Opinionista Shelagh Gastrow 14 December 2018

Is corporate giving philanthropy?

It is important for non-profit organisations to understand the difference in values and purpose when it comes to private philanthropy and corporate social investment. Alignment of such values and purpose is important when making decisions about partnering on projects with any type of grant-making entity.

At the launch of the Trialogue Business in Society Handbook earlier this month, it was reported that the corporate sector in South Africa spent an estimated R9.7-billion on corporate social investment in 2018, a 7% increase in rand terms. Two-thirds of the total spend came from the mining, financial and retail sectors, with mining and quarrying contributing a quarter of total CSI spend.

According to Nick Rockey, Managing Director of Trialogue, the top 100 companies measured by CSI spend invested R6,9 billion, but just 17 companies “accounted for well over half of the total amount spent by the top 100 companies.” Some other interesting statistics showed that 44% of annual spend focused on education; 17% on social and community development with 9% going to health. Close to zero went to social justice organisations.

The Trialogue Handbook is important reading for anyone in the corporate and developmental sectors. It provides a detailed and useful analysis of significant funding and support for non-profit organisations and also shows how increasingly sophisticated current CSI thinking about development has become.

There is no doubt that without this major contribution to our civil society organisations, many highly innovative and important initiatives would be lost. The report shows that 51% of the annual CSI fund in South Africa went to the non-profit sector and 24% of NPO income came from the corporate sector.

However, increasingly, corporate social investment has been touted as a form of philanthropy. While not trying to be purist, it is important for the recipients of CSI funding to understand the general differences between corporate social investment and philanthropic funding so that expectations can be met.

The history of corporate social investment in South Africa goes back to the Sullivan Principles established in 1977 (the year Steve Biko was murdered and the mass banning of 17 black consciousness organisations such as the South African Students Organisation, Black Community Programmes and certain publications) in response to the movement to divest foreign businesses from South Africa.

The Sullivan Principles were developed by the Reverend Leon Sullivan to promote corporate social responsibility by US companies who wished to remain in South Africa and were widely adopted. (The principles were enhanced in 1999 to encourage corporate support for human rights and social justice internationally.)

Over the years, this eventually led to the growth of corporate social investment in South Africa and the professionalisation of CSI practice in the country. This makes a significant difference to the way our non-profit organisations are funded in comparison to other countries in the world, including the US, where there is a greater reliance on private philanthropy.

The difference between CSI and private philanthropy comes down to basic values. Whilst the money for institutionalised private philanthropy is usually as a result of money accrued by wealthy individuals, it is given away with a sense of altruism. Individuals begin to explore the legacy they personally want to leave, and generally, take care when exploring what impact their private wealth will have on the world.

In South Africa, we have a significant number of private philanthropic foundations that have been established by living donors or families, whilst others have been created following the death of the founder. Clear objectives are articulated in their founding documents (usually a non-profit trust) and it is expected that these objectives (and occasionally wishes) will be honoured by trustees going forward. As private philanthropic foundations are based on the interests and passions of individuals, they cover a very wide spectrum of giving.

On the other hand, CSI is a business imperative. It is usually about developing social capital. In our existing context where news travels very fast, managing social capital is critical for the success of a company. Facebook and Twitter can drive down reputation or enhance it. Essentially the relationship between business and society has shifted dramatically. Technology has aided transparency and therefore business ethics and good corporate citizenship have become a key focus of business practice in recent years.

Thanks to the internet, citizens around the world can see cases of child or slave labour; environmental degradation through mining, logging or factory emissions; abuse of resources in developing countries as well as corruption and profiteering. Community management has become necessary in order to build social capital and we see a trend where companies make social investments in the areas where their workers live.

Building social capital also includes corporate social responsibility, separate from the corporate social investment. Being a responsible company is associated with the way business is done including governance, labour relations, tax payments, how it treats its suppliers, its impact on the value chain and, in fact, how it engages with all its stakeholders including its customers. If a company has high social capital, it becomes a destination of choice for work seekers and preferred investment for shareholders. Brands are affected by social, environmental and ethical issues and a backlash can happen quickly in the current context where news spreads like wildfire.

The Trialogue Handbook refers to the issue of reputation and it surveys the corporate sector and non-profit organisations in this regard, especially when it comes to “the greatest developmental impact”. The Handbook indicates that companies that are “better known” tend to score highly “either because of their good communications or wide reach.” Those ranked in the top three by other companies were Vodacom, Woolworths, Nedbank and Old Mutual. Those ranked in the top three by NPOs were Nedbank, Woolworths and Vodacom.

Both philanthropy and the corporate sector have professionalised their grant-making and there are significant attempts to measure outcomes and impact. However, philanthropy is likely to take more risk as it is not answerable to shareholders and certainly the Handbook shows a huge reluctance by the corporate sector to invest in social justice organisations, ie those that engage with government policy or try to tackle issues such as corruption, human rights, constitutionalism, independent media and advocacy in a range of areas. This hesitation marks the difference between philanthropy and CSI in South Africa where increasing numbers of philanthropic foundations consider social justice philanthropy as a cornerstone of their giving.

It is important for non-profit organisations to understand the difference in values and purpose when it comes to private philanthropy and corporate social investment. Alignment of such values and purpose is important when making decisions about partnering on projects with any type of grant-making entity. The nature of corporate social investment may well shift in the coming years with new ways of developing “blended value” and the boundaries between philanthropy, civil society, the corporate sector and even government may blur as efforts are made to bring the developmental field together to achieve a common purpose. DM

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