As pressure mounts for companies to demonstrate responsible business practices, corporate America is embracing corporate social responsibility (CSR) as an integrated dimension of its overall operations. As CSR and philanthropy become increasingly intertwined, the line between them is blurring. What is the role of philanthropy in CSR? How can one leverage the other to achieve greater social impact? How can a small business increase the impact of their philanthropy without increasing their charitable contribution budget?

Corporate social responsibility (CSR) isn’t new to companies and many of the largest corporations have been spearheading community initiatives since the great depression. A simple google search will show you that some of America’s most hallowed institutions were giving back to the community long before the term CSR found its way into boardroom dictionaries.

In those days philanthropy was the biggest driver of community programs and perhaps the only other reason companies would these programs was the publicity it garnered them.

In the past two decades, however, the whole concept of giving back has undergone a sea change, both in terms of the scope of activity and for the different set of reasons that drive CSR. Companies are no longer doing it simply to grab headlines or for the “feel-good” factor.

Today, social responsibility is more about how companies align their values and move towards a social cause involving the investors, suppliers, regulators, employees and the society as a whole. Simply put, CSR today is basically linked to the broader issue of corporate governance.

How companies respond

There aren’t any standard approaches to social responsibility and the model a company adopts will depend largely on the kind of objectives it seeks to achieve.

A company entering a new market, for instance, will regard CSR as an image-building strategy in its bid to minimize the risk associated with investing in a geography or product line, and to capture a big slice of the market. Often, it will include its CSR in its advertising and align it to its social marketing activities. Many businesses use sponsorships with nonprofit organizations to introduce themselves in new markets.

Companies whose ads say a part of the sales price of their products will go to charity fall in this category.

At the next level, there are companies that are fairly well established, but for whom long-term sustainability of business is the prime objective. Their chief concerns typically are security of production inputs and stability of the socio-political environment. The second concern is accentuated if the company is operating in a new territory or country.

Another school of corporate thought dwells on all stakeholders of the company — shareholders, employees, customers, vendors, social organizations, regulators and the communities in which it operates — and their right to know. This school believes that an enterprise doesn’t exist merely for engaging in a profitable business, but also assumes the role of a public institution. The CSR thrust of such an entity is a high degree of accountability and transparency. It places special emphasis on social and environmental investment.

Not for small businesses?

Unlike large corporations many small to medium sized businesses undervalue the impact of CSR and tend to operate in the area of pure philanthropy. These businesses fail to realize, until tax season, how much they have donated to various charities and how focusing those resources could improve their impact on sales and community good will.

Let’s look at an example of a typical family owned restaurant. These businesses generally have a limited marketing budget and rely heavily on word-of-mouth advertising. During the course of a year many disparate organizations approach this business for support. Even if the business owner only provides gift certificates for meals, there is a good chance that by the end of the year they will add up to a tidy sum. While this is good for a tax write-off, it’s not going to have a significant effect on their sales.

The reason for this is that they are simply spread to thin, they have given to so many causes that they are not clearly identified with any of them.

Now let’s take this same example, but this time let’s add a CSR approach to their philanthropy. Instead of giving to every organization that approaches them, they take some time to identify those areas that are most important to the local community, their employees, and their customers.

Once they have defined what’s important they can identify one or two charities that they will support exclusively. With this concentrated approach they create a deep and lasting relationship with all of the stakeholders and they have a much better story to tell.

To emphasize the difference let’s assume that the typical small business gives $10,000 dollars per year in cash and services. Take that number and divide it among even 30 organizations and you have diluted the impact to $333.33 dollars per cause, not a very impressive number. Take that same $10,000 and divide it among 3 organizations and you get an impressive $3,333.33.

As a small business owner which of these two examples would you be more proud to share with your customers, employees, and the community? This example illustrates clearly that you can significantly improve the impact of your charitable giving without increasing your philanthropic budget.

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Tags: approaches to social responsibility, Best Practices, community initiatives, corporate social responsibility, corporate social responsibility csr, feel good factor, google search, great depression, image building, Marketing, reason companies, responsible business practices, Small Business, Social Responsibility
Posted in Best Practices