Executive summary
Many companies have long sought to be good corporate citizens throughinvolvement with the local or wider community. This study has assembled theviews of 115 large companies on their current attitudes and commitment to community involvement. It explores their motives for community involvement, their pro-grams, the outcomes they expect and their sense of future directions in this area ofbusiness activity.
The study demonstrates that Australian business is experiencing a transition inexpectations of its social role. The social obligations of business have traditionally been met through producing goods and services responsibly, acknowledging com-munity standards and expectations, with optimum returns on shareholder funds.Many companies now believe they should go beyond this. The great majority ofcompanies in this study support involvement with the community as part of anexpanding social role that contributes to the continuing health and growth of their businesses.
For three-quarters of the companies in this study the goal of long–term businesssustainability is at the heart of the ‘business case’ for community involvement. They see involvement not as a means of improving short-term business competitivenessbut as a way to maintain trust, support and legitimacy with the community, govern-ments and employees. They see community involvement as a social responsibility of business but one that is clearly aligned with the long–term commercial interest oftheir companies.
A further 10 percent of the companies studied embrace community involvement activities as an obligation to ‘put back into the community’ in which they do busi-ness, without looking for a commercial return or business benefit. Indeed, some strongly resist the idea that they might be seeking a return to the business. They are happy for these activities to be a cost to their business; they celebrate their involve-ment and regard any intangible benefits that accrue to them as a bonus.
About half of the companies have a vision statement or management policy –possibly developed within the past five years – that relates to their view of socialresponsibility or community involvement.
Around 10 per cent of the companies in this study maintained that their social responsibilities were met exclusively by returning value to their shareholders.(Subsequent qualitative investigation suggests the proportion of companies in thiscategory is more likely to be in the 15-20 percent range.)
Companies not supporting active community involvement programs point outthat, apart from meeting public needs through core activities, their profits providethe savings and income of retirees and other investors. While these companies maycontribute to the community through philanthropy and as a by-product of productpromotion such as through ‘cause related marketing’; they regard further structuredactivity as an unjustified cost. They do not see themselves as necessarily competentto assume additional roles in the community, and are suspicious of being asked toaccept a transfer of responsibility in areas traditionally served by government.
The Business Case for Community Involvement
A minimum condition for any concept of good corporate citizenship is the ethicalpursuit of a company’s core economic mission while acknowledging the legitimate interests and expectations of stakeholders. Community involvement expands the definition of good corporate citizenship to include contributing money, time, products, services, leadership or other resources to the community in which the company operates. These resources primarily meet social and economic needs in the community.They also strengthen the link between business objectives and the life of thecommunity.
The priority benefits sought by companies from community involvement are anenhanced reputation, improved community relationships, and positive effects onemployee morale. Across all industry sectors, companies also regard community involvement as an important symbol, particularly for employees, of their ethos and corporate direction. For most, these benefits are credible and rational business out-comes that serve the interest of the business and its shareholders.
Perceptions of benefit vary among business sectors. Resource companies empha-sise securing from community and government the ‘licence to operate’. The retail and the service sectors, on the other hand, see ‘customer good will’ and ‘marketaccess’ as more compelling benefits. Medium size manufacturing located in a well–established industrial zone may not perceive either of these benefits nor feel any additional pressure to engage with the community.
Interestingly, no sector regarded ‘investor attraction’ as a particularly significantbenefit of community involvement. This runs counter to an emerging trend in North America where companies are rated on these activities for the purpose of advisinginvestors about companies with socially responsible attributes.
Patterns of Involvement
Identifying the patterns of community involvement programs, and certainly measuring them, requires agreed definitions of ‘community involvement’, ‘sponsorships’ or‘marketing’. Such definitions have always been difficult to arrive at. Similarly, estimating the total expenditure by companies, including the value of ‘in kind’ resources, executive time or costs for publicising community activities has been near to impossible. One estimate of business support for non-profit organisations has pu tthe annual figure at around $1.8 billion and business sponsorships account for around $467 million, totalling around $2.3 billion in 1996. However, because of definitional and measurement problems this number needs to be interpreted with caution. It is also likely to underestimate total corporate community involvement as it excludes in kind support and contributions made directly to the community rather than channelled through non-profit organisations.
