CSI grows up

A midst concerns that the global recession would shrink worldwide social spending and set poverty alleviation back years, it has been fascinating to see results coming out of Trialogue’s research into the sector, indicating that corporate social investment funding in South Africa grew in real terms by 11% during the 2008/2009 economic downturn.

While more sophisticated capture of social spending data and the inclusion of in-kind contributions to CSI measurement undoubtedly contributes to this increase, the fact remains that the largest majority of South African researched companies (just over 70%) do not anticipate a cut in their CSI budgets due to the recession.

This points to some interesting drivers behind CSI, and reflects the expanding definition and scope of the corporate social investment sector in South Africa. Out of this operating environment have emerged some innovative leading practice techniques that improve the impact of spending among beneficiary communities.

There is much to learn from these leading practices, but first it helps to understand the key factors motivating corporate spend in the area of CSI. Key among these drivers is the regulatory framework that seeks to address the imbalances of the past and bring about poverty alleviation for disadvantaged communities.

The dti’s broad-based black economic empowerment (BBBEE) codes, issued in 2007 and then reviewed in 2009, require companies to invest 1% of net profit after tax (NPAT) in the upliftment of communities, 75% of whom need to fall into historically disadvantaged groups.

Sector charters for the mining, financial, and petroleum and liquid fuels industries, and the Mineral and Petroleum Resources Development Act, also play an important role in ensuring that companies make a significant social investment in labour-sending communities as part of their license-to-operate.

The Department of Mineral Resources’ Social and Labour Plan stipulates that mining companies contribute to poverty eradication, community upliftment and infrastructural development.

‘But while the regulatory framework is a powerful ‘big stick’ incentive to ensure companies invest in social development, it alone cannot be said to be responsible for the increase in social spending during the recession,” comments Nick Rockey, MD of Trialogue.

Companies are spending more than what is required by legislation; on average they contributed 1.2% of net profit after tax (NPAT), which is up on the previous year’s 1.1% and above the BBBEE Code requirement of 1%.

In South Africa, companies are responding to the social needs and nuances of the industry sectors. A broadly applied definition of CSI picks up all forms of community support, be this part of license to operate requirements or payments in kind.

‘This broad definition of CSI, along with improved and more inclusive measurement, are key reasons for the overall increase in spending,” says Rockey.

Companies that are making the most profound impact are those that understand the importance of partnership and buy-in from government to the success of any CSI project. This is unsurprising, given the key stakeholder role played by government in defining the CSI space within South Africa.

CSI programmes should complement and lend support to existing community structures and credible NGO initiatives. The truly successful partnerships are those characterised by clearly agreed roles, well-defined terms of engagement and exit strategies.

A key learning that has emerged as CSI has evolved is the fact that sustained, integrated projects that focus on one area over a long period have deeper, more lasting impact. Focused projects that build monitoring and evaluation into their design are best placed to meet their objectives.

Social and community problems are complex and may require a range of different interventions, and a quick fix one-size-fits-all approach has been proved by the failure of such projects not to work. Projects that are designed to be flexible and innovative have a greater chance of success.

Having said that, adopting a working, best practice model is often better than developing a new one each time, as projects need to be replicable and scalable across regions in order for them to be sustainable.

These are just some of the trends that are shaping the sector and as the CSI landscape continues to evolve, all eyes will be on those companies that understand the broader CSI context, can adapt to the changing environment and keep meaningful impact in their sights.

Delegates at Trialogue’s Making CSI Matter Conference will experience a variety of practitioners discussing and interrogating what we are seeing emerging as leading CSI approaches. Join us and get up to speed with where CSI is heading.

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