Sharing the wealth: by giving in times of need, corporations can do good in the community--and for the bottom line.

It's not easy being a modern corporation. Not only are you expected to innovate the next big thing, manufacture it at the lowest possible cost, market it globally and then blow the doors off the competition in terms of sales, but you also are expected to return significant results to shareholders each quarter, all the while having an elegant long-term strategic plan. On top of that, corporations are expected to be good citizens, too.

Corporate social responsibility (CSR) has never been more important than it is now, following scandals in highly visible global companies such as Enron, Parmalat and WorldCom that dragged down the public perception of all corporations. In the public mind, perception equals reality. The result is that corporations today must act more aggressively--and publicly--to restore or maintain their reputations. Yet the world presents a seemingly infinite number of opportunities for them to demonstrate their good will: Relief efforts in the wake of the tsunami that devastated Southeast Asia in December 2004 and, more recently, in the U.S., the response to Hurricane Katrina and the subsequent flooding in New Orleans are the most high-profile examples.

In many ways, corporations behave like individuals. Indeed, many laws even treat corporations that way. W.M. Greenfield, in his article "In the Name of Corporate Social Responsibility" (Business Horizons, January-February 2004), writes that in the U.S., for example, laws developed in the late 1800s defined a corporation as "an entity separate from the people who owned and operated it--a 'legal person.'" Just as some people seek anonymity in their good deeds while others are more public, many corporations act privately in the interests of the community, while others recognize significant advantages to creating a public perception of good citizenship. Increasingly, it is becoming a principle of business strategy to adhere to that old cliche about doing good and telling others about it. Ethicists may debate the differences between being good and acting good. But there's no doubt that regardless of motive, corporations realize significant impact against the bottom line with well-managed CSR programs. For example, according to a survey conducted by the PR firm Hill & Knowlton, 79 percent of Americans take corporate citizenship into account when making purchase decisions, and 71 percent consider it when making investment decisions. Likewise, the "Millennium Poll on Corporate Social Responsibility," for which the research firm Environics International interviewed 25,000 people around the world, revealed that impressions of individual companies are shaped more by corporate citizenship (56 percent) than by brand quality, reputation or business fundamentals.

Weighing in on CSR

Proponents of CSR programs argue that preoccupation with short-term financial returns results in profit loss over the long term, and that corporations ultimately succeed or fail on the basis of public trust and support. No less a figure than business guru Peter Drucker wrote in Management: Tasks, Responsibilities, Practices in 1974: "Social problems are dysfunctions of society and--at least potentially--degenerative diseases of the body politic. They are ills. But for the management of institutions and, above all, for business management, they represent challenges. They are major sources of opportunity. For it is the function of business ... to satisfy a social need and at the same time serve their institutions, by making resolution of a social problem into a business opportunity."

On the other hand, critics suggest that the corporation's only responsibility is to maximize profits for shareholders, and that corporate responsibility runs counter to the philosophy of free enterprise. Nobel laureate economist Milton Friedman, for one, passionately argues that the sole aim of business is to make profits. In his 1962 book Capitalism and Freedom, Friedman argued that the doctrine of social responsibility was fundamentally subversive, stating: "There is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud."

More recently, a series of articles in the 20 January 2005 issue of The Economist included this comment: "Capitalism does not need the fundamental reform that many CSR advocates wish for.... Particular CSR initiatives may do good, or harm, or make no difference one way or the other, but it is important to resist the success of the CSR idea--that is, the almost universal acceptance of its premises and main lines of argument."

The Business and Human Rights Resource Centre, a nonprofit that provides information about CSR topics, compiled responses to the Economist series. In one response, Georg Kell, executive head of the United Nations' Global Compact Office, weighed in: "As business has gone global, these and other issues, once considered 'soft' or irrelevant by the private sector, pose real dilemma situations--that is, 'hard' choices where business action does make a difference, to societies and the bottom line.... So long as governments fail to do their part and so long as business goes global, CSR helps fill an important void."

In the communication arena, a multitude of scholars have linked CSR to the PR and communication functions. James Grunig, co-author of the IABC study Excellence in Public Relations and Communication Management, wrote in his 1984 book with Todd Hunt, Managing Public Relations, that "[P]ublic or social responsibility has become a major reason for an organization to have a public relations function." Not only do communicators have the requisite skills to guide the corporation in an ethical market strategy, but they also understand their responsibility to help build the company's reputation and maintain its relationship with stakeholders.

The impact of CSR

A 2005 study of CSR in the Silicon Valley area of Northern California, conducted by IABC staff member Archana Verma, illustrates the nature and extent of such programs, factors that influence a company's CSR activities, and the implications of corporate giving to relief efforts for natural and manmade disasters.

The study examined the characteristics of CSR programs and initiatives of companies in the Silicon Valley region. Cash donations (87 percent) were the most common method of CSR, it found, followed by employee participation in community relations activities through matching grants and/or volunteer programs (80 percent) and product/excess inventory donations (72 percent). The most common factor that influenced a company's choice of CSR activity was the interests of the employees (67 percent). In fact, employee morale-building and retention was found to be a key motivator for companies to engage in CSR activities.

The study supports previous research suggesting a link between a company's business goals and the social causes it supports, with community relations activities often mirroring the company's products, services or goals. More than half the companies surveyed chose social causes based on their relevance to their business goals. Interestingly, emergency services (80 percent), education (71 percent) and poverty/ homelessness (69 percent) were the most common causes that companies in this region tend to support. The high emphasis on emergency services for natural or man-made disasters could be attributed to reasons such as the urgency of the situation and pressure from stakeholders, rival companies and, increasingly, the media.

