INCREASING THE FOCUS - JSE MAGAZINE

INCREASING THE FOCUS

Good corporate citizenship is no longer merely a ‘nice to have’ – it has become a strategic pillar of successful business practice

INCREASING THE FOCUS

​‘Twenty years ago we could still get away with a philanthropic mindset around corporate social responsibility, doing some good when there was surplus money to pump into socially minded projects,’ says Arnold Smit, director of the centre for business in society at the University of Stellenbosch Business School. ‘We now seem to be moving into a space where a deeper sense of corporate engagement with the health and resilience of the economy, society and the environment will become a factor in the sustainability of business itself. If corporate social responsibility [CSR] was a trend in the past, it will become an imperative in the future.’

Tracey Henry is the CEO of Tshikululu Social Investments, a leading non-profit, corporate social investment (CSI) management firm that provides companies with a one-stop service. ‘Over the past 20 years we have seen a significant shift in the role of business in society,’ she says.

‘More and more companies are recognising that business is a key stakeholder in strengthening the South African social and economic landscape. This has also resulted in a more strategic and deliberate approach by business to partner with government and civil society in support of the National Development Plan [NDP] vision.’

​The NDP aims to eliminate poverty and reduce inequality in SA by 2030. It defines the roles that different sectors of society need to play in growing an inclusive economy, enhancing the capacity of the state, building capabilities and promoting leadership and partnerships.

Nick Rockey, managing director of Cape Town-based CSI consultancy Trialogue, says: ‘Over the past decade, [there has been] a gradual shift in CSI practices towards more strategic and impactful programmes that target previously disadvantaged communities.’ He points out that CSI spend has become more formalised within companies, with increased focus on the impact of the spending.

The consultancy’s research shows that in SA, CSI spend grew from R6.9 billion in 2012 to R7.8 billion in 2013. Trialogue’s CSI Handbook 2013 states that the real growth in CSI expenditure – when adjusted for inflation – has averaged 10% growth per annum in the six-year period since 2007, compared to only 3% in the previous cycle (2001 to 2007).

The lion’s share of CSI goes to education (43%), followed by social and community development (15%), health (11%) and the environment (6%). The handbook found that in 2013, each of the companies surveyed supported on average between four and five development sectors.

​Volkswagen South Africa (VWSA) spends 80% of its CSI budget on education and youth development as it believes that this is where it can have the most meaningful impact. Nonkqubela Maliza, corporate and government affairs director at VWSA says: ‘We are a country faced with a multitude of socio-economic challenges, so corporate social investment is the right thing to do. It is a strategic part of our business and one of Volkswagen’s fundamental brand values. CSI is integral to our success as we believe that our business cannot be healthy unless the community in which we operate is healthy.’​

​The group has invested more than R100 million in its five CSI focus areas of education, youth development, enterprise development, health and community well-being, and the environment.

Maliza says: ‘Our Volkswagen Community Trust has been in existence for 25 years. Initially the focus was on spreading available funds to as many different organisations as possible, because the need was so desperate in those early days. As the country transitioned to democracy and the economy started to develop and mature, so too did our trust’s approach. It has now refined its focus on investing in and facilitating lasting change in priority areas beyond immediate intervention.’

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‘Corporate social investment is a strategic part of our business and one of Volkswagen’s fundamental brand values. CSI is integral to our success’

NONKQUBELA MALIZA, DIRECTOR OF CORPORATE AND GOVERNMENT AFFAIRS, VOLKSWAGEN SA

The group’s initiatives have all, quite literally, been close to home: near its Uitenhage head office and manufacturing plant, in Despatch and its surrounding communities; a few kilometres away from its Sandton office, in Alexandra township.

Maliza says that while CSI is a vital part of the global VW group, each national operation decides independently on the thrust of its social investment. ‘China has very different realities from Russia, Brazil, South Africa and Germany,’ she says. ‘Each country is left to determine the most appropriate and effective way to express their CSI. Education tends to be a popular area, as well as the environment. In China, there’s a special focus on safety.’

Smit says: ‘In the northern hemisphere the emphasis seems to be on environmental issues, whereas in the global south it seems to be on social imperatives. In a South African context, one could look at drivers from a normative point of view and highlight the influence of the United Nations Global Compact, the Millennium Development Goals, the Global Reporting Initiative, the King Reports, the JSE’s Socially Responsible Investment (SRI) Index and the BBBEE Act and Code of Good Practice. These drivers envision certain dimensions of CSR and shape leadership and corporate behaviours.’

He says that certain issues also drive CSR further, as companies are increasingly forced to respond to the challenges of energy and resource availability, global warming and climate change, food and water security, unemployment, inequality and social unrest.

Reana Rossouw, owner of development consultancy Next Generation Consultants, explains how corporate reporting has been advanced by the requirements of the SRI Index, the King Reports and the Companies Act. Established in 2004, the SRI Index became a pioneer in promoting corporate responsibility and has evolved considerably since. It reviews companies listed in the FTSE/JSE All Share Index on an annual basis, measuring them against a holistic set of society, governance, environmental and related sustainability concerns.

Rossouw says: ‘Firstly, companies now have to report on their CSI spend and secondly, they must engage with communities regularly. In particular, companies are issuing sustainability reports.’ The Global Reporting Initiative guidelines require that specific information be disclosed: what was spent, how much, and where and what the impact was.

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Companies have to issue integrated reports to explain their community engagement; what these communities’ reasonable expectations are; how companies are responding to these requests; the quality of the relationship between the company and its community stakeholders; and lastly, how this relationship contributes to value creation for the business.

Companies can benefit, reputationally and in other ways, from their social investments. The principle of shared value (SV) describes a scenario where both the community and the company derive measurable benefits from CSI. Tshikululu explains that a business creates SV if, for example, it invests in education and thereby encourages a pipeline of talented future employees and helps potential customers enter the consumer class.

The more CSI benefits a company, the more incentive there is to do it well, argues Tshikululu in a 2013 report that analyses the views of 41 business leaders of large, mostly JSE-listed companies.

Henry says: ‘What is really exciting is a group of transformational leaders, CEOs of big business who recognise their influential role in shaping a future in which all South Africans can prosper. Examples include Sizwe Nxasana [FirstRand], Mark Cutifani [Anglo American] and Adrian Gore [Discovery], to mention but a few.’

The CSI Handbook, meanwhile, surveyed which companies were perceived to be achieving the most developmental impact in 2013. Both corporate and non-profit respondents ranked Anglo American and Nedbank at the top, and also frequently mentioned SABMiller, Old Mutual, MTN and Vodacom.

A common denominator of these companies is that the most effective CSI efforts balance the needs of society with those of the business. It is not enough for a company to simply be doing some abstract ‘good’.

‘It must speak to the priorities, interests and expectations of its key internal stakeholder groups,’ says Henry. Simply put, companies must be doing the ‘right kind of good’.

By Silke Colquhoun
Image: Andreas Eiselen/HSMimages