Strategic Philanthropy: Social Impact & Company Benefits

In recent years, Georgian companies seeking to develop their CSR (Corporate Social Responsibility) approaches are looking to become more strategic in their philanthropic initiatives. Lack of knowledge and experience in the field for creating such strategies and being unable to correctly measure the impact that their donations have on the causes they choose to support hold many companies back from success.

With this in mind, the Center for Strategic Research and Development in Georgia (CSRDG), with the support of the European Union and Konrad Adenauer Stiftung (KAS), on July 4 held a training for companies about ‘Strategic Philanthropy’ at Rooms Hotel in Tbilisi. The training was designed to assist Georgian companies to sophisticate their philanthropic programs and develop strategic approaches in order to achieve more significant benefits for society and for themselves.

To deliver this essential training, the organizers chose Professor and Dr. Michael Hopkins, one of the “top 100 thought leaders in the world,” [Trust of America, 2013], CSR adviser for UEFA and Managing Director of MHC International, which offers CSR/Sustainability research and advisory services worldwide. He has worked in over 100 countries as consultant inter alia on CSR, training, and linking education systems to the labor market, and has written over 100 publications and 15 books in the field of Corporate Social Responsibility. Mr. Hopkins reads lectures in Geneva, Brussels, Great Britain, India, and America, and was more than happy to come and share some of his vast know-how with a small group of eager participants in Tbilisi- representatives of the banking, beverage, fashion brand, trade, startup, transport, and pharmaceutical sectors.

“CSR is a complex notion, reflected in responsible business behavior in everyday operations. There is a misconception in many companies that philanthropy is CSR- yet it is but an element of what makes a good CSR strategy,” Hopkins begins.

He then goes on to present the key questions a company should ask itself when considering or evaluating a new project as part of its CSR strategy. With each question, he gives illuminating examples from his many years of experience in the field, aiming to help the company representatives in attendance to prepare how to define focus areas for philanthropy programs, how to plan philanthropy programs with the view of the bigger picture to achieve more significant social impact, and how to align philanthropy programs with business goals in order to produce simultaneous social and economic gains.

Is the project sustainable? i.e. after initial investment, will the project continue and even grow in the future?

Here, Hopkins briefly touches on UEFA’s ‘Respect’ campaign, which aims to promote respect for those of different color, ethnicity and physical ability. But, he says, UEFA never adopted a full stakeholder model. “In the planning, they thought about players but not the management or media. The players, off-pitch, rarely speak about the values of RESPECT, nor do they embody those values in their social behavior, and this is picked up by the media. In short, UEFA in this has thus far failed to have a long-term view,” he says, going on to emphasize his own formula for a successful CSR strategy: Treating Key Stakeholders Responsibly.

What contribution to development does the project make? Are steps being taken to replicate the project’s successful outcomes?

Hopkins speaks about a good friend of his, Bob Monroe, who in the process of his work came across a group of youth playing football at the edge of a Nairobe slum housing 1 million people. They were playing with an old plastic ball and were surrounded by mountains of trash. “Bob, intrigued, asked them why they didn’t clear their play area of trash,” Hopkins tells us. Their answer, perhaps familiar to many in Georgia, was “it’s not our responsibility to clear it up”. Bob then employed the “I do something for you, you do something for me” technique and gave the boys two days to clear up in exchange for a brand-new ball. “With that motivation, they took on the challenge and cleared the football pitch. Bob came back with the promised ball and, now inspired, began to work with the local community. With annual funding from NGOMBE, Bob’s NGO MysaKenya is helping Nairobe to use sports to develop its slums: there are 2000 leagues with 25,000 teen players, a library, and a huge sports training center. To win the league, both talent and good social impacts count as much as winning the games- clearing rubbish, working in HIV clinics…, of the 750,000 graduates of the training center so far, some have become government officials, architects… With his vision, Bob managed to convert a generation with a project that has been copied 300 times in various countries worldwide,” Hopkins tells us. [For more info visit http://www.mysakenya.org/].

