As the world enters the 21st century, multinational companies find themselves at the centre of a growing debate on the purpose of business and its role in society. They are under unprecedented pressure, from a variety of stakeholders, to deliver both shareholder value and wider societal value.
These dual pressures are having important implications for the way that companies are viewing and managing their global giving and community investment programmes. The days of corporate giving and social investment being an ad hoc ‘bolt-on’ to the company’s ‘serious’ business are numbered. At least for the companies that aspire to be world class – both globally and locally.
The triumphalism of the Berlin Wall coming down in 1989, ushering in a new era of political and economic freedom, has been tempered by the growing backlash against globalization, epitomized in the 1999 Seattle riots. During this decade, the private sector has emerged as a principal engine for development in almost every country and an increasingly influential player on the global stage. While this has created new opportunities for business, it has also increased competitive pressures and societal expectations. On the one hand, increasingly powerful institutional shareholders are placing pressure on business to be more economically competitive and to create shareholder value-added. At the same time, increasingly powerful civil society organizations, with unprecedented communications capacity via the internet and global media, are placing pressure on business to be more socially accountable and to create wider societal value-added.
In the light of these pressures, leading companies are fundamentally reviewing their global corporate giving and community investment programmes. This is leading to a professionalization of community or social investment programmes and a more strategic approach to how these are managed within the context of the company’s overall business strategy. This article outlines some of the key trends.
Mobilizing core business competencies
Companies are starting to mobilize the core competencies of their business for social investment instead of simply making cash donations (although cash support is still vitally important for many community partners).
These core competencies range from the skills and energies of company employees to the donation of products and services. Employee volunteering has become increasingly important. In Europe, the Cecile Network has been established with support from a group of major companies and the European Commission to increase the scale and quality of employee community involvement. Levi Strauss has been a leader in mobilizing the skills and commitment of its employees, developing Community Involvement Teams in most of its affiliates and plants around the world. These voluntary teams assess the needs of social groups in their local area and develop fundraising strategies, employee volunteering initiatives and partnership programmes to meet these needs.
Product and service delivery aimed at meeting social needs is also on the increase. The information technology and pharmaceutical industries have been especially active in this area, as illustrated by the vignettes in Box 1.
Box 1 Mobilizing product and service donations for disaster relief
- In the 1999 Kosovo crisis Microsoft volunteers worked with industry partners such as Hewlett Packard, Compaq, Securit and ScreenCheck, together with NGOs such as the International Organization for Migration, to create a portable and easy-to-use refugee registration system. In less than two months the group developed, field-tested and deployed refugee registration kits according to UNHCR specifications. Kits included computers, digital cameras, signature pads, special ID card printers, and related hardware and software designed especially for this project. They also trained relief and government workers on how to use the system. In its initial period of use, nearly half a million refugees were registered.
- Also in the recent Kosovo crisis, British Telecom, Dell, Newbridge Networks, Nortel Networks and Oracle collaborated to provide satellite telephones and other communications to refugees in Albania.
- IBM supports the Red Cross’s Disaster Relief website (http://www.disasterrelief.com) which receives visitors from 160 countries and has resulted in a dramatic growth of online donations to the Red Cross.
- SmithKline Beecham (SB) has developed a unique programme through which the company earmarks some of its normal manufacturing inventories specifically for donations. It has established strategic global partnerships with five NGOs: Catholic Medical Mission Abroad, AmeriCares, InterChurch Medical Assistance, MAP International and Project HOPE. The programme revolves around the concept of ‘planned giving’: SB works with its NGO partners to anticipate needs and provides extra amounts of selected products in emergency situations. In 1998 the programme distributed medicines to more than half a million people in 36 countries, including a number of war zones.
- Glaxo Wellcome has a programme aimed at providing a long-term strategic response to health needs following disasters, when media, public and donor interest tends to have faded. The company has, for example, supported RefAid to develop healthcare centres serving refugees returning to Rwanda.
Source The Business of Peace (2000) PWBLF, International Alert and Council on Economic Priorities.
A growing focus on mutual benefit
There is a growing focus on mutual benefit, whereby the company aims to get some type of return – tangible or intangible – on its community investment . One aspect of this is the increased alignment of community investment with business interests and strategies.
