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Background As a business person whose background is primarily in the business world, I thought it might be useful to give a perspective on how business - in the context of globalisation - should be thinking about the non-profit world. In particular, I would like to discuss how business and philanthropy might relate to one another: I believe corporate citizenship can be a long term investment to achieve strategic business goals. US has a stronger non-profit culture than Germany, where there may be more of a tradition of leaving social needs to the state to handle and pay for. But there may be signs of changing attitudes in Germany. In a world where Daimler is buying Chrysler, and of Deutsche Bank Bankers Trust, German companies are expanding across the Atlantic operating globally. In this context, I believe that top management needs to think about how broader issues affect their business. At a time of rapid change and uncertainty, businesses need managers who can handle more variables, solve problems through flexible thinking and are sensitive to the outside environment. I'd suggest that this changed and broadened management attitude should include corporate citizenship. Thinking about corporate citizenship has evolved. It extends beyond corporate philanthropy. Corporate citizenship examines the connection between social activities and corporate purpose I would like to focus on 3 points: How business thinking about philanthropy has been evolving How philanthropy might relate to the broader business issues How NGO' s might wish to adapt to the new thinking about corporate citizenship and strategic philanthropy Development of thinking 10 years ago the thinking on corporate citizenship reflected 2 basic models - For example one model was articulated well by William Norris of Control Data Corporation who argued that business should align business decisions with social considerations. He was dismissive of business giving money to philanthropy as insufficient compensation for business social responsibility. One the other hand, Kenneth Dayton, the CEO of Dayton-Hudson argued that businesses would serve society better if they were free to make business decisions without social considerations, but they should adhere to a high level of philanthropy (he pushed for donating five percent of pre-tax revenue) Over he past years the thinking on corporate citizenship has been evolving. A recent article by the Conference Board outlined six distinct strategies toward philanthropy. The 6 strategies reflect a continuum of thinking - First, some companies view corporate citizenship as a contradiction in itself. This viewpoint believes managers should focus solely on increasing shareholder wealth and believes businesses are not responsible for social contributions. According to this view, public welfare should be left to others, including government. - A second school sees corporate citizenship as a strategy for risk avoidance. Its goal is to avoid being singled out by consumers, or international groups for hostile attention. According to this view, the job of a manager is just to meet this risk avoidance goal as efficiently as possible. -The third school of thought views corporate citizenship as a condition for doing business. Citizenship activities are, in effect, the price for a corporate charter. Again, the business purpose would be to achieve this condition at lowest cost. - A fourth view considers corporate philanthropy as a social responsibility. Then , the task for managers is to balance this social responsibility with other obligations, in particular with the responsibility to investors. So the focus is on the word balance. - The fifth perspective considers philanthropy as a long term investment to improve the business environment, similar to investing in infrastructure or research and development. - A sixth approach sees corporate citizenship as a vehicle that helps businesses achieve their strategic goal. From this perspective, corporate citizenship can help strengthen markets and relations with customers, build employees loyalty and improve relationships with governments. Relating philanthropy with business strategy Next, I'd like to focus on the 5th an 6th view of corporate citizenship - philanthropy as a long-term investment and integrating philanthropy within a business strategy. Philanthropy provides a good for society. But in the context of competitive pressures to cut cost serving a good social purpose is not enough to convince companies to support giving. Perhaps philanthropy would be more sustainable if it can be connected to a broader business strategy. Indeed corporate citizenship can offer a competitive business advantage. A 1998 study in the CPA Journal noted a positive correlation between financial performance and achieving non-financial goals, having a long-term vision and core values, and being attentive to a broader set of stakeholders. Possible benefits for companies that integrate corporate citizenship within their strategy include: Establishing a strong corporate culture Enabling a global company to be perceived as a local contributor Broadening sources of information Developing a more comprehensive network of allies Increasing employee satisfaction Broadening the outlook of managers Improving customer goodwill Let me give you a few examples of these