions to tackle difficult social challenges. The Youth Empowerment Service initiative is an example of a collective business response, in partnership with the government, to expose unemployed youth to the world of work.
What is unique about this initiative is that structures exist that reward corporate participants for supporting the programme (for instance, through a BEE incentive score). This is a form of collective shared value, if you like — shifting the response from societal obligation to mutual vested interest.
Trialogue estimates local CSI expenditure to be in the region of R9.7bn per annum. The bulk of this expenditure, which seems like a lot but is relatively small compared to the expenditure of the government, is the world of CSI as we know it. It is a sector characterised by pockets of excellent work and pockets of investment where success is less evident.
The field has shifted over the years from an initial phase of grant-making, where the focus was on selective giving rather than on outcomes, efficiency and impact. Most programmes now have strategies in place that align CSI spending to their businesses, and are investing in demonstrating outcomes (though even today monitoring and evaluation efforts don’t always translate to crisp evidence of change).
I believe we will start to see a third generation of CSI programmes:
- Programmes that are integrated with other business-in-society programmes within companies, with boundaries blurred but overall achieving greater impact;
- Efforts to collaborate, with organisations bringing their unique competencies and resources together to achieve a common purpose. Great in theory, difficult in practice, but necessary if we are going to see systemic change;
- Innovative or blended finance models that go beyond one-dimensional grant-making programmes; and
- Investments in research, in a corporate’s own projects and also in topical issues. Research that is applied to effect change and support the corporate advocacy effort.
When we produced our first CSI handbook more than 20 years ago, CSI was for most companies an afterthought, a nice-to-have, a token of goodwill. CSI managers were few and far between and very few companies knew or would tell you what they were spending. Back then there were no sustainability or integrated reports — or guidelines on responsible business — or dedicated stock exchange platforms. There was little transparency and shareholders ruled the day at the expense of other stakeholder groups and societal interests.
It takes time to move out of our comfort zones, but history shows that we have moved on — and though the pace of change is uncertain, we are most definitely continuing to move forward.
• Rockey is MD of Trialogue.