Re-Thinking Social Responsibility

from Forbes

DAVOS, Switzerland -

Chucking a few dollars at the pet charity of the chairman's wife no longer cuts it as corporate philanthropy, if it ever did. Nor does using corporate philanthropy as PR or window dressing to mollify critics, or even roping off a slice of profits to be dispensed for good works.

The definition of a company and its involvement in wider society is expanding, as is the expectations of shareholders, employees and consumers. Traditional corporate social responsibility is starting to be replaced with a new notion of corporate citizenship, which for larger companies means global corporate citizenship.

The social and corporate agenda is being integrated, and often involves partnership with other companies, government and nongovernmental organizations--which is a challenge to those who hold to the traditional narrow economic definition of a company as an entity that is meant to maximize profits for shareholders.

John Chambers, chief executive of Cisco Systems and a poster child for corporate citizenship through Cisco's backing of the training of hundreds of thousands of engineers a year in developing economies, has no truck with that point of view. "The most successful in life have an obligation to give back. And it is not just the right thing to do; it is just plain good business," he says.

Four of the high-tech companies most involved in corporate citizenship, his own, Google, Microsoft and Intel, are four of the five most valuable companies, Chambers says.

On Thursday, at the World Economic Forum meeting here in Davos, Microsoft Chairman Bill Gates, in launching his campaign for creative capitalism, pointed out that companies are doing a lot for society's benefit, but much of it has little impact.

What is key is choosing carefully which causes to support, and then, in executing them, not abandoning the rigor and discipline that makes a good company successful in the first place.

Peter Sands, group chief executive of Standard Chartered, which operates widely in the developing world, offers four benchmarks against which companies can judge which corporate citizenship projects to get involved with. They should be relevant to the markets a company operates in; leverage a company's competencies and infrastructure; have the potential to extend existing business lines or become a new business; and offer an opportunity to make a distinctive impact.

Sands' bank's commitment to making $500 million available for microfinance passes his four tests, as does its support for a program tackling preventable blindness, a project undertaken in partnership with nongovernmental organizations.

"A lot of social issues have to be done in partnership with governments," says PepsiCo Chairman and Chief Executive Indra Nooyi, who has made corporate citizenship a part of her company in the past year. "If societies succeed, companies succeed. We all act in enlightened self-interest, so it is critically important that partnerships work."

But governments, she says, have to accept that companies are a force for good in society, both commercially and morally. The same, too, applies to nongovernmental organizations, which are often even more suspicious of business.

Governments, for their part, are becoming more aware of their limitations, a point made with disarming honesty by U.K. Prime Minister Gordon Brown. He has been a champion of the Millennium Development Goals, intended to improve the living standards of the world's poorest people, goals Brown said Friday would not be met buy the target date of 2015 unless the effort was redoubled. Those goals won't be met, he says, "unless there is a private, voluntary sector and government partnerships."

In areas like the environment, "governments have to understand they have to make it possible for companies to effect change," he says.

That will involve incentives such as tax breaks, but also an understanding that governments at times need to let go and to see companies as providers not just of resources but also resourcefulness.

Turning good intentions into success from a company's point of view is no easy matter. PepsiCo's Nooyi says it is essential to get the whole company committed to the cause. Cisco's Chambers says one of the big reasons his company gives is that his employees want it to. Cisco wins awards for being one of the best companies to work for, which helps with staff retention, he adds.

Chambers also points to the need for long-term commitment and says private-public partnerships are essential so there is a holistic approach. It is no use training engineers unless there are economic policies that create the jobs for them to go to.

Cisco and PepsiCo are still in the minority of companies that see corporate citizenship as core to their business. But consumers are increasingly demanding that companies produce environmentally friendly products and show a sensitivity to other issues such as education or labor conditions.

Witness ProductRed, a scheme founded by U2's Bono and philanthropist Bobby Shriver, in which a group of companies such as Motorola, the Gap and now Dell donate a portion of the sales of certain products to help fund AIDS research in Africa. Gates says the scheme has generated $50 million for that cause.

The biggest contribution that companies make to society is by being a good company, serving customers and creating value, says Standard Chartered's Sands. But the sweet spot, he adds, is to do all that and help address the big issues.

He quotes the billions of financing and advisory services his bank is making available in Africa, Asia and the Middle East for research and development of clean and renewable energy. "I make no apology--we fully intend to make lots of money out of doing his," he says. "But it is a way we can play our role in addressing the issues of climate change."