You can't manage what you can't measure
Good, profitable business and CSR are not mutually exclusive, but there are enough good reasons for making social investment a key part of corporate planning and spending.
This makes auditing CSR activities a must, if only to ensure that investments made on community activities contribute to the company's strategic goals, competitive advantage and bottom lines. Additionally, CSR spend audits can be used to justify long-term investment on socio-civic projects.
Unfortunately, CSR audit is an uncommon practice in the region, even for multinational companies with an established tradition of corporate giving. Ford Middle East is an example of a company that has been actively involved with corporate citizenship programmes since it started operations here, supporting grassroots level and professional initiatives in sports, career development, and conservation and environmental awareness.
In the GCC and Levant countries, $520,000 has been granted so far to about 70 worthy environmental projects from around the nine participating countries. These grants have helped local small-scale projects initiated by individuals, non-profit making groups and NGOs to be completed and expanded.
However, despite the existence of these highly commendable projects, Ford Middle East admits there is no monitoring or audit system in place. In most projects, where collaboration with partner NGOs is involved, project reports by the partner organisations are the only feedback and evaluation mechanisms corporate donors have about their social investment.
It is a good thing to give, but corporate donors must also think why they are making the investment. Asking this question does not make the donation any less charitable. Aligning social investment with sound corporate strategy is in fact good CSR practice, as it helps ensure the CSR activity can be justified, and therefore sustained over the long-term.
When asked about how Ford Middle East's CSR programmess have created an impact, Sue Nigoghossian, manager, Brand Communications & Public Affairs, Ford Middle East said: "With reference to the Ford Environmental Grants, this is the sixth year that the programme runs in the region, and it currently enjoys increasing popularity across the Middle East. The grants receive increasing numbers of entries year on year, positive word of mouth, and most of all, the support of leading environmentalists and senior academic personalities from around the region who serve as members of the independent panel of judges."
Sadly, many stewards of CSR practice in the region are still trapped in the CSR-as-a-publicity tool aspect of CSR, and this could explain, at least in part, why audit initiatives are not being aggressively pursued. Here, the only measure is the press clippings about the tangible aspects of the CSR activity.
But there are other, more important aspects that need to be measured: impact branding is one, ROI is another. In marketing practice, CSR initiatives are labelled cause-related marketing, which is increasingly being used by companies to help build their brands. In the US, among the more popular and successful companies which implemented CSR-driven branding activities include Avon, The Body Shop, and Ben & Jerry's, among others.
Numerous studies have shown that there is a direct correlation between CSR and the ability to attract and retain customers. Customer choice has traditionally been driven by price, quality, appearance, safety, convenience, and accessibility. However, increasingly other value-based criteria are influencing purchasing decisions. In the UAE, the Dubai Shopping Malls Group has made the Holy Month of Ramadan a platform to enhance each mall's CSR initiatives while simultaneously aiming to drive sales.
As with any investment, funds devoted to CSR programmes must be measured for impact. The money could have been used for product development or a promotional incentive, either which could have done the company a lot of good. How do we measure the impact of a donation to a charitable institution? The parameters will change from one cause to another, but some system should be set in place to help determine the impact of the CSR initiative.
"How many people benefited from the donation?" is a always good starting point. In advertising reach, the value of the media space is determined by, among others, the number of people it reaches.
But there is also the question of qualitative impact. Mashreqbank's equipment donation to an organisation looking after special-needs children is a good example. How did the refurbishment of the art room contribute to enhancing the artistic, even social skills of the children?
In addition to looking externally for ways to measure CSR impact, it is also important to look at how the CSR activity is generating a lot of goodwill internally. Employee recruitment, retention, and morale are among the strongest business reasons for corporations to embrace and integrate CSR into their organisations. Numerous research studies that evaluate the impact that CSR has on employee recruitment and retention offer the following data.
Morale, motivation, innovation, and creativity are all improved, as are productivity and satisfaction levels, by providing the opportunity for people to work for organisations that not only support their career or professional interests but also provide much deeper meaning in their lives.
Despite the absence of a CSR system - which need not be complicated, by the way - Ford Middle East is proud of the success its CSR programmes have achieved. Nigoghossian says, "Our environmental grants programme has been going on for six years and has achieved a reputable status in the region in terms of raising the public's awareness of and involvement in environmental issues. Because of this, Ford is seen as an example of how private sector support can be mobilised for the good of the community."
Niall McLoughlin, regional head of corporate affairs at Standard Chartered, sees positive signs for auditing among regional players.
