Are companies using CSR as a way to look good on paper or do they really care? James Ashton takes a global view on CSR, its do-gooders and how it can attract talented staff
For the world’s charities, it was the ideal early Christmas present. When a further 17 billionaires promised last December to give away half of their wealth, it underscored the fact that philanthropy was alive and well – even as many of the world’s leading economies struggle to kick-start economic growth in the aftermath of recession.
The US tycoons were responding to a call to arms by Bill Gates, the Microsoft co-founder, and investment guru Warren Buffett. Their Giving Pledge is intended to extract billions of dollars from the super-rich for good causes.
The message has succeeded in spanning the generations, even recruiting Mark Zuckerberg, the founder of Facebook, who has barely had time to get used to his immense wealth, let alone think about how he is going to spend it all.
It also highlighted that when it comes to corporate giving, no-one is capable of making bigger gestures than the titans of American industry. You only have to visit any US city to recognise that is the case. They are full of teaching foundations and hospital wings named after wealthy benefactors. It is a disparity that has weighed on British politician’s minds – and not just because of the cuts that the coalition government is having to implement.
Days before Zuckerberg and friends made their pledge last December, the UK Culture Secretary Jeremy Hunt, made one of his own. In a speech at the London headquarters of JP Morgan, he proclaimed hopefully that 2011 would be “The Year of Corporate Philanthropy”. Even without the economic crisis that has wreaked havoc with arts funding, Britons give just US$10 per year per head to cultural causes, compared to US$61 in the US. Finding a comparative figure for Asia is tough, but anecdotally, China, where philanthropy stems from the government, not the individual, gave 0.35% of gross domestic product to good causes, compared to 2.1% in the US, according to a report by the Hudson Institute.
The gaps are large, but then again so is the amount in tax that top-earning Brits pay compared to their American counterparts, and the cultural difference from East to West. Not for nothing has the mindset developed in Europe that the state should take more of the strain.
Yet bigger is not always better. Corporate and social responsibility (CSR) is a movement that grew out of the marriage of Britain’s blue-chip companies and the charity sector to go global. Its success in masterminding vicarious projects is not measured by how much is contributed, but in the benefits to the company, its staff, and the community they operate in.
Now CSR is in evidence worldwide, whether that is carmaker Volkswagen financially supporting promising scientists in Argentina or the clothing retailer American Apparel investing to ensure it has a responsible supply chain in the US. It makes companies feel better about giant profit margins, as well as helping to woo the best graduates to join them.
For the banking industry, the Equator Principles were a strong statement of intent. Set up in 2002, lenders working in project finance, including ABN Amro, Citigroup and Barclays, promised to limit lending to ventures that posed environmental and social risks.
It is hard for any institution not to forge ties with its local community, but much of what companies do crosses borders. HSBC became the first locally incorporated foreign bank to issue a CSR report in mainland China. One of its flagship programmes is the Eco-Schools Climate Initiative that teaches five to 18-year-olds about the environment by sending the bank’s staff into classrooms.
In partnership with international development organisations CARE and Plan, Barclays made a US$16.3m commitment to Banking on Change, a microfinance project that helps people in developing nations such as Egypt, Ghana and Indonesia to support the creation of savings and loans groups that are self-supporting.
But CSR has shown there are different priorities in different markets – meaning that multinational companies have to tailor their campaigns locally. In a 2007 survey, McKinsey asked companies what they thought the most important corporate responsibility issues of the next five years would be. Britain and Brazil ranked the environment first, while the US and China said healthcare benefits.
The perception that Britain and the US lead the world in CSR exists because their companies shout the loudest about it.
Corporate Knights, a magazine for clean capitalism, found a very different reality in its annual list of the 100 most sustainable large corporations in the world.
Japan supplied 19 companies to the list that marks everything from energy productivity to the proportion of women in the boardroom. The United States trailed with 13 firms, and Britain supplied 11.
In fast-growing emerging markets, the focus has been on growth, not giving something back to the community. But that is changing, for example in China, where corporations are seeking to win acceptance from western markets they have targeted for expansion.
Often it takes a tragedy to put CSR on the national agenda. It spread quickly in Argentina following the country’s currency collapse a decade ago. You can expect Japan to redouble its efforts following the devastating tsunami and nuclear meltdown that hit the country in March this year.
But there is another reason CSR is thriving there: as the ethos of a job for life has dimmed, firms think that showing their softer side can attract and retain the best staff. They might have a point. In a global economy, where talent is scarce, digging deep is set to become a worldwide phenomenon.
James Ashton is City Editor of The Sunday Times