Corporate social responsibility (CSR) is no longer a nice-to-have. Increasingly, investors, customers, and governments are asking companies how their activities uplift lives and improve the world. Social investment through charity partnerships is one way that businesses are answering those questions while also improving their bottom line.
Well-managed social investments demonstrate to stakeholders that a company has purpose, is trustworthy, and manages its intangibles such as brand, reputation, innovation, and talent well, according to a 2018 report by US-based research company IO Sustainability LLC and the Association of Corporate Citizenship Professionals.
The report also found that strong social investment indicates to shareholders that the C-suite is strategic, forward-looking, and capable of handling a wide range of situations. Lastly, it suggests that the company has a positive outlook for its future financial performance.
The researchers worked with eight leading companies across sectors. According to their report, when done well, social investments, including partnerships with nongovernmental organisations (NGOs), can deliver up to a 6% increase in share price, a 20% increase in sales, a 13% jump in productivity, a 50% decrease in employee turnover, and a boost to reputation worth up to 11% of a company's market cap.
A mature concept
Businesses have always partnered with NGOs when looking to tackle social and environmental issues that matter to them. Well-known examples include GSK's partnership with Save the Children to help reduce child mortality, the Aviva-British Red Cross collaboration to help communities with disaster preparedness and response, and Lifebuoy's partnership with NGOs to promote hand hygiene. A further example is Danone's partnership with the Ramsar Convention on Wetlands and the International Union for Conservation of Nature to restore natural ecosystems that support disadvantaged rural communities.
Corporate and not-for-profit partnerships are also on the rise. The 2018 Corporate-NGO Partnerships Barometer from C&E Advisory, a UK-based consultancy, has found that 86% of corporate respondents and 88% of NGO respondents see the role of corporate-NGO partnerships growing in importance over the next three years.
Most corporates focus their social responsibility efforts on a specific set of causes. This shortlist typically emerges from one or more of the following: the needs and ground realities where the business operates; reference to larger frameworks such as the UN's Sustainable Development Goals; alignment with the business's core competencies, brand, and corporate values; and long-term benefits for the company.
NGO partners, with their rich grassroots experience, help businesses bring about transformative social change much more quickly than they can achieve on their own, according to Andrew Wilson, executive director, purpose at communications marketing firm Edelman.
The business case for partnership
Businesses benefit on multiple levels from charity partnerships. Volunteer opportunities and internal communication on the journeys and successes of these projects make employees more sensitive to the communities they work in and create goodwill and loyalty towards the employer, according to Manish Michael, the CEO of United Way India.
The 2018 Deloitte Millennial Survey, for instance, found that young people's loyalty towards their employers decreases when they feel that business models continue to give greater priority to the bottom line than to the greater good. Fifty-seven per cent of Millennials hoping to leave their current employer within two years said their companies fixate on profit, compared with a significantly lesser 42% of those who intend to remain with their current employer for five years or more, according to the survey.
Businesses are also finding that earning trust is vital to operating in communities. Partnerships with NGOs that have strong local knowledge and experience in tackling on-the-ground concerns are therefore viewed as a positive step.
Manisha Patil, CSR lead—community engagement at Amazon India, works with NGOs across India in areas such as education and women's empowerment and sees the importance of being a good neighbour. Giving to the immediate community and helping transform lives is key, she said.
For some time now, consumers have been willing to pay more and stay loyal to brands that are seen as ethical and sustainable. Being perceived as a sensitive business that cares about local issues also builds customer allegiance for large companies in distant markets, according to Michael. Additionally, charity partnerships help businesses gain insights into the needs of vulnerable consumers, said Janek Seevaratnam, senior corporate adviser at the UK's Charities Aid Foundation. For example, a power company in the UK is now working on tweaking its offerings as it works with charity partners to help people who are dealing with fuel poverty.
CSR activities also help businesses earn the licence to operate in hard-to-reach markets, Seevaratnam said. The partnership between footwear brand Bata and the charity CARE in rural Bangladesh that trained women as salespeople is an illustration of this, generating livelihoods while also building a customer base in a market with a weak distribution network.
Strategic partnerships with NGOs have also helped large businesses emerge with credibility when exposed to unethical practices along their supply chains, Seevaratnam said. Examples he cited include UK retailer John Lewis, one of whose suppliers was involved in modern slavery, and consumer goods multinationals Kellogg's, Nestlé, P&G, and Unilever, which were found to be sourcing palm oil from a supplier with unsustainable practices. In both of these instances it was the equity these businesses had built through their long-standing charity partnerships that greatly mitigated the reputational risk to which they were exposed, Seevaratnam said.
Choosing the right partner
Once a business has identified a cause and is seeking a charity partner, NGOs may be evaluated on aspects such as expertise and impact, government and local connections in the target geographies, and scalability (see the sidebar, "How to Find the Right Not-for-Profit Partner," below). This is accompanied by due-diligence checks on the financial health and reputation of organisations being considered. External consultants and auditors are often brought on board at this stage to work with in-house legal, compliance, and CSR teams.
