In years gone by, corporate social investment (CSI) was seen as little more than philanthropy, with the main purpose being simply to convey a caring, compassionate image of companies that chose to go this route.
Relegated to the sidelines, CSI projects were largely surface deep, with no lasting impact, and were not considered part of a business’s strategic objectives.
But the past 20 years have heralded a worldwide paradigm shift in the way companies view CSI. This is no more evident than in South Africa, where the corporate world has realised that it cannot be successful without paying attention to communities and the environment. Society in general has become more humanitarian, focusing more on long-entrenched social problems and expecting the corporate world to do the same.
In today’s world, consumers, employees, the general public, potential investors and shareholders are keeping an ever-sharper eye on the social responsibilities of companies. CSI wields significant power in shaping important business decisions from all of these quarters, ultimately impacting on overall profits.
In one of the widest-reaching global studies carried out to date, consumer research organisation Nielsen found that 55% of consumers are willing to pay more for products and services provided by companies committed to positive social and environmental impact.
The 2014 Nielsen Global Survey on Corporate Social Responsibility polled 30 000 consumers from 60 countries, including South Africa. The results are mirrored by dozens of other surveys carried out globally in the past decade, with the number of influenced consumers seeming to rise exponentially with time.
“Consumers around the world are saying loud and clear that a brand’s social purpose is among the factors that influence purchase decisions. This behaviour is on the rise and provides opportunities for meaningful impact in our communities, in addition to helping grow share for brands,” says Amy Fenton, Nielsen’s global leader of public development and sustainability.
Although no such concrete studies have been published specifically in a South African context, Tracy Henry, chief executive of Tshikululu Social Investments, says that the sway held by CSI is certainly strong here.
“This is largely because consumers have become more aware of their own effects on society and the environment, so much so that they ‘vote with their money’ and ensure that they do not use their resources to support irresponsible business practice.”
Individuals are increasingly seeking ways to become active citizens, in light of growing concerns about poverty, inequality and environmental issues. One way to do this is to spend their money with companies that are working to solve these issues.
The gap between rich and poor continues to be a gaping one, which also intensifies pressure from communities. Just as the government faces mounting pressure from disgruntled communities in the form of service delivery protests and wage strikes, companies face pressure from the communities in which they operate.
Examining this purely from a business point of view, the increased demands come hand-in-hand with more opportunities for companies to capitalise upon. Although today’s tough economic climate makes it more difficult to invest in long-term CSI projects, companies that do manage to make a tangible difference can enhance their reputations better than ever before.
Increasing pressure from investors and shareholders
Investors and shareholders are upping their expectations that companies engage in CSI activities, albeit maintaining the view that “it has to make money to make sense”. Henry points out that the South African investor class is changing, becoming more diverse and inclusive.
“Broad-Based Black Economic Empowerment (BBBEE) has incentivised many large companies to extend share offerings to employees and previously disadvantaged South Africans — everyday investors, whose experiences with the country’s development challenges are quite different to those of professional investors,” she says.
Sharing a similar philosophy to business owners, shareholders have recognised the benefits of CSI. The realisation that being involved with socially irresponsible or non-compliant companies could result in major backlash from customers and/or government has led to strong insistence for social responsibility.
“Either way, there does not appear to be any inherent tension between corporate social responsibility efforts and shareholder interests; in fact there seems to be alignment. What’s good for society also appears to be good for South African shareholders,” says Henry.
A strong CSI portfolio also has the ability to attract more interest from the increasing number of potential investors who regard social responsibility as a box that must be ticked.
Henry says that individuals are naturally drawn to companies that demonstrate care for their staff in the way they offer benefits and recognition programmes.
“Although this is not a direct link to CSI, it does demonstrate issues that are critical to the make-up and reasons for CSI programmes. It stands to reason then that individuals will certainly be drawn to organisations that demonstrate a strong positive impact in communities.” — African Eye News Service