Up to now Community Affairs Briefing has profiled companies whose main sphere of operations is firmly UK orientated. But some of the Britain’s bigger corporate citizens are transnational corporations. This profile examines the challenges facing one of the biggest.
Even the most soft-hearted finance director would be unsettled at the thought of devoting 12% of profits to community affairs. Yet last year, in statistical, that was the cost to The RTZ Corporation PLC of its UK community affairs programme as a proportion of its UK pre-tax profits. True to the clich? about lies and statistics, this figure conceals as much as it reveals, but it raises the question: what should be the community affairs policy of a trans-national which is headquartered in Britain but earns most of its profits abroad?
The company
RTZ, the British-based international natural resources group, is among the UK’s top 20 companies. It spends nearly £10 million world-wide on its community affairs programme, and £2.5 million in the UK, making it one of Britain’s most generous corporate citizens. Last year, barely 3% of its profits were made in the UK, although just under a fifth of employees are based there.
The company has extensive interests in metals, especially copper, gold and iron ore, in energy through coal and uranium, and in industrial minerals such as borax and titanium dioxide. It also has a small industrial products division which employs most of the UK staff. Overall more than half the company’s assets are based in North America.
Audit and review
To answer the question posed earlier and devise a new policy for the UK at group head office level, in 1990 RTZ conducted a thorough review of activity with the help of external consultants. A comprehensive audit revealed the results of “doing good by stealth” over many years. Simply responding to requests with mainly small donations had dissipated the programme, robbing it of coherent themes. Publicity had been deliberately shunned, so the scale of the programme was hidden.
RTZ decided to re-focus the programme, recognising it would take several years to shed old commitments and take on new projects, and so to change external attitudes, a shift the company believes is now paying off.
The new approach centres the UK-based programme run from head office around four subjects, with a strong underlying theme of “youth and excellence”:
1) education – to develop the talents of young people and to broaden their education experience, with special emphasis on the understanding of science and technology and in support of higher education and research;
2) the arts – to support excellence, particularly in developing the talents of young people and fostering international cultural exchange and understanding;
3) the environment – to support voluntary initiatives which conserve, replenish and improve the physical environment;
4) world affairs – to promote debate and understanding of international affairs.
Strategy for the UK
Increasingly in the UK the debate about community affairs centres around “mainstreaming” – directing programmes towards employee questions, corporate positioning or even brand image among consumers. For RTZ, with no consumer sales and few head office staff, the strategy is in its purest state: how to fulfil the responsibilities of being a good corporate citizen as a national institution, rather than a part of a local community. So the aim is to address issues of national concern, relevant to the company’s interests.
For example in the arts, rather than sponsor (say) a major exhibition, a £370,000 training scheme channels support to five leading arts institutions to ensure young people who would otherwise miss out receive arts education, with an annual festival to offer them a showcase on graduation. (See Arts News Round-up above for further details.)
Management
The head office community affairs unit is comparatively small, with two people largely devoted full time and others drawn in as necessary. They manage a programme with more than 50 individual projects worth over £5,000. Project approval above £25,000 is done by a Community Affairs Committee of heads of department, with a sub-group of three giving approval in the £5,000 to £25,000 range.Projects less than £5,000 are authorised by the Community Affairs Manager alone.
In addition to managing the UK programme, the community affairs team at corporate HQ has a wider role within the Group, at two levels: first, as a setter of best practice, encouraging and informing rather than prescribing; second, as an innovator and risk-taker, supporting experimental projects which can then be replicated to the rest of the group. The four policy areas are not mandatory across the group, but individual operating companies are encouraged to draw from it according to local priorities.
Communication
The policy until the 1990 review was not to seek credit for donations, a not untypical approach. RTZ came to see that this was not the most responsible use of shareholders’ money. There was also the possibility of a loss of discipline in decision-taking. The policy now is to take credit where appropriate, without being seen to brag. An explanatory booklet and video has been produced and a mailing programme to key opinion formers undertaken. With a coherent and focused programme and a story to tell, RTZ is gradually seeking a higher profile.
Knowledge and reputation of the community affairs programme have been tested in comprehensive external opinion surveys. These reveal the long term consequences of failure to communicate, with investors, who have enjoyed regular information about community affairs, giving a markedly better rating than other external audiences.
Evaluation
Apart from external communication, RTZ is only just starting to tackle systematic evaluation, conscious – as are many others – of the practical difficulties. New commitments are only entered into after careful appraisal of their potential to meet the policy objectives. This provides a basis for monitoring and corrective action at the end of the first year when two or three year funding renewal is considered.
One hallmark of RTZ’s approach is the desire to build, at the outset, a close relationship with funded organisations, based on trust and common understanding. For example, the Community Affairs Manager aims to meet the organisations at their own premises. An onerous commitment, it has the effect of showing genuine concern, giving the lie to lingering suspicions that community affairs is “just PR”.
Future challenges
Internally the challenge for RTZ is to keep momentum going once the initial restructuring is completed. Partly this will come from evaluation, with the time taken in monitoring being one impetus towards a restructuring of the programme with fewer projects but enjoying larger donations. Partly it will show itself in the need to keep abreast of changes in the salience of issues in the chosen themes, whether education, environment or world affairs.
There is a challenge too within the group. Trans-nationals are often much maligned, but the best have a strong record of bringing the highest standards to every country of operation. Environmental practices are much in the news; for example, RTZ requires local operations to apply best contemporary practice worldwide in protection and technology standards regardless of local, lower, regulations. Many corporate HQs, RTZ included, are reluctant to be heavy-handed with local day-to-day operations, but there is a role in setting standards, providing training and sharing best practice, as much in community affairs as in the environment. Indeed in RTZ’s case, some of the most long standing community involvement programmes are not in the UK at all, but in Southern Africa, so it is a two way process.
Conclusion
Clear from RTZ’s experience is the time it takes to reverse the consequences of a failure to communicate. Even two years after a full scale review, perceptions of RTZ’s community affairs lag behind reality. That will gradually change. The real question now for RTZ is whether, having sorted out its own back yard, it can use its experience to enhance community affairs practice worldwide, helping others in the countries where it operates. Arguably, trans-nationals that have strong reputations for corporate social responsibility in the UK and the US should take the lead in spreading best practice and understanding across the globe.
FactFile
The RTZ Corporation plc
Year ended 31 December 1991
Chairman: Sir Derek Birkin
Main business: mining of metals, industrial minerals and energy resources, predominantly in North America and Australasia
Turnover: £4,885m
Profit before tax: £562m
Employees: 73,495
FT top UK 500 ranking: 17
Declared charitable donations: £987,000 (UK only)
Declared total community contribution: £9.2m (worldwide);
COMMENTS