Business in society: let us talk the same language

By Marcus Coetzee and Dr Roger Stewart, November 2008.

The role of business in society is receiving increasing attention. There have recently been many articles on corporate social responsibility, corporate social investment and corporate philanthropy. We have noticed confusing and inconsistent use of these terms. In response, we propose some definitions that we hope will reduce the confusion.

Social Responsibility:

Corporate Social Responsibility (CSR) refers to the good citizenship that is expected of corporations: they are expected to act responsibly with the organisations and people who have an interest in them. This responsibility extends to the environment, both physical and biological, to society and to future generations.

Societies sanction the existence of corporations and provide them with a license to operate within that society. Consequently, companies are corporate citizens with rights and responsibilities. There is a tacit expectation of reciprocity between society and the corporation; there are both tacit and explicit social and economic contracts between society and the corporation. Even though the distinction between these contracts is rapidly becoming blurred, corporate social responsibility is about honoring them.

It is in the rational self-interest of all corporations to be socially responsible. Failure to be a good corporate citizen places the corporation at risk. The approach of a corporation to social responsibility is entrenched in its value system and is manifested in its behaviour.

An example of good CSR is Anglo American’s commitment to reduce the incidence of fatal accidents in its mines and rehabilitate the environment at old mine sites.

Social Investment:

Corporate Social Investment (CSI) is the investment of corporate funds, or other assets, for the primary purpose of achieving social outcomes because there is a business case for the investment.

The primary intention of this investment is to achieve social outcomes. The expectation is a “social return on investment”, which may not always be measurable in economic terms.

While focused on a social return on investment, CSI is intended to enhance a corporation’s reputation, its strategy and possibly lead to preservation or an increase in long-term shareholder value.

An example of good CSI is SABMiller’s project of formalising the informal bars in South Africa’s townships and training their owners and managers in good business practices. Clearly, this is good for the direct beneficiaries, for society and for SABMiller.

CSI is a term that is usually not applied to social purpose organisations because investment of funds for social outcomes is their core business.

Philanthropy:

Philanthropy is an act of benevolence; it is charity, a voluntary donation for the benefit of others with no expectation of benefit to the donor other than, perhaps, the satisfaction of having been benevolent.

While the donor’s primary expectation is social benefit, philanthropy usually enhances the donors’ reputation in society. While philanthropy may be to a donor’s benefit, as with all genuine acts of philanthropy, the primary motivation is benevolence. In order to avoid being accused of unethical publicity-seeking, some donors elect to remain anonymous.

While some cynics may think otherwise, Wal-Mart’s donations and action in respect of the Katrina Hurricane disaster were acts of philanthropy – but it did also enhance Wal-Mart’s ailing reputation.

These definitions are a start to developing a common language to describe emerging behaviours in corporations. They may require redefinition in the near future. It is likely also that new terms will emerge.

Marcus Coetzee is a business strategist who helps leaders to think clearly about the future. To find out more about how he can help you, call 0828799131 or visit Marcus Coetzee.co.za.

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