David Logan describes the work of the London Benchmarking Group in devising a new approach to reporting the totality of a company’s community involvement.
A company is an integral part of the community. Its foremost contribution is in providing goods and services and thereby creating jobs and paying taxes. Traditionally good corporate citizenship was about managing the business ethically and making and an additional voluntary, usually charitable, contribution. Today companies’ relationship with the community is more complex, the motivation for involvement more diverse, including:
a sense of moral and social responsibility corresponding to social expectations;
a belief that it has a long term interest in fostering a healthy community;
the knowledge that community interventions involving employees, customers and suppliers can have direct benefits, through increased profitability, stronger company image, reduced costs, better employee morale and improved customer loyalty.
In the light of these changing motivations, six leading UK-based companies came together in 1996 to examine how they manage and measure their CCI programmes, seeking to learn from each other and explore common definitions and performance measures. The group of companies (BP, GrandMet, IBM, Marks & Spencer, NatWest and Whitbread) took the name the London Benchmarking Group to differentiate itself from a similar grouping of 16 companies meeting in the United States. Because of the level of interest in its findings, the group agreed to publish a report, Companies in Communities: getting the measure which appeared in March.
The three motivations for CCI cited above provide the basis for a new approach to reporting the totality of a company’s community involvement, based on three headings (see illustration):
charity, corresponding to moral and social responsibility;
social investment, corresponding to long term corporate benefits;
commercial initiatives, corresponding to bottom line commercial benefits.
New template
Under these headings, the London Benchmarking Group has created a new template to report in detail individual community activities, including those beyond traditional charitable giving, and to draw together the totality in a common form. It provides clear definitions for each type of activity, specifying how the costs incurred (inputs) are to be valued. It acknowledges that the management costs must be included. For some companies, this template increases considerably the amount of community contribution they can report, although it does not require companies to compute a grand total figure under all headings if they do not desire. It is not designed to replace established methods of reporting, rather to expand and complement them.
Input costings
In more detail, under charity comes contributions which respond to local or national appeals to support good causes. This will include sundry donations and social sponsorships not part of a marketing strategy. It will also include general matched giving, backing staff volunteering or fundraising, where this is responsive.
Under social investment comes the costs of sustained involvement in issues important to the company. This will include grants or donations where the money is invested to achieve specific agreed goals. It will also include secondments and other contributions which are focused on goals and sustained.
The third category is commercial initiatives as partnerships to promote and protect commercial interests, and will include sponsorships, cause-related marketing and community assignments for staff development.
In addition, the programme management costs should be included, covering the salaries, benefits and overheads of staff fully or partly engaged in managing community relations.
Output and impact
So this four part template allows a more comprehensive valuation of the cost of inputs to the programme but it also goes further, to cover what the programme achieves. Outputs, or at least examples of them, are plotted on a matrix against input costs. Such outputs are defined in terms of:
leverage of cash and resources from other sources drawn in by the programme;
the social impact, such as the number of people in society who benefit;
the business benefit which accrues.
Examples of leverage are the cash generated from a marketing campaign on behalf of a charity or government funds attracted to a local community by the company contribution. An indicator of social impact is the number of young people gaining jobs from a company supported training scheme. Business benefits would include enhanced reputation and increased sales during a cause-related marketing promotion.
Comparing input costs and outputs achieved between companies allows a judgement to be made about the effectiveness of community involvement programmes. Including programme management costs, as this model does, allows a judgement about efficiency. An example from among the benchmark group of companies is Whitbread which engaged retired managers in the regions to advise pubs and restaurants on local community relations at very low cost.
Reporting
One of the primary benefits of better recording of information is internal, from improved management control. But given the growing public scrutiny of companies, many will want to use the framework to improve external reporting, each deciding the level of detail appropriate for them. This format encourages consistency which facilitates benchmarking.
Up until now, the main comparison was the input cost of total community contribution against pre-tax profits, with 0.5% being the norm for the minimum acceptable. This measure suffers from weaknesses:
because of profit fluctuations, only an average over the business cycle is truly meaningful, not a one year figure;
the scale of voluntary effort by staff and by customers, facilitated by the company, is not captured in a single figure for the company’s own contribution; a figure for the whole company can hide wide national variations within international groups.
The broader approach adopted by this methodology overcomes these problems. It goes beyond narrow philanthropy to include the good citizenship aspects of the whole business. Ultimately a common basis for monitoring, measuring and reporting helps managers make the case for expanding and diversifying their activities, benefiting business and wider society.
For copies of the full report, price £50, contact Profile Corporate Communications on 0171 222 2121. Companies interested in spreading the use of this model are invited to contact David Logan of Corporate Citizenship International on 0171 836 6132.
Corporate Citizenship Briefing, issue no: 33 – April, 1997
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