Corporate culture: - Built to last - written by James Collins and Jerry Porras - identifies characteristics of companies that prospered over a long period of time. - These companies had core values and a sense of purpose beyond making money - a pragmatic idealism". - The key to lasting staying power was a purpose that guided and inspired people throughout the organization and established a cultural strength - After WW II Merck brought streptomycin to Japan to cure tuberculosis. The venture did not expect to make any money at that time, yet today Merck is the largest pharmaceutical company in Japan - Merck and similar corporations cite both self-identity and pragmatic long-term business for their philanthropy. Global versus local: Today businesses must think globally but act locally. Companies need to compete around the world. At the same time companies need to be close to their customers. Image and reputation are important to customers and good Corporate citizenship is a key component of a business image around the world . Citizen's expectations are the same around the world although different localities seek different things from businesses. Corporate citizenship can build local reputation and knowledge. For example IBM made a special effort to support handicapped in Japan; today bills in Japan reveal that IBM is only second to Sony in Japanese ratings of social responsibility. Modern high-tech companies offer another example: Social Venture Partners, created by Aldus founder Paul Brainerd supports local non-profit initiatives to support education and extra-curricular activities of children and their families. The purpose is to give something back to the community. The charity is building an asset. These initiatives also enable hi-tech companies to improve the quality of the local workforce. Broaden sources of information: - The charitable foundation of a major oil company was widely admired, but was not connected to corporate strategy. After an oil spill, senior management had few contacts to environmentalists, and could not get advice, making it a target n part because the philanthropy didn't build allies. - In contrast, another oil company used its philanthropy develop a strong network with environmentalists who helped the company to respond quickly and openly, when accidents occurred. In turn, the company helped environmentalist to push through legislation that sought to address both business and environmentalist concerns. Employee satisfaction: - In 1935, George Merck II, wrote that Merck was "inspired by the ideals of advancement of medical science and service to humanity". Years later, the company developed and gave away a drug to cure river blindness. When asked why, Merck responded that a failure to go forward would have demoralised the company's scientists. Customer goodwill: - Good corporate citizenship can promote a brand name because brand is based on reputation. Surveys show that a company's image and reputation matter to customers. Companies that neglect public opinion are running the risk of serious economic losses from negative reactions. Shell, for example, underestimated public opinion when dismantling one of its oil platforms. The result was a drop in sales of more than 40%. Philanthropy can also be customized to match the needs of particular business sectors or locations. - For example, commodity companies competing in developing countries can improve their competitiveness if they are good citizen and later work constructively with local government to create the right legal and regulatory environment - broaden support base - help attract local employees In sum, I believe there are a number of reasons why corporations should integrate philanthropy with their business strategies For employees, good corporate citizenship will improve their job satisfaction, pride and loyalty. How NGO's should deal with it Finally, let me close with a few ideas of how NGO's and non- profit organisations might adapt to this changing thinking about corporation and philanthropy. NGO's and charities need to understand the changes I've described, so they can consider ways to match the interests of corporate givers. NGO's can offer advice, ideas, information and support. They can become partners on projects. NGO's can improve social and educational conditions in communities Where businesses operate . NGO' s can help businesses broaden their outreach to networks of opinion leaders. Employee involvement with NGO's can broaden their experience and outlook. In return, companies can help NGO's in ways beyond financial support. They can, for example, provide management advice and technical and communication support. Better performance nay attract others philanthropists A recent Bloomberg article analysed what modern givers expect from NGO's. Modern givers think about philanthropy like any other investment. They expect: - Efforts need to be hands-on and the non-profit needs to demonstrate that it can fulfil its mission - Deliver quantifiable results -Use funds efficiently ( infrastructure) - Financial viability - Independent board Summary So, in conclusion, I believe well run businesses will increasingly consider how relations with non-profit and the use of philanthropy relates to their business strategies. Both sides need to improve communication and linkage with one another to serve their mutual interest - that of society. |