Does Business Really Care?

Jo-Anne Schofield
New Matilda

How do corporates measure up when it comes to community investment and philanthropy? Is there more to it than cynical PR? Jo-Anne Schofield from think tank Catalyst unpacks some new research.

Believe it or not, corporate Australia has a generous side. In 2010, 10 of our biggest public companies donated a massive $513 million to community initiatives.

70 per cent of this amount came from our two mining giants, BHP Billiton and Rio Tinto — an indication of the sheer wealth of our miners, and perhaps of their desire to present a socially responsible face to the community.

Recently, we undertook a comprehensive study which looked at the community investment — or corporate philanthropy — approaches of 12 of our big corporate performers, spanning the banking, resources, manufacturing, retail and services sectors. The report found that BHP lead the pack by contributing one per cent of its pre-tax profit, an amount considered internationally as good practice. Wesfarmers were the most effective firm studied in getting community contributions from other sources, mostly customers and staff. Their efforts resulted in extra funds totalling almost one and a half times their own contribution.

The potential of volunteering also appeared a little unrealised across our sample and only two companies in the group (ANZ and NAB) made significant contributions. The report suggests that volunteering has the potential to provide more than a feel good or team building experience for employees, if programs deliver technical and specialist skills to build the capacity of community organisations.

While half a billion dollars is nothing to be sneezed at, when looking for evidence of what motivates companies to invest in particular areas, or why they donate to one worthy cause over another, our research drew a bit of blank.

Instead we found most companies undertake their community investment activities without a strong framework, strategy or tools to measure the performance, impact or the effectiveness of their approach. Only a handful of the sampled companies published, or had undertaken to develop, a community investment strategy; while company motivation statements veered along a spectrum from altruistic through to business-focused, with most sitting somewhere in the middle. While altruism is highly valued by the community as a motivator for investment, there can be distrust of purely altruistic statements.

In looking at how companies selected the areas they chose to focus their investment on, we found they were guided by a similar mix of approaches. The two resources companies took a local community driven approach which drew on research and consultation to develop programs that met local community needs. Four companies selected areas that aligned with their business need or expertise; and two targeted issues that were important to the company.

The more closely aligned an issue is with the company’s core business, the more likely it is that it will have strong internal and enduring financial support. At the same time, this can lead to pressure within the community sector to tailor programs based on what corporates are prepared to fund.

Recognising the distorting effect that community investment can have on publicly funded services, we were interested to see that four companies made explicit statements that they would not undertake activities in areas under the purview of government. Such statements should be encouraged, and in cases where community investment intersects with government funded areas, companies should ensure they assess the long term impact of their activities on public funding

When it came to measuring the impact of their investment, the approach taken by companies appears in stark contrast to the sort of systematic and hard-edged analysis that typically accompanies more mainstream investment decisions. Despite being leaders in sustainability reporting, only three companies in our sample were found to be measuring the impact of their investment in 2010: BHP, ANZ and NAB.

The study raises a number of areas where the corporate-community investment landscape could be improved. In particular, better disclosure would lead to more targeted philanthropy and potentially enhance the reputation of firms. Only one, Rio Tinto, extensively disclosed recipient organisations and the amounts received.

There’s little doubt that corporate donations can provide a lifeline for cash-strapped community organisations at a time when many are responding to higher demand for their services, often against a backdrop of cuts in public spending. And as well as getting in touch with their warm and fuzzy side, corporates can gain public relations points or, more importantly, develop relationships with communities on whose goodwill their business activities rely.

Above all, there is a need for a much more collaborative approach to developing good community investment models by engaging more broadly with civil society organisations. As with other aspects of corporate social responsibility (which now goes under the modern idiom of ‘sustainability’), Australian companies can learn much from their overseas counterparts about involving workers and communities in creating sustainable enterprises.

In the case of community investment, broader engagement would ensure initiatives are not simply focused on corporate public relations but have a measurable and positive impact for the communities companies set out to support.

The other upside to involving community stakeholders is that it would help appease perceptions that investment is primarily aimed at bolstering a company’s reputation. Such attitudes were confirmed in a survey by the Centre for Corporate Public Affairs which found 90 percent of community organisations in Australia felt PR and marketing benefits were the main reason companies engaged with them.

While community largesse is an important part of this landscape, companies also need to be judged across the full range of their activities. How a firm treats its workers, its approach to supply chain and environmental management, the integrity of internal governance, its relationship with customers and its preparedness to pay taxes and contribute to the social good are all factors that will have a positive (or negative) impact on communities.

Corporate citizenship must be the sum of all these parts, and it appears there is still much work to do before Australian firms can claim such a mantle.

One comment

  1. Maybe I am over cynical but when I went to school many moons ago, we were taught that taxation was the method of attempting to spread the wealth of a nation a little more evenly across the community. Our biggest public companies donated a massive $513 million to community initiatives of which 70% came from our two largest mining companies.
    The point I am making here is that if these two companies paid a more representative and appropriate tax figure then it would be exceedingly more than these “donations” which I beleive are just pacifiers to the government not to legislate for further tax increases.