Within these constraints, this study estimated about one third of corporate community funds goes to sporting and cultural sponsorships that cultivate community involvement and serve marketing purposes. Community participation activities,philanthropic donations and community business partnerships each attracts approximately 16 per cent of corporate community funds.
Community involvement activities range very widely and are clearly a source of pride for companies. They include locally directed programs such as partnershipswith local education and training institutions and construction of community recreational facilities. Activities also embrace significant social welfare programs such asassistance with the homeless and socially dislocated, management and infrastructure support for voluntary helpers with the sick and elderly; and assistance with young unemployed people. Support is also provided to culture and the arts, often with a regional emphasis. Others assist in more integrated regional development initiatives where support is provided for communities to evaluate their needs and local leaders are supported in economic and social development.
Some companies are specialising more in environmental projects or education assistance, for example, while other programs spread across numerous stakeholders and themes. Some have retained an arms length approach to providing assistance,perhaps using an intermediary to allocate resources on their behalf. Others consider partnerships and alliances with community bodies are more productive and many intend to expand this way of operating.
Business Strategy and Management
Perhaps the most important finding of this study was that some companies are reflecting more deeply than in the past on the business benefits that flow from community involvement. They are also drawing on more internal and external expertise and adopting more formal approaches to program development and delivery and this is expected to spread more widely. For many, this has been a development of the past five years. Companies, however, vary in the quality of their approach and a comparatively small proportion – around 15-20 percent – would nominate their programs as exemplary in that they gain full business benefit from their community involvement. The study has concluded that, given the attention that is currently directed at lifting performance in this area, the proportion of companies in this category will grow dramatically over the next few years.
Improvement in quality and enhanced business results will come from the increasing use of strategic planning and business management disciplines. Many companies define objectives for community involvement and select the most constructive activity for the community and for the company. Measurement and reporting of business and community outcomes is also the focus of attention. While most say they are ‘not very accomplished in this area’, more companies expect to embrace techniques such as triple bottom line reporting in the future. One immediate consequence of adopting more concentrated business planning in community involvement is that companies are reviewing the level of staffing expertise they need both to plan and manage programs strategically.
In all of this, companies appear to be motivated by the need to respond to rising community expectations as well as the need to demonstrate the business case more effectively.
Strategic management of community involvement brings into play the particular features of industry sectors. For example, ‘cause related’ marketing combines community needs with marketing strategies and is therefore of considerable interest to retail companies looking for innovative brand differentiation and market access.Engagements are sought that align the brand or the company with particular characteristics or stakeholders – computer literacy with information technology companies and children’s welfare with companies producing children’s products.
Community relations programs, including forums for stakeholder dialogue, are valued by companies whose operations are physically located in a community and where stakeholder support is needed for longer–term development. Utilities and telecommunication companies also engage with local communities, local businesses and special interest groups. Some see that assisting in building local infrastructure has a strategic benefit in that a robust local economy and a cohesive community are important for business to flourish there.
Vision for the Future
In the future, most companies expect to see greater strategic emphasis on the role of employees in corporate community involvement. Many CEOs anticipate employee activities will almost double. Securing employees’ support or involving them directly appears central to some companies’ motivation for community involvement. Involvement improves employee morale, helps teamwork and broadens management perspective when volunteer employees and managers come into contact with locations, interests and social groups with whom they do not routinely engage. Companies also regard community involvement as contributing to their reputationas the ‘employer of choice.’
A few companies take this perspective further and believe their organisations will gain from thinking of the company as part of the community, not separate from it, and as a social institution in its own right. For a business to be sustainable, theyargue that it needs to be deeply engaged with and responsive to consumer attitudes,community expectations and employee preferences. Engaging employees in com-munity involvement programs is only one small part of this endeavour and it wouldbe unwise to overstate its impact. Nevertheless, some companies value employee engagement and support in community involvement as a contribution to the wellbeing of their organisation and the sustainability of their business.
The future community involvement activity profile for Australian business will include, in addition to activities that engage employees, more partnerships and alliances with community groups and more opportunities for dialogue with the community. In order to gain greater benefits and impact this will mean a narrower spread of activities with fewer partners, and projects that are conducted over a longer period of time. There may not be a greater allocation of financial resources, but smarter use of existing resources, more in–kind support and leveraging of existing infrastructure. Intermediaries, either groups or systems, operating between companies and community bodies to facilitate allocation of resources, may well grow in importance.
