This article helps you understand the basics of what corporate social investment (CSI) is and how it differs from corporate social responsibility (CSR). It also covers important concepts related to CSI, such as strategic CSI, shared value, and how CSI relates to socioeconomic development.
What is corporate social investment? Defining corporate social investment
Corporate Social Investment (CSI) refers to company investment in social development, through the provision of cash, services, products, staff time and more.
CSI aims to improve the lives of disadvantaged people across multiple development sectors. It is external to the core function of a business, and is therefore not undertaken to pursue revenue, although there are other benefits to the business.
How does CSI differ from corporate social responsibility (CSR)?
CSR and CSI are often used interchangeably. However, Trialogue defines CSR as an overarching value-based framework that encompasses all social aspects of business operations, ensuring that a company manufactures its products and conducts its business responsibly and ethically. CSI, which forms part of CSR, refers to a company’s financial and non-cash contributions – beyond its commercial operations – to disadvantaged communities and individuals for the purpose of social upliftment and welfare.
CSI tends to have a more strategic philanthropic focus, and emphasises partnerships to achieve specific, measurable outcomes that benefit society. It is also mandated by law: in terms of the Codes of Good Practice of the Broad-Based Black Economic Empowerment Act of 2007, a company’s CSI contribution should be at least 1% of net profit after taxes (NPAT).
While CSI programmes do not operate in isolation of other CSR considerations, CSI is only one way in which companies fulfil their social responsibility obligations and, as such, is only one element of the broader CSR agenda. Nevertheless, in South Africa, CSI has become an important part of this agenda. This is reflected in CSI’s evolution from ad hoc philanthropy to a strategic business consideration.
Recognising the need for business activities to extract a degree of return on investment if they are to be sustained, Trialogue advocates for companies to practice strategic CSI that has significant developmental impact, as well as a positive impact on the business, beyond reputation. Trialogue’s strategic CSI positioning matrix helps companies to plot the developmental and business impact of its CSI projects. This assists in refining CSI strategies and in resource allocation decisions.
While developmental CSI offers beneficial social outcomes, it does not always have significant corporate benefit. Similarly, commercial grantmaking prioritises corporate benefit over social return. Strategic CSI projects deliver a high combination of positive social and business outcomes. Since 2014, the Trialogue Strategic CSI Awards has recognised projects that exemplify best practice.
Creating shared value versus strategic CSI
Creating shared value goes well beyond the notion of CSI, making far greater demands on the business than a negligible percentage contribution of their net profit after tax. While CSI has social and, if done strategically, business benefit, shared value must form part of the business model and strategy, and be driven from the top. Companies create shared value by identifying business opportunities in response to social problems: opening up new markets, tapping into skills and pooling various corporate resources, including research and innovation.
Shared value does not, however, replace a company’s philanthropic responsibility to support welfare causes that cannot be addressed with profit-based solutions.
The King reports on Corporate Governance, among others, have significantly influenced the way businesses approach their societal, environmental and financial responsibilities.
How does CSI relate to SED?
In terms of the BBBEE Codes, there is considerable overlap between CSI and SED. The BBBEE Scorecard requires companies to spend 1% of their net profit after tax on SED initiatives that facilitate sustainable economic inclusion for previously disadvantaged beneficiaries, 75% of whom must be black. SED initiatives, as defined in the Codes, clearly fall within the traditional scope of CSI. However, CSI has a broader ambit that includes areas not directly linked to economic inclusion, such as food security, arts and culture, environment, safety, disaster relief and sporting initiatives.
The Department of Mineral Resources requires mining companies to develop social and labour plans that include local economic development (LED) programmes, which must focus on three objectives at community level: poverty eradication, community upliftment and infrastructure development. These objectives and project activities fall well within the scope of CSI. However, a LED programme must also include measures to address employee wellness, as well as procurement progression plans for suppliers – elements which are not considered to be part of CSI as they fall within the company value chain.
CSI in South Africa
South Africa has a rich history of corporate philanthropy. Companies first began to take socially responsible decisions decades ago, and a global Barclays Wealth survey conducted in 2012 found that, as a proportion of disposable income given to community causes by employed individuals, South Africans were the most generous in the world after Americans.
Trialogue research indicates that companies routinely give above 1%, although growth in CSI expenditure has fluctuated over the years. In 2019, growth was flat in real terms, and in 2020 it there was a decline of 12.7%, reflecting the weak economy.
From a legislative perspective, giving in South Africa is very much related to alleviating past injustices, addressing widespread poverty and inequality, and building a more inclusive society. The empowerment of marginalised individuals and communities is particularly important. From a developmental perspective, the country is highly dependent on CSI and the relationships forged between the public, private and ‘third’ sectors. Although CSI programmes bring considerable financial resources to the table, they also assist with interventions like skills development, skills transfer, mentorship, employee volunteering and more.
Striving for systemic change
The role of business in society is multifaceted, complex and evolving. As CSI becomes more integrated with other business in society programmes and the parameters and overlaps of corporate interventions and contributions to society are increasingly blurred, the achievement of greater social impact is in sight. Efforts to collaborate, with organisations bringing their unique competencies and resources together to achieve a common purpose, may be great in theory and difficult in practice, but is essential if we are to achieve systemic change.