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The Future of Corporate Responsibility: Innovative, Personal, and Focused

July 27, 2011

Goodbye checkbook philanthropy.

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A large component of corporate responsibility has always been giving back. And companies show no sign of stopping the habit of giving. The Committee Encouraging Corporate Philanthropy (CECP) placed aggregate corporate giving in 2010 around 13 billion dollars. But companies are rethinking how, where, and why they give. The old approach – writing a check and checking out- is being shaken up by a new take on corporate social responsibility (CSR).

I recently had the opportunity to sit down with several knowledgeable CSR professionals in Chicago and New York to chat about their experiences and expectations for the CSR field. The take-away? Corporate social responsibility in the 21st century will be more innovative, personal, and focused than what’s come before.

More and more, companies are giving back through initiatives that leverage their expertise, talent, and intellectual property; that compliment and reinforce their brand; and that view nonprofits as implementation partners – not merely recipients.

I’ve examined notable CSR initiatives in past posts, and here I will once again return to the concept of shared value, as many innovative CSR initiatives reflect this approach. In future posts, I’ll examine how CSR and corporate giving in particular are becoming more personal and focused.

Shared Value

Companies are expanding CSR from reactive – “give back” and “do no harm” – to proactive. They are seeking and finding ways to generate both financial return and broader social benefit, hence the term shared value.

The Stanford Social Innovation Review (SSIR) identifies three primary ways in which companies can create shared value: by reconceiving products and markets, by redefining value in the production chain, and by building supportive industry clusters at the company’s locations. These three buckets capture a broad diversity of activities. For example, eliminating waste in production, delivering essential goods or services to bottom of the pyramid consumers, and transforming a mine from a mechanism of extraction to an engine of local economic development would each fall into one of these categories.

As these examples suggest, companies are no longer doing good by writing a check and leaving implementation to third parties. They are reexamination their own operations to in search of opportunities to generate social value directly. One expert I spoke with suspects there are several reasons for the new approach.

  1. More control over outcomes – Companies are directly involved in both planning and implementation of shared value initiatives. Even if they collaborate with nonprofit partners in the process, a more active seat at the table affords the company greater control over execution.
  2. Demand for greater Accountability – Shareholders, consumers, and the public increasingly demand transparency and more robust CSR reporting. This demand pressures companies to quantify the impact of their activities. Bringing more philanthropic initiatives “in-house,” or cultivating close working relationships with funding recipients,  ensures that metrics of measurement will be considered from the outset of a project. This enables companies to effectively report the impact of the CSR initiative and the social/ financial ROI.
  3. New generation of management – A new generation of corporate leaders does not view the bottom line and social good as inherently opposed. They are actively looking for opportunities to create shared value and are finding them.
  4. Sophisticated consumers – Finally, consumers increasingly regard their purchasing power as yet another tool of social or environmental advocacy. Many of these socially aware consumers are willing to pay some premium for goods and services that are produced humanly, sustainably, and responsibly.

Learn more about the Smarter Cities Challenge

Giving 2.0

Last month, I noted the creative CSR initiatives of Panera Bread, HP, and Nestle – all examples of companies moving beyond giving to integrate corporate responsibility more directly into the fabric of their brand and operations. Another great example is the IBM Smarter Cities Challenge.

Smarter Cities represents corporate giving, make no mistake, but it’s also a shared value initiative – call it corporate giving 2.0. Through the Challenge, IBM will award over $50 million in grants to global cities that are tackling the big challenges of urbanization – transportation, energy, health, sustainability, livability, etc. More importantly, IBM will supplement financial awards with human and intellectual capital. Chosen cities will gain access to IBM talent (IBMers) and intellectual property – IBM’s City Forward tool, which helps cities analyze, compare, and visualize data across systems (an extremely neat site, which I highly recommend exploring).

The value for society is clear. Cities receive badly needed human, financial, and technological resources to tackle one of the 21st Century’s greatest challenges – how to make mass urbanization sustainable productive, safe, and humane. Systems of energy distribution, transportation, education, governance, health, and security all will need to evolve and adapt as the worlds 7 billion people become increasingly urbanized.

The value for IBM is equally authentic. The company has staked its claim on a distinctive issue -urbanization – and in doing so associated its brand with civic innovation and democratization of data (more on that later). This confers real brand and PR benefits. But most importantly, this philanthropic initiative (IBM’s largest) has put its engineers and data products at the heart of whatever solutions are produced as a result. The very process of engaging different urban challenges across the globe may inspire IBM talent to innovate further, and develop new tools and products in response. All of this can only bode well for the long-term relevance of IBM.

In fact, think of the entire project as one giant R&D initiative for IBM. Suddenly $50 million seems like a bargain for goodwill, widespread product adoption, field-testing and research, and social benefit.

In one program, IBM accomplishes several things it would have undertaken regardless. Yet it chose to do so in a way that generates real value for society.

IIC Adds Value

And this brings the conversation home again to Investing In Communities, where this week we announced the upcoming distribution of $42,000 to the nonprofit community. That philanthropy was generated by a single company, which – like IBM – made an intelligent and socially responsible choice. It seized an opportunity to generate social value through standard operations and in doing so generated $42,000 in philanthropy. The difference? This company didn’t actually pay a dime to generate those funds. Intrigued? Then check back in later this week when I profile the event here and recognize the company that made this philanthropy possible.

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