Keeping with the corporate social responsibility theme of this week, we’re featuring a Student Spotlight by Carolyn Weinschenk, a senior finance major from Belle Meade, NJ who predicts what the future of CSR will look like. Reports have indicated that CSR is becoming more and more an aspect of companies’ strategy for growth and less of a marketing ploy. She describes corporate impact investing, enterprise philanthropy, spin-offs and joint ventures.
Corporate social responsibility (CSR) was coined as a term in the 1960s, but it truly came to prominence around the turn of the century as large multinationals began to adopt the phrase to demonstrate that they were committed to delivering a positive impact to all stakeholders and the communities in which they operated. Criticisms of CSR range from cynics who feel that CSR is simply a PR or marketing ploy, to economists, such as Milton Friedman, uncomfortable with the notion that companies have any moral obligation to society; famously stating, “The social responsibility of business is to increase its profits.” In the past decade as climate change and the environment have boiled to the surface of the conversation, CSR has quickly evolved into an assembly line of sustainability reports.
The fact is CSR has become a part of every multinational company’s vocabulary. But far too often corporations and the impact sector develop their impact strategies isolated, and in parallel of one another. So, why does collaboration remain the exception rather than the rule? Seeking to defy the one dimensionality of traditional CSR, the following three types of corporate initiatives exemplify the emerging paradigm shift in corporate social responsibility.
1) Corporate impact investing
Corporate impact investing (or venturing) is the practice of corporate investment in ventures that are expected to bring financial returns, as well as either social or environmental returns. This methodology puts a new spin on CSR that sits better with advocates of corporations existing to maximize shareholder value. One example is JP Morgan Social Finance, launched in 2007 to serve the growing market for impact investments. Through Social Finance, JPM has committed its own capital to the impact investment market, seeking to pursue positive impact on low-income and excluded populations, while earning a reasonable financial return. JPM invests its capital in impact investment funds, such as African Agricultural Capital Fund and Bridges Social Entrepreneurs Fund. While similar to traditional corporate grant giving, impact investing provides corporations an opportunity to earn a return that it can continue to reinvest in impact initiatives, as well as imposing a degree of financial rigor on the funds and businesses receiving the capital.
2) Enterprise philanthropy
Enterprise philanthropists can be found in the form of corporations not only willing to make grants, but also willing to invest time and money into social businesses at the early stage of their growth. By doing so they are helping firms bridge the “Pioneer Gap”, in which social enterprises struggle to attract investors and raise capital prior to having achieved proven success and scale. In addition to investment capital, social businesses also need access to expertise and value-creating resources, and some corporations are reorienting their corporate philanthropy in this direction. The Shell Foundation leads this arena by providing grants combined with a strategic partnership to a select set of social enterprises. These partnerships leverage both the funds and business acumen of Shell, to maximize the potential for the grant-receiver to successfully grow, and independently attract investors in the future.
3) Spin-offs & joint ventures
Corporations are also moving towards financing start-ups and spin-offs related to their core business, with combined social and financial objectives. The most significant example is perhaps Grameen Danone. Groupe Danone (known as Dannon in the U.S.) is a French multinational corporation and the world’s largest yogurt maker. Muhammad Yunus proposed to form a joint venture between Grameen and Danone in 2006, with the mission of supplying nutritious food to the poor children of Bangladesh. This joint venture produces a yogurt enhanced with crucial nutrients, at a price even the poorest can afford. Danone expects the enterprise to run at a breakeven or better, but any profit will be reinvested in similar products.
For multinational corporations, the key implication is this: it’s time to say goodbye to the traditional notion of corporate social responsibility. The time has arrived for new initiatives that can leverage the key driver of value creation in corporate philanthropy: the synergies that corporations can develop with their socially-driven investments or partners. This new conception of CSR on the rise is far more ambitious, but the potential payoff for both business and society in terms of scale and impact is far more significant. Pioneers of this next chapter for CSR are not merely aiming to create a foundation or charitable program, but rather are surpassing traditional notions of CSR and driving the convergence of the business and social sectors.