Lighting fires around the world: corporate social responsibility and philanthropy have become more than good business practices. Now it is up to American companies to bear the torch south of the border.

Philanthropy is not a new concept. For as long as people have made money, donating it has been one way to spend it. And as far back as corporations have understood its benefits, corporate social responsibility and philanthropy have been popular in the boardroom.

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Corporate giving reflects economic prosperity. If profits are up, so is giving. But participation in corporate philanthropy has seen a boom in recent years, and it is not just the result of economics. Social responsibility and philanthropy have come to the foreground of the many reasons why successful companies reach high levels of achievement.

"The return is having a community with an economic, social and cultural capacity that gives them more clients," says Felipe Cajiga, director of Corporate Social Responsibility at the Mexican Center for Philanthropy (CEMEFI). "That allows them to have better-prepared employees and workers, with better business conditions, and at the same time an expanding market."

Corporate giving is not only important from a humanistic point of view--everyone wants stronger, better communities--it is also effective from a business point of view. Looked at from all angles, social responsibility and philanthropy are better for the bottom line.

Corporate ethics and "the tone at the top" have visibility today as never before. Nowadays, news spreads at an unparalleled speed. A company's questionable business behavior is likely to disseminate--quickly--to customers, the investment community and partners alike. And the consequences of ethical lapses are grave.

Transparency is not just a helpful business practice anymore: It is a requirement. Corporate scandals in recent years (names like Enron, WorldCom and Adelphia have become part of the vernacular) led to the implementation in the U.S. of the Sarbanes-Oxley Act in 2002, which dramatically increased corporate oversight and disclosure requirements for public companies accessing U.S. capital markets. The legislation capped a decade of excess at some of the largest corporations in the U.S. Increased attention to corporate social responsibility has been one of many ripple effects of the focus on ethics in the boardroom. The public image of big business has been tainted, and companies are now trying to speed the recovery.

But transparency goes both ways. Though a seemingly immaterial indiscretion can wound a hard-earned reputation on impact, good news is equally powerful and visible. And businesses that base their competitiveness on sustainable factors such as integrity, innovation and a strong, honest relationship with customers and investors--the good business practices that produce positive publicity--have a renewable advantage over the competition.

It does not stop at social responsibility, either. Companies can use philanthropy strategically to promote brands. Corporate philanthropy thus has multiple instigating factors: It builds a stronger community, which supports a stronger company, but it ultimately helps enhance the image and customer base of any business.

NEW WAYS OF GIVING

Though corporate social responsibility and philanthropy have been in the business lexicon for years, how they are implemented is changing. Increased focus on organization, communication and relationships between companies and philanthropies has created a network for corporate giving that never institutionally existed before.

Such organization is evident on both sides of the border. In the U.S., it can be seen in the formation of organizations like the Committee to Encourage Corporate Philanthropy (CECP), a forum of business CEOs and chairpersons founded in 1999 focusing on how businesses and philanthropies can collaborate more efficiently. And in Mexico, it is represented by programs such as the Corporate Social Responsibility (ESR) sector of the Mexican Center for Philanthropy (CEMEFI), a non-profit organization that aims to promote philanthropic culture and social responsibility in Mexico.

Companies are motivated to engage in corporate philanthropy for a variety of reasons. According to the 2004 Corporate Giving Standard survey of philanthropy conducted by CECP in the U.S., seventy-one corporations participated and categorized 49 percent of total giving as charitable, 36 percent as strategic and 15 percent as commercial. A company engaged in charitable giving does not expect a business benefit to result, whereas with strategic giving the donor corporation expects that the business and the community will each prosper as a result. And in the case of commercial giving, the company expects itself to be the principal beneficiary. Although the classifications may be imprecise, they do force survey participants to categorize their reasons for corporate giving.

CEMEFI's ESR program was developed in 1997 to reinforce the corporate responsibility trend in Mexico. Created to support businesses in the implementation, development and improvement of socially responsible practices and corporate citizenship, the program has enjoyed success with local and multinational businesses. Currently, CEMEFI has 75 exemplary businesses and 21 corporate foundations on its membership list.

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And the 2005 membership (accessible on CEMEFI's website, www.cemefi.org) reads like a who's who of important companies in Mexico: American Express, Coca-Cola, Deloitte, Ford Motor Company, General Electric, JP Morgan, McDonald's, Merck Sharp & Dohme, Microsoft, Novartis Pharmaceuticals, Pfizer, Phillips Mexicana, S.C. Johnson & Sons, Shell, Wal-Mart and Wyeth are all members. Many have belonged to the group for years. The list can be cross-referenced with Fortune's Global Most Admired Companies, Barron's World's Most Respected Companies, the UN Global Compact and Expansion's 500 Most Important Businesses in Mexico.

Membership criteria involve an analysis of the quality of life within the company, commitment to the community, care and preservation of the environment and social responsibility in the business' day-to-day functions. And the program aims above and beyond, working to connect businesses and non-profits through counseling and forums that yield productive philanthropic relationships.

Such programs depend on the understanding that businesses--especially service-oriented companies--rely on feel-good sensations for customer and employee support. Social responsibility and philanthropy bolster businesses from the inside out: They improve morale among the workforce while projecting a positive image to customers.

As their market base remains in the States, American companies may be held to different standards abroad than on home turf. Still, information regarding such business practices is now public, thanks to the international scope of Sarbanes-Oxley. Companies that root competitiveness worldwide on the same standards they hold in the States--including giving back to the communities in which they operate--have the benefit of transparency behind them.

Thanks to its obvious benefits and its visibility, corporate social responsibility and philanthropy are not extracurricular activities anymore: For any modern business, they are musts. And such programs must cross the border when a company does.

