Taking responsibility

The last year has been laden with signs that major corporations are dedicating considerable resources towards improving society and the environment in which they operate. Corporate citizenship is being taken ever more seriously by businesses that are eager to prove their commitment to improving local communities, sustainability and general business practices the world over.

New types of strategy are being implemented too, with organisations being formally set up to manage this part of a company’s operations. What is clear is the key role corporate responsibility now plays in a company’s strategy; a significant shift from when it was just a brief and vague statement in an annual report to placate the press, campaigners and concerned shareholders.

Sustainability has formed an integral part of all corporate citizenship policies, which was reflected in a report by Ernst & Young that highlighted six emerging trends in corporate sustainability. One significant finding was that many firms were treating sustainability as more of a risk reduction and mitigation practice, as opposed to a focus on environmental issues. The report says risk management and sustainability were interlinked, and companies were realising this: “The role of sustainability issues hasn’t historically been front and centre of business strategy, but these issues continuously linger in the background. Companies may not talk about climate change per se, but many are being buffeted by its effects. Similar issues, including deforestation and shrinking biodiversity, are affecting the availability of agricultural and corporate sustainability. That, in turn, is making sustainability issues more prominent on company agendas.”

Around the world
In the US, a large number of companies have shown that enhancing their role in the community can have real benefits to the business as a whole. Leading telecommunications firm AT&T has been widely praised for its activities in enhancing communities, particularly through its ‘It Can Wait’ campaign, which encourages people not to use their mobile phones while driving. The company has also heavily invested in a pilot scheme for creating more efficient cooling towers that could save million of gallons of water each year.

The company’s Vice President of Sustainability and Philanthropy, Ben Shiroishi, told reporters: “We’re continuously learning, but know that the full impact of sustainability comes when it is integrated across the company operations and benefits both the community and our shareholders.” Shriobi’s is just one of the companies that realise their success relies on a strong society.

There have been calls across Europe to improve the way in which companies report on their impact on communities and the efforts they are taking to improve the environment around them. In April, European Commissioner for the Internal Market and Services Michel Barnier unveiled plans to force large corporations to reveal their environmental, sustainability and diversity strategies.

The US has some of the largest corporate givers, with many found in the pharmaceutical industry

These proposals split opinion, however, with trade body BusinessEurope joining four German industry groups in saying the rules were too strict, while some non-governmental organisations complained the rules lacked teeth. Coca-Cola recently celebrated 50 years of operations in Kenya by launching a series of events aimed at highlighting its impact on the local community. The drinks giant has helped foster local entrepreneurship through schemes like Project Nurture, which helps local farmers provide fruit for the company’s drinks and last year received a large increase in investment.

The company has also developed its 5by20 project, in partnership with the Bill & Melinda Gates Foundation, which looks to empower local women to become entrepreneurs, with training in business skills, financial services and networking.

Philanthropic causes
Many of the world’s largest companies also donate considerable resources to philanthropic causes, aiming to enhance and support the communities that they serve and those that are less fortunate. In its Giving in Numbers report for 2012, the Committee Encouraging Corporate Philanthropy found the 214 companies surveyed had contributed over $19.9bn in cash and product donations.

The study also found 60 percent of companies had increased their donations from the previous year; 46 percent was through direct cash donations, and the main focus areas of corporate philanthropy continued to be health, education and economic development for communities.

The US has some of the largest corporate givers, with many found in the pharmaceutical industry. In 2009, Pfizer donated cash and products amounting to $2.35bn, while retail giant Walmart gave the most in terms of cash with a donation of $288.1m.

Corporate foundations
According to a recent report by consultancy firm Corporate Citizenship, companies in the UK are increasingly looking at outsourcing their corporate responsibility activities in the form of independent corporate foundations. The report, ‘The Foundations of Business: The growth of corporate foundations in England and Wales’, shows there are now 140 corporate foundations in England and Wales, dominated mostly by companies in the financial services industry. These foundations manage all manner of aspects of a company’s corporate responsibility plans, including volunteering and charitable investments. Corporate Citizenship’s Co-Founding Director, Amanda Jordan, said many companies “continue to voice strong support for responsible business practices, including playing an active role in their communities”. She added: “Stakeholders expect companies to not just talk about responsibility, but demonstrate through their actions that being good corporate citizens is part of everyday activity.”

The report goes on to say that it is not surprising that many financial institutions have been keen to implement some form of corporate foundation to address the mistrust from the public they have received since the financial crash in 2008.

The report said: “From a reputation-building point of view, the strong growth in foundations from the financial services sector is not surprising. Many companies have been rocked by high degrees of scrutiny in recent years and some have sought to ‘give something back’, more prominently to the community through a foundation.”

The reasons for forming a corporate foundation are diverse, according to the report, and not just part of a PR stunt: “The reality is that companies have many and varied motives for setting up a foundation. For some, there are reputational benefits; for others, a more structured and independent approach to community giving is the logical next step on their corporate responsibility journey. Often, this is linked to an anniversary, providing an enduring legacy for the foundation.”

For more on corporate citizenship, please see here