In recent years Trialogue has broadened the focus of its knowledge-sharing platforms, including the Handbook and its annual conference, from corporate social investment to the more holistic role of business as an integral part of society. To some extent this shift mirrors the trajectory of a maturing approach to corporate social responsibility in South Africa, with many companies looking well beyond their CSI departments to affect meaningful change in society and some interrogating how their management strategies can address social issues.
Despite considerable advancement in the sector, questions remain about the parameters and overlaps of responsible business concepts. This article unpacks commonly used terms and is intended to help companies map their interventions and to support potential implementing partners to better understand the various responsible business touchpoints to which they can appeal.
Responsible business definitions
|Inclusive capitalism||An alternative form of capitalism that uses market-based solutions to address poverty and inequality.|
|Responsible business||All of the activities and investments aimed at enhancing the social and/or environmental impact of the business. These can be internal to the business (e.g. products or services offered, employee wellness or environmental initiatives) or external to the business, including CSI and SED.|
|Shared value||A management strategy focused on companies creating measurable business value by identifying and addressing social problems that intersect with their business. CSI and SED can contribute to the shared value strategy if they create business value as well as social value.|
|Corporate social responsibility (CSR)||Activities and investments aimed at enhancing the social impact of the business. These can be internal (e.g. employee wellness initiatives, products or services offered) or external, including CSI and SED.|
|Corporate social investment (CSI)||Investments of money, time, products and/or services in projects external to the company and with a primarily developmental intent.|
|Broad-Based Black Economic Empowerment (BBBEE)||This legislative framework aims to ensure that the economy is structured to enable meaningful participation of the majority of its citizens and to create capacity within the broader economic landscape at all levels; through|
skills development, employment equity, socioeconomic development, preferential procurement, enterprise development, promoting the entry of black entrepreneurs into the mainstream of economic activity, and the advancement of co-operatives.
|Socioeconomic development (SED)||Investments of money, time, products and/or services in projects external to the company and with a primarily economic developmental intent. While similar to CSI, in order to claim SED points on a BBBEE Scorecard,|
at least 75% of beneficiaries must be black.
|Local economic development (LED)||Investments of money, time, products and/or services in projects external to the company and with a primarily community-focused economic developmental intent.|
Responsible business can propel societal development
Responsible business must permeate all aspects of a company, from ethical operations and value chains, to quality and accessible products and services, responsible marketing, taxpaying, fair employment practices (including diversity, equitable pay and working conditions), respect for human rights and sustainable environmental practice.
There are a plethora of frameworks, codes and standards that coerce business towards greater transparency and societal responsibility. The Global Reporting Initiative Standards, the International Integrated Reporting Council, the King IV Report on Corporate Governance for South Africa, and the FTSE4Good Index refer to concepts such as materiality, stakeholder centricity, and value addition via the six capitals (financial, manufactured, intellectual, human, social and relationship, and natural capital), etc.
Despite significant annual effort and resource dedicated to integrated reporting, we continue to see corporate failures, bloated executive pay, destruction of value and neglect of social and environmental responsibilities. In part, this could be attributed to short- term investor performance horizons, inappropriate reward structures, directors who do not hold executives to account and, at times, blatant fraud and greed that so often go unpunished. While the codes, standards and focus on responsible business are making a positive difference, the pace of change is too slow to make the necessary impact on the socioeconomic pressures faced.
Today’s societal challenges are complex – globally and most definitely in South Africa. Business recognises that a disruptive and unstable socioeconomic environment is not conducive to good business and while some companies are resigned to this situation, others are adopting a more outwardly-focused and visionary response. Such response can take on a number of forms. The most obvious and yet hugely significant contribution is realised when the core business exists or orientates itself to addressing societal needs.
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 shared value proposition works well when the core business links neatly to societal benefit. However, this is not always the case and shared value alone will inevitably neglect certain developmental areas. As a result, there remains a critical role for business to address causes and issues that fall outside of their direct value chain or immediate interest. An effective way of doing this is through a ‘corporate voice’ (i.e. corporates advocating for a particular issue or cause). In the past, companies were reticent about being openly critical of government, but this is changing.
In South Africa at present, the stakes for business to secure a stable political environment and policy certainty are so high that there is almost no choice but to speak out individually, through a sector body or through a big business grouping. Our CEOs, if they choose, can be powerful advocates for change.
Business can also act collectively and collaboratively with government and other stakeholders to effect change. Over the years we have seen the establishment of initiatives such as the Joint Education Trust and the Business Trust – collective business contributions to tackle difficult social challenges. The YES (Youth Employment Service) initiative is an example of a current collective business response, in partnership with government, to expose unemployed youth to the world of work. What is unique about this initiative is that structures exist that reward corporate participants for supporting the programme (for instance through a BBBEE incentive score). This is a form of collective shared value which shifts the response from one of societal obligation to mutual vested interest.
Creating shared value vs 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.
Corporate social responsibility (CSR) vs corporate social investment (CSI)
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. 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 Award has recognised projects that exemplify best practice.
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.
Sector transformation charters
Each industry is required to align their individual Sector Transformation Charter with the overarching Amended Codes of Good Practice, setting social spending targets as a licence-to-operate requirement. Sector Charters gazetted under Section 9(1) of the BBBEE Codes to date include the Agri-BEE Charter; the Financial Sector Charter; the Information and Communication Technology (ICT) Charter; the Property Sector Charter; the Chartered Accountancy Sector Code; the Integrated Transport Sector Codes; the Marketing, Advertising and Communication Sector Code; and the Tourism Sector Code.
These are not easily comparable, with some industries operating within stricter measures and criteria than others.
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.