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OPINION: Companies spent $10bn doing good in 2018. Here's how we could do even better

Dec 23 2019 18:45
Ralph Hamann, Jeeten Morar and Jess Schulschenk

Corporate social investment (CSI) – financial contributions by companies to social causes, such as education, health, and enterprise development – has a long tradition in South Africa.

In recent years, it has become more professionalised and widespread, in part because it is included in the government’s Broad-Based Black Economic Empowerment (BBBEE) scorecard. Companies spent close to $10bn on CSI in 2018, according to Trialogue, a CSI consultancy.

Yet, in the context of broader debates surrounding the role of business in a necessary “just transition” that responds to interlinked problems of climate change, poverty, and inequality, important questions remain regarding the strategic purpose and implementation of CSI. At a recent workshop of the Embedding Project including leading South African companies, we highlighted the following key points.

Beware of replacing the state

All too often, CSI is conceived of as corporate contributions that fill gaps in public investment by the state. Companies thus become de facto state-like organisations in the provision of vital public services such as education or health.

This has a number of important risks and problems. For a start, the long-term sustainability of such public service provision by companies is inherently constrained by companies’ varying fortunes. This is strikingly manifest in mining towns that die when the mine closes.

There is also the risk that “gap-filling” by companies invites the state to abscond from its constitutional mandate. For example, local residents near Rustenburg were told by government officials that they were “children of the mine” and they should ask the mining company for public services, rather than the government. This is not only an unconstitutional abrogation of government responsibility.

It also leads to systemic failures because no company can replace the multi-layered public regulation and investment required from the state, ranging from land use planning to bulk services infrastructure.

Focus CSI on experimentation and innovation.

If providing basic public services is neither an appropriate nor an effective use of corporate discretionary funding for social causes, then what is? The answer is that CSI should focus more on experimentation and innovation. This is a powerful focus because it addresses a legitimate challenge faced by the state, which struggles to use tax-payers’ money for uncertain outcomes, and it also makes much better use of companies’ comparative advantage in innovation. The idea is for companies to pilot new ways of doing things, which – once confirmed and refined – can then be adopted and scaled by the state or others.

For example, rather than build yet another school or clinic that then remains defunct because the state fails in providing teachers, CSI programs might experiment with better ways to support teachers or with the distribution of textbooks or medicines, or another of the many challenges faced by the state.

This could also involve the establishment of social impact bonds, where CSI is used to establish such a fund, but the state pays for the project if agreed outcomes are achieved. The CSI budget is thus replenished and can be used to good effect in the next innovation project.

Leverage CSI for systems change

In identifying opportunities for social innovation, corporate CSI managers have not only an ability to tap into corporate innovation capabilities. They may also have some freedom from short-term performance expectations. There is thus the possibility for CSI to focus on “leverage points” in social-ecological systems that can shift such systems onto more socially beneficial long-term trajectories. 

For example, consider the interlinked social problems of youth unemployment and violent crime. Research suggests that many young offenders’ troubles start very early in life and indeed before they are born. A powerful intervention is to provide targeted psycho-social support to pregnant girls and women, who often feel overwhelmed by the prospect of giving birth and becoming a mother in difficult social conditions. CSI managers can identify such opportunities for intervention and pilot effective responses, which can then be scaled up by the state or NGOs.

Connect to corporate strategy

It is a well-worn ambition to connect CSI to the strategic objectives of the firm. But prevalent responses are largely limited to focusing CSI spending on themes that have some or other link to the core business. Recognising the potential for CSI to experiment and innovate, as suggested above, can also help create stronger links between CSI and strategy. That’s because CSI funding can develop the investment proposition to unlock larger “shared value” investments that generate both social and business returns. For example, Santam used CSI funding to develop a broader programme to support municipalities mitigate risks to residents, which then enrols core business resources – such as risk assessment expertise – in making a greater impact with benefits for Santam policy holders as well as other community members.     

These recommendations are not easy to implement. It is relatively easy to tick the BBBEE scorecard box and to say that X Rands were spent on building a school, without bothering to check that the school is actually performing two years later. It is more difficult, but much more rewarding, to engage in discussion with diverse stakeholders about the complex, systemic challenges to education or health or whatever the thematic focus is, and then to experiment, pilot, and innovate in addressing leverage points for positive long-term change.

The authors are with the Embedding Project, a global public-benefit partnership between researchers and managers hosted by the UCT Graduate School of Business that seeks to help companies embed social and environmental factors in their strategies and operations. Views expressed are their own. 

gsb  |  uct business school  |  csi  |  b-bbee
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