Several oil and gas companies, for example, are focusing more strategically on supporting alternative energy projects via their community investment programmes. Banks are focusing on offering pro bono or discounted banking services, financial education or financing mechanisms to beneficiaries. One example is Citigroup’s Banking on Enterprise programme, which supports microenterprise intermediaries around the world with both financing and technical assistance. A number of companies with direct interests in promoting road safety have helped the World Bank to establish a Global Road Safety Partnership. They include 3M and TRW, which manufacture products to increase road safety, Ford Motor Company and Volvo, and Diageo and Heineken, which are both committed to promoting responsible drinking practices. Microsoft’s European Scholars Programme uses funds recovered in anti-counterfeiting actions to help unemployed people acquire advanced skills needed to get a job in the information technology business.
For some companies and industry sectors, there is an increasingly blurred line between what is being done for direct business reasons and what is social investment or philanthropic. The practices of cause-related marketing and stakeholder consultation are examples. The latter is increasingly required for business planning, pre-investment impact analysis and accountability on core business operations, especially for ‘big footprint players’ in the oil, gas, mining and infrastructure industries. Such stakeholder consultation is also forming a crucial element of their local community projects.
Developing coalitions and partnerships
Companies are developing business-to-business coalitions and cross-sector partnerships to leverage resources at global, national and local levels.
There are a plethora of new business-led or supported partnerships that have emerged in the past five years with the aim of pooling and leveraging resources for social purposes. National examples include the Business Trust in South Africa, created in 1999 with support from over 100 companies to address job creation and education, and Business Links in Indonesia. Created in 1999 with support from about 15 multinational companies, UNDP, the World Bank, the PWBLF and national NGOs and business groups, Business Links supports small-scale enterprise and ethical business in the wake of the Asian financial crisis.
At the global level companies are forming a variety of partnerships with the United Nations to tackle issues ranging from immunization and HIV/AIDs to the digital divide.
Engaging in the public policy debate
Some companies are getting more engaged in the public policy debate via their social investment programmes.
The US-based Partnership for Quality Medical Donations is one example, where leading pharmaceutical companies and humanitarian NGOs have joined together to improve the process of drug donations. Apart from sharing practical advice, they are also engaging with WHO, the World Bank and the US government to improve the enabling framework for medical donations and business–NGO partnerships. In Europe the European Business Network for Social Cohesion is an example of a business-supported organization engaging with the European Commission on a range of issues aimed at promoting social cohesion. Community affairs directors in several leading European companies provide EBNSC with strategic direction and technical support as well as financial support.
Building institutional capacity
Another emerging characteristic of corporate giving is the increased focus on building institutional and management capacities in recipient communities rather than simply supporting ‘bricks and mortar’ projects.
While bricks and mortar projects are often easier to measure, in terms of impact assessment, and easier to ‘take photographs of’, in terms of public relations benefit, capacity-building is often critical in building sustainability and long-term benefits for recipient communities. Examples of this approach include McKinsey & Company’s support for organizational development of NGOs in India and the Liberty Life Foundation’s help with building the NGO sector in South Africa. Johnson and Johnson’s European Health Care Leadership Programme offers another example. This is a collaborative effort between Johnson & Johnson, the UK-based Kings Fund and the French-based business school INSEAD. It also works with local health authorities in a number of European countries. The programme aims to train and educate a new cadre of health care leaders from both the EU and Central and Eastern Europe.
Increased focus on evaluation
As part of their drive for increased efficiency and effectiveness, companies are focusing on better evaluation of the impacts of their community investment and corporate giving programmes.
As the Conference Board concluded in a 1996 study, ‘Managers of contributions and community relations are under increasing pressure to prove what they do adds value to the business … Their approaches vary from informally tracking the progress of individual grants to formal evaluation and benchmarking structures.’
Leading work has been done in the field of impact measurement through collaborative efforts such as the London Benchmarking Group in the UK and the Ford Foundation’s Corporate Involvement Network in the USA and through the work of specialized consultancies such as the Corporate Citizenship Company and Probus BNW. BP Amoco was one of the first companies to carry out systematic evaluations of its community investment activities, focused initially on some of its education partnerships. A growing number of companies, such as Diageo, Shell, Ford Motor Company and South African Breweries, are now incorporating community impact assessments into the broader social auditing of their core business activities.
Combining global strategies with local delivery
A core business challenge faced by most multinationals today is how to combine global strategies and frameworks with local delivery and accountability. This is also becoming a key challenge for their corporate giving and community investment activities.
