Taking up the cause of Corporate Social Responsibility is increasingly seen as a powerful way of building brand equity and ‘giving back’. But can we equate reputational value with figures on the balance sheet?Are we pursuing a ‘fire and ice’ equation for which there is – at best -a marginal financial return? Do we fully understand the complexities that a CSR programme can impose on the business? Associate Editor Zenifer Khaleel evaluates.
Corporate Social Responsibility may be a relatively new concept in the UAE but it has been growing at an enviable rate.
Companies are beginning to understand the viability of CSR as not just a means of accomplishing goodwill and brand value, but also as a measurable and concrete way to enhance shareholder engagement. Today, CSR is considered to be vital for the functioning of any major company and essential element of their value proposition. Over the years, CSR has emerged from a simple act of patronage to a complex set of principles that signifies nearly every interaction a company has with society. It has garnered the power to dictate how companies can make profits and what to do with those profits. It goes beyond philanthropy and addresses how companies manage their economic , social and environmental impacts, as well as their relationships in all key spheres; the work place, the marketplace, the supply chain, the community and the public image. Most importantly, it has also embraced the ‘sustainability’ agenda with enormous ramifications especially for larger corporates.
Without doubt, the companies that can integrate sustainability effectively in their operations will be the most successful in attaining shareholder attention and interest. Climate change, alternate energy solutions, economic development, education,healthcare, human rights, protecting ecosystems, etc are the enormous challenges faced by the world today. Businesses that are the most innovative in finding solutions to these global problems willeventually turn out to be the most profitable too.
CSR and financial performance
The relationship between CSR and financial performance has also gained prominence by the substantial rise of CSR practices in the GCC region. Companies engage in CSR because they think it will be good for their profit margins. The challenge, however, is to develop an approach that can deliver substantial results both for the company’s image and in the balance sheet.
A few trends observed by companies involving in CSR are
- Corporations are trading not on products or services but on their reputations, brand value,‘goodwill’, and ‘intellectual capital’. These are termed ‘intangibles’ and have an actual numerical value on the company balance sheet.
- Having a CSR activity means the company is a ‘safe bet’ for investors as they are compliant and conscious of governing laws and regulations. Many investors consider ‘socially responsible’ companies to be more secure investments.
- Companies will go to great lengths to appear socially responsible so that the morale of employees are boosted.
- A company can position itself as the market leaderin its field, by taking up CSR as a strategic business policy.
- Ultimately, CSR can save money. Some environmental measures such as minimising waste or saving energy can also reduce operational costs. These measures are often prioritised by companies as part of their operational policy.
- A healthy and ongoing CSR activity has more impact than a heftily priced advertising campaign.
Over the years, CSR has emerged from a simple act of patronage to a complex set of principles that signifies nearly every interaction a company has with society.
ENOC Group – a champion of CSR in the country
Emirates National Oil Company (ENOC) is a pioneer establishment in the UAE which aims to promote year-round CSR activities of varying levels. In 2013, they conducted 29 key campaigns touching all aspects of life; like
- Hosting international students on knowledge sharing
- Visiting environmental conservation activities as part of Earth Hour
- Promoting women empowerment by organising International Women’s Day
- Supporting the IPC 2014 Power lifting World Championship organised by the Dubai Club for the Disabled, among others
This April, they were accorded with the CSR Label Award presented by the Dubai Chamber of Commerce & Industry for excellence in undertaking initiatives that make a difference to the community and the world.
Noaman Al Saleh, CSR & PR Manager of ENOC states that “CSR is the core responsibility of ENOC to the society and environment to pursue its corporate value enhancement through innovation and sustainability. It holds a holistic return financially and morally. There is a set budget for CSR activities and campaigns. Those are all imbedded within the budgeted sheet which entails other activities too. It may take a little more effort to plan and incorporate CSR activites on an ongoing basis. But ENOC strongly believes that all that ‘profit’ is not necessarily meant only for the balance sheet”
Most recently, ENOC has rolled out “Human Fuel”, its most ambitious CSR campaign, by partnering with United Nations World Food Programme (WFP) and Dubai Charity Association to raise funds to support the activities of the two organisations to address global hunger.
A few CSR guidelines
Many companies start small with CSR as just a way to garner some publicity with activities that are quick and easy to implement. CSR strategies can be improvised and managed in a more professional and profitable approach. The greatest opportunities for CSR will arise from areas where your nature of business regularly interacts with. Concentrate your efforts on those key areas so that time and resources can be utilized more effectively. This way, the business can gain a deeper understanding of the mutual dependencies and attain the highest potential for mutual benefit that exists.
Organisations have to find the right partners who benefit from your core business activities and capabilities so that you can benefit from them in turn. Partnering is easier when there is a quotient of mutual advantage as there is greater motivation to realize the substantial benefits. Relationships – particularly long-term ones that are built on a realistic understanding of the true strengths on both sides—have a greater opportunity of being successful and sustainable.
Notwithstanding, CSR activities do not have many tangible benefits or vivid outline policies. Companies that indulge in CSR as a feel-good or quick-fix exercise, run the risk of missing huge opportunities for both the business and society. A meticulously planned, step-by-step approach should be implemented by leaders, to reap the true benefits of CSR. It may cause drastic rearrangement and reallocation of company personnel and resources. It may also call for more demanding time schedule, a shift in mind-set, greater focus, added work pressure and long-term commitment. But the rewards are potentially much greater for all entities involved, viz organization, employee and the society.
The impact of business on society is directly proportional to the benefits accrued from the society and the mutual responsibilities that this entails. CSR is a very handy tool to increase trust in businesses, enhance customer choice of product or service and improve reputation with suppliers. Being socially active and aware also increases employability as the next generation of leaders will choose employers whose values match their own. Many companies have recognized that CSR has to be implemented on strong foundations within the company and as a commitment to the society.
Around the world, traders who analyze their share value have understood that corporate social responsibility has inherent value for a company. While it may not be clearly quantified or accountable in exact currency figures, the general trend toward greater corporate engagement in social issues is one that will have long-term impacts on the company and the community at large.