"Regional companies are catching on however," he argues. "They're understanding that CSR is not just about getting involved in any charity. That's just one aspect.
"It's also about being conscientious as to how the resources you use, and how your company and the products/offerings affect the community. They are also becoming aware that CSR is an important aspect of their planning and that budget should be allocated for it, keeping in mind of course that you need to get value out of any would-be successful CSR programme. It is about showing best practice in the way you do business as well. The question you must as throughout is 'are you responsible?'"
Killing me softly
Even the makers of harmful products can benefit from social responsibility
If there is any product in the market that has come heavily under fire for its potentially harmful side effects, it must be the cigarette. Sure, car companies have lost legal battles and suffered losses due to recalls, while oil companies have also been primary targets for environmentalists and have been on the losing side of class action suits all over the world.
But tobacco companies have been among the most badly hurt, losing well-documented legal battles involving billions of dollars in damages. The high-profile nature of such cases has only added to their impact. Worse, government restrictions and private sector initiatives in many countries have banned smoking in public and private places, casting a dark cloud on the industry's future prospects. Even the advertising industry pulled the rug on tobacco advertising in parts of Europe. Similar action may happen in the rest of the world.
"Some people question whether tobacco and responsibility can go together," says Alexander Lioutyi, director of Corporate & Regulatory Affairs, British American Tobacco (BAT) in Middle East and North Africa. "We believe that the risky nature of our products makes it all the more important that we manage our business responsibly.
"We think many governments and other stakeholders would prefer that our industry is run by accountable companies operating responsibly."
Corporate responsibility could mean a lot of things. Truthful advertising is one; accurate reporting of the company's financial condition is another. To many, however, corporate responsibility means social responsibility.
With the risk of smoking acknowledged, to some, the more responsible thing would be to stop operating altogether. But smoking is not illegal, just frowned upon. Critics might not like BAT's end product, but they can't complain about the way the company operates.
"Whether somebody likes it or not, governments, societies and companies must address the best ways of ensuring responsible management of tobacco products, which millions of adults, balancing pleasure and risk, are likely to go on consuming.
"We are a legal industry and need to be allowed to address any health or more general social concerns about our product, rather than being simply demonised. We don't know all the answers, and we don't claim we can get everything right every time. But we do believe if all parties can listen and engage, there are real opportunities for finding workable solutions. We offer an open mind, knowledge of our product and its science, support for balanced regulation, and over a century's experience of operating in diverse cultures," explains Lioutyi.
Here, CSR plays a part. BAT takes its CSR committments seriously. It implements a variety of programmes and activities across the globe. Generally, its CSR activities are grouped into the following categories: Youth Smoking Prevention (YSP), Sustainable Development, Economic Empowerment, Tertiary Education, Environment, Health & Safety, Responsible Tobacco Production (including eliminating child labour), and Biodiversity. Globally, BAT has donated 14.6 million for community and charitable purposes.
Recently BAT started what is called YSP-City campaign in Aqaba, Jordan, where jointly with the Aqaba Special Economic Zone Authority (ASEZA). It conducts educational advertising to ward off underage people from smoking. BAT is also actively working with its trade partners in Aqaba to improve controls on underage access to cigarettes by asking for identification from suspected minors.
Lioutyi says "The campaign has had quite a big response and we were very happy to see Jordan's Minister of Health as well as other Ministers and officials at its launch in Aqaba earlier this year."
Through independent objective recognition of its activites, BAT hopes to be recognised as a responsible company. It has, for example, been selected once again as an index component for both the 2006 Dow Jones Sustainability World Index (DJSI World) and the 2006 Dow Jones STOXX Sustainability Index (DJSI STOXX). Launched in 1999, the DJSI track the performance of the leading sustainability-driven companies worldwide, providing a useful benchmark for companies to evaluate their CSR programmes.
All of the BAT Group companies are expected to operate responsibly and are required not to compromise standards for the sake of financial results. To critics of the smoking industry, BAT is already viewed as treading on dangerous grounds. Sincerity in its corporate social responsibility programmes is an absolute must.
BAT's success in crystalising its CSR commitment is not an isolated effort. It works closely with non-government organisations to mobilise collaborative effort to address smoking-related issue. Working together with other groups increases stakeholdership of an advocacy, giving it a wider support-base and a better chance of success.
"Everybody in our company in some way owns CSR as everybody needs to act responsibly and in line with today's society's expectations. Responsibility is a key pillar of our business strategy," ends Lioutyi.
