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."
Chris Polk -