But, Hopkins points out, the system is far from perfect. “The mechanism is reliant on annual funding, which is sad because such good causes should not be at risk of closing due to lack of finances.”

Hopkins tells us he suggested the idea of contracting all those who benefit from the scheme to, in exchange for the education given by MysaKenya, contribute 10% of their future earnings- paying back into the system that helped them and in so doing prolonging the life of the project and enabling it to help future generations in the same way.

The July 4 training participants immediately saw that the same sustainable approach could to some extent be used in Georgia when training youth and the socially vulnerable.

Is the project consistent with company feedback from stakeholder consultations? What impacts does the project have on the company’s bottom line?

Hopkins gives us the example of the island of Mauritius, whose Minister of Finance decided to tax the companies of the island’s 1 million population a 2% Philanthropy Tax, meaning 2% of the company profits had to go towards NGO support and charities. Hopkins, called in to consult on the issue, said he was displeased with the decision, seeing it as potentially damaging to the country’s economy in that it might drive away business. But, he tells us, on seeing India follow suit, he realized that there might be something to it after all. “I got Mauritius and India to reduce that tax to 1%. The NGOs weren’t happy, but there was no doubt it made CSR a hot topic, forcing companies to think about the bigger issues and to take CSR much more seriously.”

Does the project create capacity at the macro, meso or micro levels?

“CSR is not the same as philanthropy,” Hopkins emphasizes. “Most philanthropy projects tend to work at the micro level, when a 3M approach should be employed to intensify the impact: Micro (the project level); Meso (capacity development- translating the project into things that work); and Macro (at the policy level with government involvement).”

Costs for stakeholders within these levels, Hopkins says, would by “rule of thumb” be 50% spending at the Micro level, 40% at the Meso and 10% at Macro. The point here is that for CSR to be truly sustainable, it needs to involve high-level stakeholders but be built on a grassroots foundation, with everyone involved encouraged and eager to work for the common good.

“CSR needs a mixed economy and democracy- a leadership who listens to the grassroots. People in the world today are becoming unsympathetic to those who are different. Considering the old adage that ‘Sustainable development meets the needs of the present without compromising the ability of the future generation to meet their own needs,’ this needs to change!” he says, adding that it is also the government’s responsibility to introduce measures to ensure that short-term gains are sustainable and not damaging or at risk of failure.

Hopkins at this point presents a slide with an inspiring quote: “[Companies have an] economic, financial and environmental responsibility to create higher standards of living while preserving the profitability of the corporation and integrity of the institution for people within and without- achieving sustainable development in societies, addressing multi-stakeholders and their materiality. Being a responsible company/institution means working in partnership with society and being part of its long-term development.” [A Planetary Bargain: Corp Social Responsibility Comes of Age (Macmillan 1998, updated)]

Is the project Type 1,2 or 3?

Hopkins, on evaluating CSR projects for their effectiveness, uses the questions in the box on this page and also his own criteria. A “Type 1” project is a “Charitable, philanthropic action, such as a donation to a good cause.” He gives us here an example of an NGO-led “free meals for socially vulnerable school pupils” campaign that was begun in India with far-reaching aims but which, if funding is lost, would be closed.

A “Type 2” project is one which sees the development of a by-product of the company actions. Hopkins gives us a negative example whereby an international company in Jamaica decided to boost employee satisfaction and productivity by raising their salaries. To their surprise, the move had an adverse effect on the local economy in that it led to pay dissatisfaction in other companies and strikes. In Hopkins’ view, it would have been better in this case to “pay lower wages to the employees but willingly pay higher taxes to the government for the benefit of wider society.”

A “Type 3” project is one that promotes sustainable development and positive initiatives, often in addition to Type 2.

Are project operations transparent? What key indicators are used to measure project impact, if any?

