/ 23 December 2015

Spend down, impact up

Cathy Duff
Cathy Duff

For the first year in its 18-year history, the Trialogue 2015 CSI Handbook has reported corporate social investment (CSI) expenditure is down in both real and nominal terms. (In 2014, it was down slightly in real terms, but not in nominal terms.)

The report puts South Africa’s estimated CSI expenditure at around R8.1-billion for the 2014/15 financial year — a year-on-year decline of 6% in real terms, following a real decline of 2% in 2013/14.

“The primary reason given by those corporate research respondents whose expenditure declined was a decline in corporate profits,” says Cathy Duff, director at Trialogue.  She says the rapid and continuous growth that the CSI sector experienced between 2001 and 2013 appears to have entered a period of decline. However, among the primary research sample (81 large companies that were interviewed), corporate giving had grown, from a median per company of R14.4-million in 2014 to R16.6-million in 2015.

The Trialogue CSI Handbook is the result of primary research into CSI spending patterns and support per development sector in South Africa. The country is unique in the world in that CSI spend is regulated at a target of 1% of net profit after tax as part of the Broad-Based Black Economic Empowerment Codes (BBBEE). The revised BBBEE codes that came into effect this year kept the number of BBBEE points a company could earn through traditional charitable giving the same, but placed additional emphasis on developing skills, suppliers and small businesses.

Education remains key

Education remains the most popular sector for corporate support, showing steady growth over the last five years, from 37% of total CSI expenditure in 2011 to 47% in 2015. The majority of corporates in Trialogue’s research sample (92%) invested in education initiatives in 2015, with social and community development and health coming in as the second and third most popular sectors. Tertiary education accounted for 27% of corporate spend on education in 2015.

Other trends in CSI

Duff says companies are being more strategic around their CSI initiatives by looking for benefits to business, in addition to social benefits. “An example would be healthcare companies training and interning healthcare specialists,” she says. “This is a good thing; it means the project is more sustainable as the business has a vested interest in its success. A food manufacturer providing food to indigent people can do it more cost effectively than a bank, for instance, giving food.”

This alignment doesn’t only happen in terms of a company’s products and services, but can also be geographical (such as a mining company providing assistance to the communities around its mines across South Africa) or can relate to key business stakeholders, such as projects that involve customers and suppliers.

In line with this, there is a move away from reactive grant-making to proactive investments. “Twenty years ago, companies would issue a call for applications which would be assessed and cheques issued. These days, companies identify partners that are more aligned to their businesses.” This goes hand-in-hand with a trend towards longer-term partnerships between companies and the non-profit organisations (NPOs) that are recipients or agents in spending the money.

Similarly, Duff says  there has been an increase in non-financial assistance and volunteering, as well as an increase in communication around CSI spend. “Communication around CSI is now also firmly linked to brand positioning. Companies are trying to portray their values as good corporate citizens and are using CSI as one of the mechanisms to do this.”

Trialogue has also noted a slow but steady rise in monitoring and evaluation of CSI spend, to assess the impact of CSI programmes.

“It is no longer just about how much money is being spent — the input — but also about the impact of that money,” says Duff. “What difference has it made not only in the lives of the individual beneficiaries, but to society as a whole?” This can be quite difficult to determine, but a number of frameworks exist. Duff says companies can overcome the measuring difficulty by agreeing with NPOs, before a project is initiated, on outcomes and which indicators will be used to measure the success of the programme.

In South Africa particularly, a continuing trend is that of collaboration between companies, NPOs and government to tackle complex societal issues. “Companies have realised that no single player can solve any of the hugely complex development issues. As a result, companies are working more closely with the government and other corporates to deliver solutions. This only bodes well for overall outcomes,” says Duff.

Local trends are in line with global trends identified by Trialogue’s partnership with New York-based membership research group Committee Encouraging Corporate Philanthropy (CECP). The group’s Giving  Around the Globe 2015 report found that across the world corporate giving as a percentage of profit has increased, corporates are becoming more focused in their giving and are increasingly measuring impact.  (Some of Trialogue’s South African data feeds into the Giving Around the Globe report.)

“Education is the biggest corporate cause internationally. But the rest of the world gives more outside their country than South Africa does. In South Africa, the average corporate supports 4.6 development sectors, but in the US, companies are more focused and support on average only 1.5 development sectors.”

This year, Trialogue has issued, in tandem with the Trialogue CSI Handbook, a Funders Guide, to assist companies and donors in their giving efforts. “It is focused on practical guidance, including information on what ‘good giving’ is,” says Duff.

Asked what advice she’d give a small company that is considering a CSI programme, Duff says deciding on a strategy is the starting point. “Select a focus area and articulate how the projects you’ll support will align to your business. What is your goal for the business — improved community relationships, more involved employees? Also remember that you are not a development expert. Work with non-profits and experts in the field. And make sure that social and business objectives are aligned across those partnerships — do you want to achieve the same things? Finally, set up a monitoring and evaluation framework first.

“Following this process will allow companies to get the most out of their CSI spend, because it is more difficult to give money away intelligently than to earn it in the first place,” says Duff, quoting Andrew Carnegie’s 1889 work The Gospel of Wealth.