The vision business
Two examples of how to tie the business function to the social benefit
In one of the more commercially-relevant acts of CSR Nokia earlier this year challenged leading photographers from the region to produce fine art photography using its Nokia N90 model. The results were then auctioned by Christies of London, in aid of Foresight, an organization helping to improve the lives of blind and partially sighted people. The N90 is Nokia's most advanced camera-phone, with the lens supplied by specialists Carl Zeiss. HP got in on the act by printing the resulting work off its printers.
In a similar vein, though less product-related, Standard Chartered has been running its 'Seeing is Believing' campaign since 2003. The original idea had been was to give eyesight to one person for every Standard Chartered employee, engaging staff and setting a relevant target. There were 28,000 employees at the time, and with the procedure costing $30, it meant $840,000 needed to be raised.
The company collected $1.76 million in 2003 and has since upped its goal to help 1 million people by 2007. This year, Standard Chartered has already committed $2 million just from the company. The rest will be from the employees, customers, the public, from fund-raising, donations and pledges.
While Standard Chartered insists the programme is also about building awareness of the disease and not just raising funds, one of the biggest benefits is the uptake by all levels of staff. The programme also ties in with some of the company's other marketing activities: the Dubai Marathon on 6 January - sponsored by the bank - will include a 3km charity run dedicated for the programme.
Niall McLoughlin, regional head of corporate affairs, says, while regional companies have successfully instigated CSR programmes, "they tend to be mostly humble and discreet about their contributions".
"International entities that can take a cause and leverage it," he explains. "They have the experience in other regions and have the support and networking system that regional companies might not have."
Last year, money was channelled into projects like maintaining and building hospitals in Nairobi, Singapore, Hong Kong and Pakistan.
A legal whitewash
Marketers can step in ahead of the legislators
The speed of development in parts of the region often allows companies to pre-empt government legislation with voluntary action. Cigarette brands have been the most obvious candidates, working together to regulate communications boundaries before the law-makers crack down. Other sectors are following suit.
In October, Dulux, part of leading international paint business ICI Paints, called for greater government protection for paint buyers. It is a message that generates sympathetic press coverage while positioning the brand as a pillar of the community.
Tony Myers, managing director, Exports and Licensing, ICI Paints, says there is no current UAE national legislation in place for paint manufacturers to regulate the composition of paint or driving environmental concerns. However, Al Gurg Leigh's Paints (AGLP), manufactures Dulux paints adhering to ICI Paint's charter for safety, health and environment (SHE) performance.
Globally, ICI Dulux Paints works in accordance with the CHIP Regulation 1994, which stresses the usage levels of restricted and banned materials in the production
of paints.
"Environmental concerns should play a more significant role for businesses and retail customers when selecting a paint product," he says.
Due to commercial reasons many local paint producers do not make an effort to source eco-friendly ingredients, thereby producing cheaper and more hazardous paints. This is a great cause of concern because many of the ingredients at high levels can be dangerous, particularly lead. In some cases, high levels of lead exposure, can lead to kidney damage or harm to the central nervous system that can cause convulsions, coma or even death.
Lead poisoning particularly comes into the spotlight with children. According to the US Department of Housing and Urban Development, nearly one million children in the US under six have blood lead levels high enough to impair their ability to think, concentrate and learn. In children, lead poisoning can reduce IQ, cause learning disabilities and impair hearing.
According to report by International Union of Operating Engineers, indoor air pollution is estimated to be two to five times worse than outdoor air pollution. The U.S. Department of Labour Occupational Safety and Health Administration (OSHA) estimates some 21.2 million Americans are working in 1.4 million buildings teeming with indoor air pollution that can lead to health problems such as allergy, nausea and fatigue. One of the many causes of indoor air pollution is the volatile organic chemicals (VOCs) which can be found in many paints.
"It is for these reasons that safety, health and environmental care are central to our business," says Philip Mathew, general manager, AGLP.
"For over three decades, ICI Dulux has remained the only paints company producing paints with no added mercury, lead and chromium containing compounds."
AGLP has recently completed projects for the Modern High School and Westminster School in Dubai. Moreover, they have worked on many major healthcare facilities including Zulekha Hospital, American Hospital and the Wellcare Hospital. In the UAE, several bodies like Ministry of Public Works and Housing have recognized and commended AGLP's commitment to SHE issues.
"Dulux paints will continue to set an example for other paint manufacturers by strictly using environment friendly raw materials, even where regulations have not come into force. Concern for safety, health and environment is what our business is determined to continuously build upon," adds Mathew.
There's value in rubbish
Dell gets busy collecting unwanted computers
In the past 12 months, Dell exceeded its recycled paper content goal and collected more than 175 tons of unwanted computers at recycling events around the world. In the first six months of 2005, the company also accelerated efforts to recycle, reuse or resell non-hazardous wastes from manufacturing and other operations.