Hopkins here emphasizes the role of the media in CSR promotion and of renowned international reporting mechanisms for presenting the results and impacts of a CSR initiative, a fact which any Georgian company who has budgeted for a philanthropy initiative and any local NGO who has received foreign funding, knows is essential. Some companies here, especially in the banking sector, are already employing international standard reports in their annual practice, a “laudable, necessary, but complex and sometimes confusing step for those unaccustomed,” Hopkins said.

Many Georgian companies are linking the UN’s Sustainable Development Goals (SDGs) to their CSR strategies, selecting goals from among the 17 and working to implement them within their CSR strategies, the most popular being poverty, education, responsible consumption, climate action and gender equality.

How does the project contribute to the company’s reputation?

Starting out with the poignant “Reputation takes 20 years to create and 5 minutes to destroy,” Hopkins presents the example of oil giant Shell, whose reputation was all but destroyed in the early 2000s. A good CSR strategy, if done right, can do more for a company than an advertising campaign- in fact, it becomes an advertising campaign in itself, and the more people involved at the grassroots level, the more effective the impact can be. “We all know to treat customers well, but a company should not forget its employees and managers,” Hopkins says, highlighting that this will have a wider social impact.

The key points of the July 4 training can be summarized as such, useful for any company setting out on the CSR path: Accountability- record your project’s impact (social and otherwise); Consider ROI (return of investment); Evaluate continuously; Create guidelines to demonstrate your company has a business case for what you are investing in; Compare with a control group, evaluating through the example of others doing the same or through those who are not being affected by your project; Have a strategic approach to giving; and Consider sustainability and the long-term impact.

I’ll use a final inspiring quote to close this piece, one which I feel encompasses much of Mr Hopkin’s advice of the day. This quote was given to the Harvard Business Review by Michael Porter and Mark Kramer: “Corporations are not responsible for all the world’s problems, nor do they have the resources to solve them all. But a well-run company can have a greater impact on social good than any other institution or philanthropic organization.” And this goes for a well-run CSR strategy too!

Questions to answer when creating/evaluating a CSR project:

1. Is the project sustainable? I.e. after initial investment, will the project continue and even grow in the future?

2. What contribution to development does the project make (create employment, reduce disease, create growth, empower people, enrich civic life, improve human rights)?

3. Is the project consistent with company feedback from stakeholder consultations?

4. What positive/negative impacts does the project have on the company’s bottom line?

5. Does the project create capacity at the macro, meso or micro levels? Madonna- Africa- school- affect policy!!!

6. Does the project have any leverage- are steps being taken to replicate the projects successful outcomes? Work with govt, replicate country-wide.

7. Is the project Type 1,2,3?

8. Are project operations transparent?

9. Do the projects pay a living wage?

10. What key indicators are used to measure project impact, if any?

11. How does it contribute to the company’s reputation?

“Reputation takes 20 years to create and 5 min to destroy.”

CSRDG, which was established in 1995, has a successful multi-year experience in the field of civil sector development in Tbilisi as well as in the regions of Georgia. CSRDG has been focused on results that can improve the lives of individuals and societies in general. It was the first Georgian organisation to prepare and publish a Sustainability Report in accordance with GRI (Global Reporting Initiative) sustainability reporting guidelines; the first Georgian-language textbook on CSR for higher educational institutions; and comprehensive analytical research on “Corporate Social Responsibility and Public Sector’s Role” (analysis and recommendations for the Government of Georgia).

Since January 2017, a consortium led by Konrad Adenauer Stiftung in partnership with Georgian civil society organizations: Center for Strategic Research and Development (CSRDG), Civil Society Institute (CSI), Center for Training and Consultancy (CTC) and Education Development and Employment Center (EDEC), has been implementing the Georgian Civil Society Sustainability Initiative (CSSIGE) in order to address key challenges of Georgian civil society sector.

By Katie Ruth Davies