CSR has nothing to do with charity

In my opinion, Corporate Social Responsibility (CSR) will continue to evolve in 2013. Companies are now learning to understand ROI and looking for stronger partnerships from non profits, professional associations and community organizations. This model can work and companies can  find solutions which will not only impact communities but also the bottom line.  Below are a few remarks from  the Committee Encouraging Corporate Philanthropy (CEP) leadership regarding how this might play out in the future.
 

Remarks from -Margaret Coady-Executive Director, Committee Encouraging Corporate Philanthropy

"Society would benefit tremendously if companies rewired their business models to lift up disadvantaged  communities. Doing so could bring solutions to entrenched problems“at enormous  scale”. The thinking goes: if philanthropy hasn't delivered the impact we need  and societal problems are getting worse, then it's time to unleash the efficient  engine of the free market and make way for a new, more sustainable model for societal progress.

 The logic is compelling. With a little creativity, we can think of societal issues for which a motivated company could find a profitable solution. In fact, some companies are already doing so. Take GE’s inexpensive, portable ultrasound
machines designed for rural China. Here is an example of unlocking substantial profits and societal good simultaneously. As a proponent of shared value, I often ask corporate CEOs to investigate whether tough societal issues or previously unreachable market segments represent “a business opportunity in disguise,” as management theorist Peter Drucker once put it.

 But pause for a moment and a simple question intrudes on these “conscious capitalism” imaginings: why hasn't this happened already? If market-based  solutions are right under our noses, why are only a handful of companies
celebrated again and again in the shared value literature? Nestle, Unilever,  Vodafone, GE, Western Union, IBM, PepsiCo, Novartis, and a few other pioneering  companies seem to be on their way. Where's everyone else? As it turns out,
finding commercial fixes to entrenched societal issues is difficult.

Here’s where corporate philanthropy comes in: its most powerful application  may be its role in building a bridge toward market-based solutions.

 One of the biggest obstacles a company faces in delivering a profitable  solution to a tough societal issue is its internal “hurdle rate” for investment  opportunities. Innovative ideas are in constant competition with one another—and  also in competition with ongoing productive uses for corporate cash (paying down  debt, funding acquisitive growth, issuing dividends and so on). Only new ideas  with the highest and fastest expected rate of return will move forward. 

Faced with this type of competition, promising but fledgling ideas for  products or services that profitably address a societal issue are at a severe  disadvantage. By their very nature, the market data upon which they are based is  often speculative, the technology may be early in its development, sales and  delivery channels may be poor or untested and the anticipated time horizon for  gaining a foothold may be long. The idea could be transformative one day but  judged by current frameworks for assessing an investment’s attractiveness it may  look messy and uncertain.
 
Philanthropy as an incubator for promising ideas makes perfect sense. In  fact, many corporate grant makers view their work precisely that way. This is  not the only appropriate use for philanthropic resources—for example, disaster  relief requires a focus on immediate needs and, as I have said, not every issue  lends itself to a commercial solution. But charitable resources that can seed  ideas should be part of every thoughtful company's philanthropic portfolio.

 In a rush toward shared value, companies may be tempted to shutter their  corporate foundations and dial back their philanthropic grant making, claiming  that their impact is “a rounding error” (as Judith Samuelson wrote in her guest
comments for this debate) or a distraction compared to the scale and potential  of market-based approaches. 

But the reality is that the pipeline of shared value projects is still in  early stages—in fact, many companies are still wondering what the concept means  for their company. In eliminating corporate philanthropy, they would lose not
only the significant business benefits engagement in societal issues brings with  it but also a mechanism for understanding community needs. (As for being a  “rounding error,” corporate giving among companies in the US alone amounts to
over $15 billion annually including product donations—a sum few nonprofits would  characterise as negligible).

 Companies that are serious about market-based approaches—or even those that  are simply serious about the future health of their business—should tap the  expertise of the professionals who manage corporate philanthropy programmes more
aggressively. These individuals offer an uncommon vantage point: a deep understanding of the business and of the real-world dynamics of the community. 
 
Intelligent grant making requires working with recipients, non-profit  leaders, community activists, government representatives and even the company's  critics. The networks enable philanthropy professionals to detect and analyse
important demographic and societal trends in a way that few corporate executives  might be able to. These individuals should be part of strategy discussions as a  company develops an integrated approach to solving relevant societal issues.

Philanthropy can play a powerful role in building the bridge between the  promise of shared value and its rewards. Those who see commercial models as  ready to replace philanthropic grants in solving societal issues underestimate  the role of philanthropy in developing those solutions."