"Part of being a great global company is being environmentally responsible," said Tod Arbogast, Dell's sustainable business manager, speaking on America Recycles Day, mid-November.
"America Recycles Day provides an opportunity for us to recognize our employees, suppliers and stakeholders who have helped Dell increase usage of recycled paper, offer communities no-cost options for recycling computers and increase the volume of waste material we recycle in our own operations."
Dell established a Forest Products Stewardship Model in October 2004 that documented its paper-usage practices and established paper sourcing and recycling goals.
One year into the programme, Dell has exceeded its initial target by achieving 90% recycled paper content in the company's small and medium business catalogue, using Forest Stewardship Council-certified paper sources for the majority of the catalog. In addition, Dell has increased its usage of post-consumer recycled content for catalog inserts to almost 15% and achieved about 30% post-consumer recycled content for office paper used companywide.
"The fact that Dell has exceeded its original environmental goals is proof positive that when a company chooses to focus on the environment, it can have a real impact," says Todd Paglia, executive director of ForestEthics. "We applaud Dell's leadership example and the collaborative process that the company has taken in developing its environmental standards. Dell has raised the bar for the catalog industry and its success is a rallying cry to its competitors."
Dell conducted community computer recycling events earlier this year in the UK, Germany, Australia, and at two locations in the US. Dell employees volunteered at these events and helped collect more than 175 tons of unwanted computers, keeping the equipment from going to landfills.
Dell also expanded its partnership with Goodwill Industries by establishing an ongoing computer drop-off program for donation and recycling in the San Francisco Bay area and the State of Michigan. The partnership, called Reconnect, began with a pilot program in October 2004 in Austin, Texas, and is expected to gain momentum across the US.
"Dell has demonstrated that public-private partnerships are a productive, effective way to educate both consumers and businesses about the importance of responsible disposal of computer equipment," said Kate Krebs, executive director of the National Recycling Coalition.
In the first half of 2005, Dell recycled, reused or resold more than 45,000 tons of cardboard, plastics, pallets, paper and related materials generated in its manufacturing and other operations. The volume of recycled, reused or resold material represents more than 90% of the total non-hazardous waste generated at Dell facilities in the first half of the year, exceeding the 85% recycle/reuse rate achieved last year.
All Dell facilities recycle or reuse a variety of materials, including cardboard, office paper, plastics, foams, metals, batteries, disks, aluminum cans, bottles and pallets. In order to reduce the volume of material for disposal, Dell has continued to refine its processes for collection and recycling of waste materials, working with suppliers to reduce or optimize packaging associated with incoming parts and materials and training employees to minimize and properly dispose of wastes.
Three percent of the company's annual budget - that's the baseline allocation for corporate social responsibility (CSR) programmes in many corporations. The bigger ones allocate as much as five percent, possibly even more especially if the owner happens to advocate or is passionate about a particular cause.
Actual budgets vary, but can be as high as multi-million grants spread all over the world, cutting across various advocacies. However, the trend of late has been to focus on advocacies that resonate closely with the company's vision or operations. With the money involved and the potential impact on corporate image, managing a company's CSR activities has become an important function.
While there are some who engage in mere dole-outs and occasional donations which are easier to manage, others take their CSR commitments seriously enough to appoint or set up a dedicated department, in some even a different organization to manage their CSR programmes.
In many smaller organisations, CSR is confined within the executive office. This is especially true when the type of CSR activity involved is purely donation, decided largely by the chief executive. In most cases, these types of donations are not even monitored or evaluated, but feedback from the beneficiary is usually appreciated, especially if an "upgrade" is needed.
Because CSR programmes are designed to generate goodwill for the company, the PR department has also been traditionally designated as the corporate steward for managing its socio-civic activities. PR is, of course, known by many names - public affairs, corporate communications, corporate affairs, and external relations, among others.
An increasing number of companies are establishing separate foundations to handle their CSR programmes. Private foundations have also become en vogue, and though they are named after the company's chief executive, the foundation remains tied to the corporation. This approach is especially suitable for organisations with more money to share - this means tighter screening and qualification for grants, as well as more thorough evaluation and monitoring procedures.
Ultimately, the CSR function has to be owned and embraced by anyone and everyone in the organisation. Ask a Unicef employee what he or she does, and there's a good chance you will get this simple, yet inspiring reply: "I am working to achieve a better future for children all over the world."
© Gulf Marketing Review 2005
