Briefings

Citizen Gain
© lianez; Losev Artyom; Gino Santa Maria

Citizen Gain

By Apurva Gosalia - Jul 26, 2021

“Citizen Kane” is still considered by many cinephiles – myself included – to be the greatest film ever made 80 years after it was released. In that movie, American media mogul William Randolph Hearst was the blueprint for the central character, Charles Foster Kane.

Like Kane, Hearst amassed a vast personal fortune from publishing. (Talking of sustainable businesses, imagine that being possible today!) When Hearst died in 1951 aged 88 in his palatial home in California, he left behind an empire of newspapers, magazines, radio stations and film productions, as well as a world-class collection of art.

Also like Kane, Hearst was a figure of controversy and debate. Throughout his life, he exercised his influence and great power for his own ends. But he also championed social causes, the rights of the underprivileged and the fight against corruption.

Public Good

“With great power comes great responsibility,” a phrase also known as the “Peter-Parker-Principle,” a modern day maxim found in the legendary Spider-Man comic books created by another American icon Stan Lee.

In positive uses of their power, companies such as Hearst Corp. and their CEOs are increasingly taking on a sub-political role by serving the public good, in areas where governments often fail to have an impact.

In a 2010 article in Business Ethics Quarterly, professor of business ethics Florian Wettstein refers to these corporate citizens as quasi-governmental institutions or agents of justice.

“During the last decades, the discourse around Corporate Citizenship (CC) has switched from whether or not to get involved in CC activities to how to get involved in social engagement,” wrote academics Shuili Du, C.B. Bhattacharya and Sankar Sen in the International Journal of Research Marketing in 2007.

Massive growth in CC activity lends evidence to this development. In the five years from when Du, Bhattacharya and Sen’s paper was published, CC spending increased by 42%. Today, Fortune Global 500 companies spend about U.S. $20 billion per year on CC activities.

When the Chips Are Down

Other factors can stimulate CC growth. For example, the media attention during crises such as the coronavirus pandemic or the recent devastating floods in Germany can have a direct, positive impact on the willingness of individuals and companies to donate. Many companies that demonstrate consistent social commitment in such negative situations, strengthen their employer brand and the cohesion within the company.

However, companies must be wary of “greenwashing”! Generally, I’m a fan of the strategy “Do good and talk about it.” But regarding CC in crisis situations, I think the motto should rather be “Do good and do not talk about it too much.”

There are many companies involved in CC that are serious about it, but there are also some around who do it only for the brand image – that is not advisable. It’s justifiable to a certain extent when companies talk about their commitment, as that in turn inspires and motivates others to also get involved. However, I believe that stakeholders sense how serious a company is about its commitment. Is the donation just a one-time CC action and then nothing more happens? Or does it become part of the corporate culture and is it noticeable in various places that the company is also committed in the medium or long term.

Then the questions become: What formats do companies choose for their CC commitment? Which donation topics are they concerned with? What significance do sustainable CC measures have for employer branding, brand positioning and internal cohesion?

As defined in last week’s blog, in a nutshell CC is a company’s responsibility toward society beyond its gates, i.e. beyond its actual business activities. The aim should be improving the living standards and quality of life for surrounding communities, while maintaining profitability for stakeholders.

Companies progress through several stages of developing CC as they incorporate programs to support community activities, gain an understanding of that community’s needs and bake CC into their business culture.

To help them along the way, the International Standards Organization’s ISO 26000 Guidance on Social Responsibility shows how businesses and organizations can operate in a socially responsible way and actively engage as good corporate citizens.

In the Mix

It is also recommended that a mix of CC approaches can be used that consists of corporate giving, corporate foundations, corporate volunteering and social sponsoring.

Similar to the marketing mix – defined as the “set of marketing tools” that a firm uses to pursue its marketing objectives in the target market – this CC mix can be a construction kit from which a company can select and implement suitable instruments within the framework of its CC strategy.

A CC mix can include 10 instruments that companies of all sizes might already use in practice:

  1. Corporate giving is the generic term for ethically motivated selfless giving, donations or endowments of money or material resources, as well as for giving or donating company services, products and logistics free of charge.
  2. Social sponsoring is the transfer of the familiar marketing activity of sponsoring – as a mutual business – to the social sector. This opens up new communication channels for the company and new financing channels for non-profit organizations.
  3. Cause-related marketing is a marketing tool whereby the purchase of a product or service is advertised with the company donating a portion of the proceeds to a social cause or organization.
  4. Corporate foundation refers to the establishment of a foundation that serves as a type of engagement that is also increasingly used by medium-sized companies.
  5. Corporate volunteering (employee volunteering) is the social engagement of companies through the investment of their employees’ time and knowledge and the support of employee volunteering in and outside working hours.
  6. Social commissioning refers to the targeted business partnership with non-profit organizations that employ, for example, disabled and socially disadvantaged people, as (equally competent and competitive) service providers and suppliers, with the intention of supporting the organizations through commissioning.
  7. Community joint venture refers to a joint venture between an NGO and a company to which both partners contribute resources and know-how but neither could carry out alone.
  8. Social lobbying is the use of corporate contacts and influence to further the goals of NGOs or specific community groups.
  9. Social venture capital (venture philanthropy) refers to entrepreneurial venture capitalists who invest both money and expertise in NGOs for a limited time and a specific project.
  10. Community involvement is another important element of CC.

These voluntary CC activities should also be reported in the company’s respective annual or sustainability report. Successful CC communicates to stakeholders a company’s commitment to ethical behavior and its ability to balance shareholder expectations and community needs. CC is also becoming an important factor in swaying the minds of individual and institutional investors’ decisions about where to park their money. Companies that don’t share their values don’t get investment.

As Adam Hayes, an economic sociologist at The Hebrew University of Jerusalem, points out: “All businesses have basic ethical and legal responsibilities. However, the most successful establish a strong foundation of corporate citizenship, showing a commitment to ethical behavior by creating a balance between the needs of shareholders and the needs of the community and environment in the surrounding area. These practices help bring in consumers and establish brand and company loyalty.”

The current high willingness of companies to donate is therefore in the context of social changes that go beyond the pandemic or the flood disaster in Germany. It is part of the positioning and internal cohesion of employees, as well as stakeholder loyalty. And it provides the necessary support for those in need.

CC has established itself as an integral part of corporate culture. More and more companies – also in the global lubricants industry – are getting involved in CC for the common good and thus taking on additional social responsibility. In doing so, they integrate social commitment into their corporate strategy and make it an integral part of their corporate culture. Both sides – business and society – benefit from this kind of corporate engagement. And in this way “Corporate Gain” and “Citizen Gain” become two sides of the same coin.

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