Kindly hosted by Investec on 25 February in Johannesburg and 27 February in Cape Town
The approach to corporate social responsibility (CSR) in South Africa is maturing, with many companies looking well beyond their corporate social investment (CSI) departments to affect meaningful change in society, and some interrogating how their management strategies can address social issues. However, despite considerable advancement in the sector, questions remain about the parameters and overlaps of responsible business concepts. At this Trialogue CSI Forum, delegates unpacked commonly used responsible business concepts, including shared value, CSR, CSI and socioeconomic development (SED), interrogated where CSI fits in, and discussed how to advocate internally and externally for change.
All the activities and investments aimed at enhancing the social and/or environmental impact of the business.
How far should business extend its sense of responsibility? Is it only required to be legally compliant or should it be driven by a greater sense of ethics and values? And who in the business should be responsible for these considerations?
The short-term profit-driven approach of most businesses is no longer sustainable as consumers become more considerate – and vocal – about the sorts of businesses that they support, further strengthening the business case for responsible business. Johannesburg delegates explored some of the other drivers of this shift to responsible business, which include social and ethics committees, communities, employees and shareholders, with one company saying that its largest shareholders come to social and ethics committee meetings and are putting pressure on the business to improve its social and environmental practices.
After an oil and gas company failed its sustainability performance review, its CEO introduced a values-based approach in the organisation and included a human rights clause into the company’s ethics charter. He also advocated for financial investment to be made in communities near the company’s operations.
Cape Town delegates from the retail, insurance, and oil and gas industries said that their businesses had begun to think more deliberately about responsible business practices, including their environmental impact, compliance, supply chain and human resources, with the majority considering how to mitigate industry-specific risks that may be posed to the societies in which they operate.
Responsible business considerations are generally led by social and ethics committees, or in the case of one attendee, a council led by the CEO, and then managed by different parts of the business.
Shared value versus strategic CSI
Shared value is a management strategy in which a company creates measurable business value by identifying and addressing social needs or problems that intersect with its business. Shared value includes, but is not limited to, strategic CSI. It goes beyond strategic CSI and can include the company’s operating model, products and services offered.
Strategic CSI, as defined by Trialogue, is achieved when companies have significant developmental impact, as well as a positive business impact, beyond reputational management.
Delegates at the two forums provided several great examples of strategic CSI initiatives, including:
- An insurance company, in partnership with the Department of Basic Education, running a pilot project in which insurance risk assessments are carried out at public special needs’ schools, many of which are insured by the company. Where compliance issues and risks arise, the company connects the schools with partner organisations that are able to assist. This is seen as a win-win strategy because when the government needs an insurer the company will be at the top of its list. At the same time, the company reduces the number of potential claims by conducting due diligence at the schools. This initiative does not incur significant costs since it draws on core business competencies and resources.
- The same insurance company works with local municipalities on disaster risk management strategies and approaches, helping the municipalities to curb risk and reducing the company’s resultant insurance payouts.
- Another insurance company has programmes focused on skills development for youth, addressing the high youth unemployment rate, but also creating a pipeline of young talent for the business.
- The SABC Foundation is using under-utilised properties owned by the SABC across the country as production studios, with the intention of generating local content using local producers in areas outside of the big three cities.
- GrowthPoint set up Property Point ten years ago, in order to unlock opportunities for small and medium enterprises (SMEs) operating in South Africa’s property sector (for example, those providing services to the property sector such as quantity surveying, paving, maintenance and repairs, fire protection, environmental and safety consulting, waste management, aluminium and glass, and advertising). Property Point supports the growth, compliance and procurement-readiness of the SMEs, helping them become sustainable companies, with the potential to access GrowthPoint’s supply chain, as well as access market linkages across the entire property sector.
- A clothing retailer trains unemployed women in clothing production. Once trained and employed by the company, the women make blankets that are donated to disaster relief initiatives. Through the programme, local economies are empowered.
- A food retailer has established food gardens in more than 100 of the communities in which it has stores, decreasing food insecurity in these mostly rural areas where access to fresh produce is limited. Community members involved in food gardening can sell their fresh produce to their neighbours, as well as to the stores.
CSR versus CSI versus SED
CSR is an overarching value-based framework that encompasses all social aspects of business operations, ensuring that a company manufactures its products and conducts its business responsibly and ethically. CSR includes, but is not limited to, CSI.
CSI forms part of CSR (along with human resources, economic development, supply chain and marketplace) and refers to a company’s financial and non-cash contributions – beyond its commercial operations – to disadvantaged communities and individuals for the purpose of social upliftment and welfare.
The Broad-based Black Economic Empowerment Scorecard requires companies to spend 1% of net profit after tax on SED that facilitates sustainable economic inclusion (75% of beneficiaries must be black). SED initiatives clearly fall within the traditional scope of CSI.
A forum delegate shared this example of a CSR initiative:
- A food retailer runs a programme with farmers who contribute to the company’s supply chain, upskilling them on soil management‚ water usage‚ biodiversity‚ pest management‚ carbon footprint and compliance with environmental laws.
- All companies represented at the forum have or are in the process of considering how responsible their businesses are, but use different terms – including shared value, sustainability, transformation, CSR, CSI and SED – to describe their responsible business activities.
- Additionally, the CSI function sits in different parts of the business, with some delegates reporting to marketing, some to HR and others to corporate affairs or central services.
- There is often overlap between CSI, human resources, marketing and sponsorship within companies. Rather than clearly delineate between different departmental functions, it may be more effective to integrate developmental and responsible business initiatives across the business and have various departments support with their core competencies.
- One of the biggest challenges highlighted at the forum is the lack of co-ordination across the different activities / departments and the fact that many responsible business units operate as silos. Another challenge mentioned is that budgets and incentives are not always aligned with responsible business objectives.
- While CSR and CSI practitioners can advocate for more responsible business approaches in their companies, this advocacy is often most impactful and sustainable when driven by the leadership within an organisation.
- Many companies are still reluctant to advocate for social and environmental change externally due to the perceived reputation risk of advocacy.