While better global coordination can enable the company to leverage its corporate competencies and interests in the most effective way, it must still allow for flexibility at the local level. This is a difficult balancing act to achieve. It requires the combination of a clear strategic framework and operating principles supported by head office, with appropriate management processes, incentives and skills development at the local operational level. See Box 2 for examples of companies that have started to adopt this approach.
Box 2 Companies that are combining a global strategy with local delivery
- Shell has developed a strategic framework around the themes of sustainable energy and youth enterprise development.
- Levi Strauss has identified four priority thematic areas for its Community Partnership Programme. These are economic empowerment – emphasizing job training and job creation schemes, as well as access to capital; HIV/AIDS – focused on prevention and care projects; social justice – tackling issues such as racism, xenophobia and religious intolerance; and youth empowerment – seeking to offer routes back into society to young people who are marginalized and alienated.
- Citigroup has structured its global giving around two key themes: Banking on Enterprise and Banking on Education.
- Diageo has established a four-pronged global strategy around both thematic areas and delivery mechanisms. Water for Life and Skills for Life are thematic programmes, while Local Citizens (aimed at giving business units the flexibility to support diverse projects in their own communities) and Our People (aimed at supporting employee volunteering and matched giving) focus on the delivery side.
- SmithKline Beecham has adopted a four-pronged geographical structure for its worldwide Community Partnership programme. Different themes, although all in the field of healthcare, have been selected for North America, Europe, the International division, and the company’s Corporate Headquarters locations in the UK and USA.
Global Corporate social responsibility FeaturesA variety of delivery mechanisms
It should be apparent from the examples in Box 2 that multinationals are using a variety of management structures and delivery mechanisms to implement their global giving and social investment programmes. These include:
Individual corporate foundations – ranging from global foundations, such as Diageo’s and Citigroup’s, to locally constituted foundations, such as those established by Rio Tinto in southern Africa and Indonesia.
Globally branded programmes – which may or may not be funded by a foundation but which have a clear ‘brand name’. Examples include Shell’s Livewire programme for young people who want to start and run their own businesses, which is now operating in about eight countries; BP Amoco’s Science Across the World programme to encourage contacts between schools aimed at broadening scientific, environmental and cultural understanding; Diageo’s Water for Life programme; and Citigroup’s Banking on Enterprise programme.
Employee volunteering frameworks – as promoted by Levi Strauss, Marks and Spencer, British Telecom, Diageo and others.
Cause-related marketing – examples include Benetton’s campaign for the United Nations High Commission for Refugees; the Ericsson campaign on communications and disaster relief; Ben & Jerrys various campaigns to promote peace; and campaigns by Molson and Tanqueray Gin to increase awareness of HIV/AIDs.
Strategic company–NGO partnerships – such as the partnership between SmithKline Beecham and the five NGOs described in Box 1 and the long-term strategic partnerships that NGOs such as Conservation International, ActionAid, CARE International, the World Wide Fund for Nature, ACCION and the International Youth Foundation have developed with a variety of companies including Intel, McDonalds, Nike, Unilever, Starbucks, Citigroup and Cable & Wireless.
Support for ‘business in society’ coalitions – such as the PWBLF, Business in the Community (UK), Business for Social Responsibility (USA), Jobs and Society (Sweden), the European Business Network for Social Cohesion, Ethos Institute (Brazil), the National Business Initiative (South Africa), Philippines Business for Social Progress and the Global Business Council on HIV/AIDs.
Support for national corporate philanthropy centres – such as CEMEFI in Mexico, the Philippine and US Councils on Foundations, the Canadian and Colombian Centres for Philanthropy, and the South African Grantmakers Association.
It is difficult to say which of these mechanisms are more effective than others. They serve different purposes and have different benefits. Nor are they mutually exclusive. Diageo, for example, is using all these strategies in delivering its global community investment programmes. One thing is certain: each of these approaches is likely to be adopted by more companies in the future. Business, especially multinational companies, will continue to face a combination of growing competitive pressures and societal expectations. In the face of these twin pressures, the ongoing professionalization of the community investment function and further convergence between the company’s community investment and its core business activities are trends that look set to continue.
Jane Nelson is Director, Business Leadership and Strategy, The Prince of Wales Business Leaders Forum.