News from The Globe and Mail
Social expectations have increased for firms
Tuesday, April 01, 2003
What defines good corporate citizenship? Traditionally, it has been philanthropy and charitable giving; but although companies today are looking beyond that, to community development and employee empowerment, a lot more is also being asked of them.
Social expectations of companies have increased dramatically over the past decade. EthicScan Canada Ltd., a Toronto-based corporate responsibility research house and consulting firm, struck a panel in 1989 of professionals from various fields to examine corporate social responsibility issues.
At that time, panelists were impressed if a single woman were sitting on a board of directors, says EthicScan president David Nitkin. Today, they expect an equal complement of women and men on a board.
Subsequent panel results have shown that companies are expected to perform bottom-line assessments for social, environmental and financial performance, even though no more than 25 per cent of companies are doing that. ''So expectations outperform performance in Canada,'' Mr. Nitkin says.
''The public has an extremely unrealistic idea of what business is doing,'' says Chris Pinney, vice-president of corporate citizenship for the Canadian Centre for Philanthropy and director of Imagine, Canada's national program to encourage public and corporate giving, volunteering and support for the community.
According to polls, ''the public thinks business should give 13 per cent of its profits to charity. In Canada, we have the second-highest expectations in the world. Fifty per cent of Canadians believe business should be engaged as a partner in social development.''
Today business accounts for one per cent of support to charitable causes, and the government for 60 per cent, Mr. Pinney says. But surveys show the public wants to see a 30/30/30 split among business, government and individuals. ''There's a very different role we're looking for business to play in society.''
Companies that had been running well are now facing higher expectations from non-governmental organizations, for instance, and a majority of survey respondents say they have punished companies if they don't consider them socially responsible, Mr. Pinney says.
Seeing Canadian companies performing on the international stage may be raising the public's expectations, Mr. Nitkin suggests, but he also believes Canadian companies are underperforming.
''I think from an international perspective, other companies and multinationals are moving more aggressively,'' he says. ''We have a great reputation for environmental laws, but we're not enforcing them. Other foreign-based multinationals are outstripping us in terms of the environment and the triple bottom line process: how well is the company doing in social, environmental, and financial performance? In many of these areas, Canadian companies have not met the international performance, and it shows in their rating.''
However, Mr. Nitkin also finds that many companies ''are looking in the area of community investment,'' and engagement more, through gifts in kind, or warning the community about the closing of a local office or a planned expansion. Firms are offering to match charitable donations for employees who volunteer 50 to 70 hours a year, for example.
Imagine was started in 1988, when 550 companies signed a pledge to donate a minimum of one per cent of average, domestic, pre-tax profits to the charitable organization of their choice, and to encourage and support employee giving and volunteering. Today those original pledgers are still members of Imagine's Caring Company program.
At a 1998 conference with the Business Council on National Issues, however, a new direction was taken. More than charity, it was a new agenda for Canadian corporate citizenship, Mr. Pinney says.
The current business plan includes a more robust set of benchmark standards for corporate responsibility and citizenship, increased charitable giving, a focus on outcome and a difference companies can make, including a way to leverage money for employees, and public education on the role of business.
''Now it's more a community investment model, the returns you're creating for the company and the community. You need to have a balanced portfolio, you need to engage and work with employees.'' Companies are looking at their core competencies and aligning them with the community, the way Home Depot has for Habitat for Humanity, he says.
Finning International Inc., a Vancouver-based company that sells, rents, finances and supports equipment from Caterpillar of Canada Ltd., and complementary equipent, has done just that through its corporate giving program. Its major gifts have included a land gift to four post-secondary institutions in November 2001, valued at approximately $33.8-billion, and a $150,000 donation last year to the 2010 Vancouver Olympic Bid Committee -- gifts which Finning expects will also benefit the company.
''The gift of land to the four universities: we see the payback in order to train good mechanics who can come to work at Finning,'' says president and CEO Doug Whitehead. He contends that the Whistler Olympic bid is good for B.C., and if the Olympics go ahead, there'll also be tremendous business for road construction, which is Finning's business through its equipment sales and servicing.
''It's making selective investments in the community in areas that will ultimately benefit the corporation,'' he says. ''I think that in the big picture, creating shareholder value is what public companies are all about, but in that pursuit there is a social responsibility that says you can achieve shareholder value over a longer run by meeting the broader needs of society.''
The Imagine program is continuing to provide leadership in this regard. This spring it will launch the corporate citizenship leadership challenge to CEOs and boards, says Mr. Pinney. A voluntary initiative developed at the World Economic Forum last year in New York, it is supported by the Canadian Council of Chief Executives and outlines good corporate governance practices for firms.
''The agenda is changing,'' he says. ''Philanthropy in the end is an individual occupation.'' Imagine wants companies to continue their volunteerism and philanthropy, but also to become better corporations.
Special to The Globe and Mail
© The Globe and Mail