INVESTING IN MEXICO'S FUTURE

U.S. companies are the worldwide leaders of corporate giving: Data for 2003 reports US$13.5 billion given by companies to charitable organizations, and if the current trend continues, giving will only increase.

The influence of philanthropy as it is practiced within the United States is especially important in Mexico, where for hundreds of years, the Catholic Church and government organizations dominated the charitable realms. It is only in the last fifty years that citizens and civil society organizations (CSOs) have come to the fore of the culture of giving in Mexico. Philanthropy is experiencing a crescendo in Mexico, and the infusions of creativity and funds that American companies can provide will have maximum impact.

American companies in Mexico have the opportunity to carry a torch, lighting the way for national companies to follow. But roadblocks exist, Giving in Mexico is different from giving in the United States, which can be a shock for businesses accustomed to certain philanthropic mores.

Cajiga stresses the importance of understanding the international context when trying to implement philanthropic programs abroad. American conventions and procedures do not translate in Mexico. Though the same standards should apply, the rules of the game shift, because Mexican realities bear little resemblance to those in the U.S.

Donors hoping to work with familiar causes may find themselves lost. Different standards of living denote different needs. The necessities in Mexico revolve around the lack of an infrastructure that many Americans take for granted. To adapt U.S. philanthropic programs, one must back up a few steps.

"The child who comes to school, why isn't he learning?," comments Jorge Hierro, executive director of Institutional Relations at Banamex. "Because he doesn't eat breakfast in the morning. So first, we have to fix that. It's all interrelated here."

The lack of infrastructure also applies to the non-profit arena itself. In the U.S., donors are accustomed to finding a non-profit for every cause. In most cases, there is an abundance of worthy, tax-deduction-granting CSOs to browse. It is harder to consider Mexico's selective non-profits, many of which do not have the authorization to give tax deductions to donors. But in the end, a tax deduction has the smallest impact of a donation's many benefits.

Companies can and should take steps to steer philanthropic efforts towards success and reap the benefits in reputation, image and loyalty of auspicious programs. Teaming up is essential to effecting change, whether with other companies, Mexican non-profits or American non-profits.

"In Mexico, there are so many necessities that it's not efficient to make individual efforts," attests Hierro. He suggests joining forces with other businesses and, if applicable, the government.

A mere financial donation makes little noise: Perhaps someone will recognize the donor for generosity, but its effect could be tenfold if research, teamwork and creativity are involved. Businesses have the resources to make a lasting impact on Mexican society. But the resources require more than just money. While financial generosity is important, philanthropy--especially abroad--is more than a check and a photo opportunity. Goals should be honed and followed with precision and determination.

Companies can learn from one another's efforts. Programs effective in the U.S. have little relevance down south, but that does not mean obsolescence. It just takes creativity to tailor programs to Mexico's needs.

Banamex, in an example of strategic philanthropy, adapted Citigroup's financial education program for implementation in Mexico after its acquisition. The first step, says Hierro, was taking the program seriously. Though Citibank's program, which focused on responsible use of credit cards, didn't apply to the needs in Mexico, Banamex saw something valuable.

In Mexico, only a small portion of the general population uses the financial system. Another segment of the population chooses not to, and a third group--the largest--doesn't have the resources to use either credit cards or banks. Still, the program was adapted to Mexico's needs.

"It has more to do with education than finance," says Hierro.

Banamex's program focuses on teaching citizens to save gradually in order to finance large purchases, rather than borrow. Such concepts may seem basic, but they need to be taught. Banamex's "Educacion Financiera" now serves as one facet of its six-pronged Fomento Social division approach to philanthropy.

Foreign companies in Mexico still have a long philanthropic road to travel. A soon-to-be-published study on giving in the states along the U.S./Mexico border by American non-profit International Community Fund exposes the black and white of corporate practices in the area.

"Considering the amount of money spent on the product, the amount re-invested into the community is very small," says ICF's Anne McEnany. Still, she emphasizes the creativity with which determined donors confront challenges. The study finds that the presence of a champion within a company is the single biggest determinant for giving by companies in the border states. One person, it seems, can make a difference.

Mexico's lack of infrastructure allows for a greater range of philanthropic motion than other countries. Companies and organizations can combine efforts for maximum benefit. Though it may be daunting to the average American philanthropist accustomed to a certain manner of giving, a certain relationship with a familiar non-profit, giving in Mexico allows for unparalleled freedom and impact. And that's good for everyone's bottom line.

THIS ARTICLE IS THE FIRST OF WHAT WILL BE A MONTHLY PROFILE ON CORPORATE PHILANTHROPY.

RELATED ARTICLE: Making it Work

Felipe Cajiga lays out a plan for effective philanthropy in Mexico:

Focus on one or two causes, maximum. If you attend to different fronts, the impact is lessened. If a business focuses on one theme, it's much easier to localize the benefit.

This cause, or two causes, have to be as close as possible to the company's talent. If you take a cause that doesn't have anything to do with your company, the only way you'll be able to impact it is economically. If you pick a cause that's next to your company, the mere name of your brand will open many doors for that organization, that cause. Where you don't know anything about the cause, it will take time to learn it. Don't waste that time.

The next thing is not to fall into the temptation of directly operating your programs. The expertise of the company is doing business, not managing social programs. Better to determine, within the chosen cause, what it is you want to change, what it is you want to do, define the politics of it, define your needs and look for an ally that matches this profile. And act not as a donor, but an ally.

Another point is to permanently follow it. It's not just give them support and wait until they give me a deductible receipt, that they give me credit in the annual report and send me a letter of receipt, but to permanently monitor the impact.

And, finally, communication, internal and external. This will permit the business to continue positioning itself, transmitting its message, looking for a position of leadership and inviting other businesses to join its work. But it also begins to position it as an example to other businesses.