The impact of media attention and public opinion on charitable contributions is obvious from the recent example of Wal-Mart, whose initial response to Hurricane Katrina was considered miserly and attracted negative press coverage. Shortly thereafter, the retail giant significantly stepped up its involvement, donating USS 17 million in cash to emergency relief efforts and sending 2,450 truckloads of merchandise and in-kind donations to refugee shelters throughout the Gulf Coast states.

According to the Center for Corporate Citizenship at Boston College in Massachusetts, as of 12 September 2005, corporate giving to help with Katrina's aftermath had reached US$547 million, with Wal-Mart, Office Depot and General Electric being the largest donors. Experts predict that corporate donations to Katrina relief efforts will surpass corporate donations in response to the tsunami in Southeast Asia.

Why the large outpouring of aid in response to Hurricane Katrina--a tragedy with a death toll of around 1,000--as compared with the tsunami, which had a far more devastating impact in terms of human lives, with a death toll of as many as 250,000?

The most obvious explanation, of course, is simply geography. Similar to international news flows wherein the Western media marginalizes issues in the developing world, perhaps the predominantly U.S.-based companies making these large donations focus on issues near and dear to their stakeholders. In fact, almost half the companies in the Silicon Valley CSR study allocated more than 75 percent of their annual charitable donations to local causes.

Another possible reason could be timing. The tsunami struck at the end of the calendar year, a time when several CSR departments had already exhausted their annual charitable giving budgets. Digging deeper into their pockets could mean borrowing from the coming year's budget.

Whatever the reason, one thing is clear: Today's companies can no longer afford to ignore CSR. Scholars today acknowledge that a citizenship portfolio helps integrate companies into the social environment of communities by developing bonds between the organization, its employees and the local citizens. It helps a company build reputational capital. As stated by CSR Network, one of the U.K.'s leading consultancies on CSR issues, "By not engaging in CSR, companies are not only under-managing their impact on society and the environment, they are under-managing their own economic self-interest."

RELATED ARTICLE: Measuring goodness.

How do you measure something that defies definition? One of the most glaring voids in corporate social responsibility (CSR) research and practice has been the absence of accepted standards and performance indicators for the measurement of CSR activities. Many of the methodological quagmires in measuring CSR stem from the nature of the subject, which is a relatively new field of study whose concepts are normative, value-laden, and susceptible to ideological and emotional interpretations.

Some of the problems in CSR measurement are:

What should be measured? Some of the categories to assess the effectiveness of CSR programs include alignment between corporate actions and mission statements, publicity received for CSR activities, stakeholder perceptions, and the link between CSR and profitability. However, because of the intangible nature of the field and varied schools of thought, no globally accepted practice has yet been defined.

Who should do the measuring? Can companies be trusted to present an unbiased and fair assessment of their CSR performance, or should outside companies perform the social audit? Should these be voluntary, or should the government or a global legislative body enforce compliance? The implications of government regulations and/or legislation to enforce or monitor compliance raise an age-old debate regarding the role of the government in free-market economies.

Which standard should be followed? The multiplicity of CSR measurement standards that exist globally poses dilemmas for companies. Several excellent frameworks have been proposed, ranging from broad aspirational standards to issue-specific ones. Some examples include the U.N. Global Compact, GRI guidelines, AA 1000, ISQ 14001. QHSAS 18001, Dow Jones Sustainability Index and the Domini Social Index 400. A consolidation of codes, standards and guidelines is becoming increasingly important.

How can CSR programs be benchmarked against one another? Each industry has specific issues that are more relevant to its business objectives and stakeholders. Other factors such as company size, geographic coverage, management support and corporate culture also affect a company's choice of CSR activity. How can diverse CSR programs be compared with one another fairly?

--W.B. & A.V.

inspiring employees

In 2004, Ameristar Casinos Inc. inspired its employees to donate more than US$648,010 to a variety of charitable causes. How did it more than triple employee donations in one year? By creating an overall theme, Ameristar Cares; offering a choice of different charities to donate to; and recognizing employees for their generosity.

Read about more CSR programs in the 2005 edition of Best Practices in Communication Planning and Implementation. For more information, visit store.yahoo .com/iabcstore.

10 benefits of CSR for businesses

1. Increased profits

2. Access to capital

3. Reduced operating costs/increased operating efficiency

4. Enhanced brand image and reputation

5. Increased sales and customer loyalty

6. Increased productivity and quality

7. Increased ability to attract and retain employees

8. Potentially reduced regulatory oversight

9. Reduced risk/increased risk management

10. Keeping ahead of the market curve

SOURCE: CSR Network

giving to the community

Farm Credit Canada (FCC) typically generates more than half of its total media coverage with community-based activities. FCC's charitable activities focus on farm safety and hunger. For the company's 2004 World Food Day activities, an FCC account manager embarked on the IABC Gold Quill Award-winning Drive Away Hunger tour, driving a tractor a few hundred kilometers through more than a dozen communities, collecting food donations for local food banks.

For more information about this and other Gold Quill Award-winning programs, visit store.yahoo.com/iabcstore/ knowcenres.html.

William Briggs, Ed.D., is a former member of the IABC executive board and is director of the School of Journalism and Mass Communications at San Jose State University in San Jose, California.

Archana Verma is marketing communication specialist at IABC headquarters.