What drives corporate social responsibility?
Research shows that the motives behind corporate social investment (CSI) are driven more by a desire to contribute to the country’s development than racking up government broad-based black economic empowerment (B-BBEE) scorecard points.
CSI consultancy Tshikululu set out earlier this year to answer the question, what really drives corporate social responsibility in South Africa? Polling 41 senior executives at 39 companies, mostly large and global firms listed on the Johannesburg Stock Exchange, the study unearthed interesting insights into attitudes and motivations.
Tracey Henry, Tshikululu’s chief executive and a member of the Investing in the Future judges panel, said the research showed that a reputation as a positive and proactive contributor to society appears to be becoming the de facto standard in South Africa, particularly in sectors dealing with consumers. “Companies understand clearly that their success and vitality is intrinsically linked to the success and vitality of the society around them,” she said.
“Most survey respondents and interviewees were ardent that contributing to South Africa’s continued development — and having genuine impact — is a strategic business imperative in and of itself.”
The survey results, released earlier this month, showed that nearly two-thirds of respondents were motivated to invest in social responsibility programmes because they show their commitment to developing the country; because they fit in with the company’s values; and because they are seen as an ethical imperative.
This is not to say that the B-BBEE scorecard is unnecessary, but it appears to contribute little to the viability and sustainability of such initiatives. “While respondents indicated that they feel significant pressure from government to invest in social responsibility programmes, regulatory compliance is not, in and of itself, cited as a primary motivating factor,” Henry said.
The viewpoint of organisations on this was not homogenous, however. More than half of respondents in “non consumer-facing” sectors, including mining, energy, engineering, and industrial services, reported that compliance motivated them to a “very large degree”. In contrast, fewer than 10% of respondents in the retail and financial services reported that B-BBEE or industry regulations drove their social responsibility programmes.
“While regulatory compliance-management may not always be a primary driver, respondents indicated that the regulatory benefits of such initiatives — such as earning points for their B-BBEE scorecard —are a welcome if ancillary outcome,” Henry said.
However, the motivation is not purely altruistic: “While most respondent companies are motivated by their values, they do see short-term benefits as well,” Henry said.
“Business does not pretend to do this for purely altruistic reasons. In the longer term, businesses can see a clear convergence between the interests of their companies and those of the country.
“Crucially, respondents reported significant and increasingly market-based pressures and incentives to be seen as socially responsible —from consumers, from employees, and even from shareholders. Thus, companies are recognising that their social responsibility efforts strengthen their brand and reputations, and earn them favour with sought-after young employees.”
The survey revealed that one common factor among the majority of respondents was a combination of realising the potential benefits to their brands and these efforts reflecting their values.
“Businesses can see a clear convergence between the interests of their companies and those of the country. This suggests that the South African business community recognises that for government to address inequality, poverty, the high levels of unemployment and economic growth, the active engagement of business and civil society is a pre-requisite to the country’s prosperity and societal transformation,” she said.
This long-term view is necessary to sustain enthusiasm for CSI programmes as there is little evidence of direct financial benefits from social investment programmes. The Tshikululu study revealed that fewer than 40% of respondents could claim that their reputational benefits were reflected in real financial value.
“To a few respondents, the discussion of financial value was entirely beside the point,” Henry said. “As one senior executive explained: ‘We shouldn’t get involved in corporate social responsibility because we want direct financial benefit.’ “The general trend is fairly clear: while corporate leaders see that their companies derive significant benefits from corporate responsibility initiatives, they are much less certain about if or to what extent those benefits add financial value.”
Key findings from the Tshikululu survey into what really drives corporate social responsibility in South Africa are:
- Companies are driven primarily by values
By a fairly significant margin, values-driven factors rated as the most important motivators. Social responsibility programmes are seen as an extension of companies’ values and culture, and a means of demonstrating their commitment to the development of South Africa. While these characteristics are undoubtedly important, they are also often intangible, suggesting that much of the value that companies derive from their social responsibility initiatives is, essentially, intrinsic. Many companies were investing substantially in social responsibility programmes long before government regulations demanded it, and said they would continue to do so even if those regulations disappeared.
- Companies feel regulatory pressure, but the benefits of compliance are unclear
Although companies feel pressure from many different quarters to be socially responsible — ranging from employees to communities and shareholders — they said most pressure comes from the government. More than 60% of respondents indicated a “large amount” or “very large amount” of pressure from the government to invest in CSI initiatives, while less than 50% reported that doing so improves their relationships with politicians and government officials. On top of these pressures, companies are under increasing scrutiny from shareholders, with nearly two-thirds of respondents indicating they are motivated to a “large amount” or a “very large amount” by shareholders. These findings indicate that South African shareholders do not believe social responsibility initiatives diminish value, and in fact suggest that they may actually add value.
- Pressure from communities is largely impulsive
Nearly 25% of respondents indicated a “very large amount” of pressure to invest in development programmes from the communities in which they operate. This is particularly true in sectors such as mining and energy. Since community pressure is largely impulsive, corporate investments tend to be reactive and therefore appear insubstantive and low-impact. This often contributes to frustrated and frayed relations.
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