These trends have implications for those community bodies that traditionally seek corporate support. Some areas of social concern may not easily align with the goals of the business, with the result that community groups may miss out on support as corporate community involvement becomes more strategically linked to business outcomes and longer–term partnerships become the preferred vehicle.
As arms length ‘cheque-book’ support gives way to these deeper relationships, greater attention will be given to mutual benefit and mutual obligations will be negotiated carefully and built into contractual relationships between partners. Community organisations will need to present the ‘value proposition’ for their activities when seeking support from business. Companies will also be seeking improved measurement and evaluation techniques to assess the value of their contributions and benefits to their business. As well, some companies may prefer to engage directly with audiences or stakeholders rather than use a community group as the conduit for their community activities.
Expanded Social Expectations of Business
The study found that the rise of community and government interest in expanding corporate community involvement is best understood as part of a wider and changing set of social expectations of business. Many aspects of public policy are changing as governments throughout the developed world reconceive how public needs canbe met. This includes the role that business, as an important social institution, should play in this transition. Further, communities themselves are transforming the meaning of democracy, seeking to have their voice heard on issues that directly concern them and expecting increased opportunities for involvement in matters that affect their lives.
The changed business environment also has an impact on the social role of business. Business competitiveness in a global market is increasingly mediated by information technology. Standards and expectations in one part of the world are rapidly applied elsewhere and affect companies’ intangible assets such as reputation and employee commitment.
This study has shown that Australian business has been increasingly active in recent years in considering its role in the community. Companies expect community involvement and stakeholder engagement to intensify over the next five years. There was a strong view, expressed by survey respondents, that the Australian public and government do not appear to understand the extent and depth of current activities.
Nevertheless, while business is embracing the discussion of social responsibility and community involvement it is also sensitive to the need to achieve a balance among all its roles. Achieving competitiveness in the global market place, embracing information technology and the knowledge economy and meeting social and community expectations whether in Australia or globally are all challenging tasks. Business needs to give its full attention to its primary stakeholders, in particular to provide returns to investors whose resources are being used and whose support it is necessary to retain. Its first responsibility is to undertake its core mission ethicallyand responsibly. From this position, the challenge is to find the most productive approach to community involvement – one that meets business imperatives and also aligns with the Australian government and community context.
The chapters of the study are as follows:
Chapter one is a discussion of the broad context in which Australian business is being asked to take a greater role in meeting social needs. The role of government is transforming throughout developed economies, including in Australia; people are seeking more involvement in their communities; companies are reconsidering how they relate to employees as they build high performance workplaces; and the global knowledge economy is transforming the nature, flow and use of information. The chapter also covers the key concepts that are used to describe business activity in this area, concepts such as social responsibility, enlightened self-interest, stakeholder relations, and the firm as a citizen. It refers to a number of similar studies thatexplore the benefits for business of community involvement.
Chapter two discusses the results from this survey of large Australian companies on their community involvement activities. It examines companies’ rationale for involvement, the business benefits they experience, the nature of the activities and their management, and the trends and challenges for the future.
Chapter three explores the trend in companies to adopt a more strategic approach to planning and managing corporate community involvement. Drawing on case studies and interviews with companies, it covers setting objectives and selecting a theme or focus. It also illustrates how leading companies are increasingly directing their attention to achieving business outcomes.
Chapter four explores the main vehicles or models that leading companies have established for community involvement programs. Along with more strategic planning, there is a need to select or construct the most productive way to deliver a program. Forming longer-term partnerships, alliances and other targeted structures where the respective parties work to meet mutually agreed goals would seem to be a preferred model and one that will expand in popularity.
Chapter five looks more closely at the theme of employee involvement. While it isnot necessarily a common element throughout all companies in this study, there was sufficient attention given to the actual and potential benefits of employee involvement to warrant a separate discussion. Some companies see the employee perspective and ways to enhance employee support as a core feature of how they meet social responsibilities.
Chapter six examines the measurement and reporting techniques being adopted in companies. Measurement of community involvement in terms of both business outcomes and the community is important in the minds of many companies, but i tis not necessarily easy to do. There is a convergence with broader measurement techniques such as reputation mapping and triple bottom line reporting, which includes a social audit.