While these are important hard measures, the deciding factor that leads a business to settle on a partner is often a shared value system. For Amazon's Patil, values are not up for compromise, and she doesn't move ahead if there are discrepancies in the partner's value process. For instance, when Amazon India was evaluating a pioneer not-for-profit in the area of STEM (science, technology, engineering, and maths) education for girls, it came across what it saw as unreasonable fee increases in schools they ran and certain other beliefs that did not sit well. Consequently, Amazon India decided to look at other charity partners.
In addition, major, recognised NGOs may seem to be relatively risk-free choices that bring greater credibility to an initiative. However, businesses should also carefully consider smaller, lesser- known charities that are doing innovative work, often in niche causes, Wilson said. Microsoft Xbox's partnership with UK-based NGO SpecialEffect to create adaptive video game equipment for people with physical disabilities is one such example.
The most successful corporate-NGO partnerships leverage the strengths of both parties to create unique value. Businesses are adept at developing the quantitative parameters that hold together a good collaboration. According to the latest Corporate-NGO Partnerships Barometer from C&E Advisory, the trend towards strategic partnering for long-term impact is also on the rise, with businesses placing a much greater emphasis on deeper, problem-solving collaborations. Some 92% of businesses also believe that their competencies and noncash assets can help NGO partners more than financial support.
Beyond this, other criteria that define a fruitful cross-sector partnership include shared values, mutual respect, effective communication, and continuous learning.
Because corporates and charities have different operating purposes, they often have different priorities. It follows that a successful partnership is most likely to occur when clear guidelines are laid down at the very start. "The whole reason you are working with each other is that you are both bringing something unique and distinctive to the table. So there needs to be a clear articulation of the end goal in terms of impact, and the fundamental guiding principles that will keep the relationship together," Wilson said.
These include monitoring mechanisms, reporting requirements, expectations in terms of shared resources and engagement levels, mutually agreed-upon communication strategies, and an exit plan if things go wrong.
It is not uncommon for corporates to appoint staff from their departments of core competence to work with the NGO partner. Businesses must also remember that some NGOs may not have the same breadth of resources and skills in areas such as accounting, reporting, and automation. As field organisations, they are very good at delivery and results, but if you do not record consistency of impact, you are not able to measure where you started and how far you have gone, Patil added. Her organisation helps partners put together a process for monitoring and documenting goals. Corporates supplement this organisation-level skill sharing by encouraging employees to volunteer both skills and time to the partnership.
Most notably, respect is the cornerstone of a successful relationship, and businesses need to be cognisant that charity partners bring to the table learnings that are hard to gain in the corporate domain. Through its partnership with the British Red Cross, for instance, Aviva has trained its UK claims team to spot signs of stress when customers call in with flood claims. This means callers can be helped with greater sensitivity. Advocacy and a deeper understanding of public and regulatory policy are among the other areas where businesses can turn to their NGO partners for guidance, Wilson said.
Of course, there is always the chance that, despite the best due diligence and frameworks, partnerships will not evolve in the direction envisaged. According to KPMG's 2016 report Unlocking the Power of Partnership, the exit plan that is put in place at the outset should look at how both parties can move on when needed with no antagonism, disengaging shared systems and resources, but acknowledging accomplishments and lessons for future partnerships.
Shilpa Pai Mizar is a freelance writer based in the UK. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at Andrew.Adamek@aicpa-cima.com.
How to find the right not-for-profit partner
Companies and charities can benefit from a good match.
By Beth McLoughlin
We asked some experts for advice on how companies wishing to partner with or sponsor a not-for-profit can best go about assessing the organisation.
Use online tools
For evaluating US charities, GuideStar (guidestar.org) has a database of 2.7 million not-for-profit organisations, including more than 23,000 charities working internationally, and provides information from publicly available US tax documents.
For UK-based charities, the Charity Commission for England and Wales hosts a Central Register of Charities, available at gov.uk, that lists revenues and expenditures for over 168,000 organisations. Rules governing charities are left to member states throughout the EU, so disclosure requirements vary, and there is no central repository of EU-based charities. Evaluator organisations such as Givewell (givewell.org) and the UK's Charity Clarity (charityclarity.org.uk) offer deep analysis on a limited number of select global charities.
Some charities may have their financial records on their websites, but there are no global standards for how charities account for and report their finances, so it is incumbent on you to perform the research.
Review the information on the not-for-profit's website, understand what it does, whom it serves and why, and try to get a sense of its organisational values to ensure that it aligns with your company's values. Apart from what a not-for-profit has chosen to write on its own website, there is a wealth of information on the internet — everything from reviews by former employees to news reports of past scandals or financial problems involving directors or the organisations themselves.
If you have questions, call the not-for-profit's development director and arrange to speak to the top managers or a board member.
"Asking questions is perfectly legitimate. If you don't like the answer, walk away," said Christopher Cole, CPA/CFF, CGMA, an associate director at the Association of International Certified Professional Accountants who manages the AICPA Not-for-Profit Member Section.
Forget the 'overhead myth'
An overemphasis on what percentage of a not-for-profit's expenses goes towards overhead could be a mistake, said Bunkie Righter, senior director of national sales at GuideStar.
When looking at these figures, compare them with your company's statements about where it is headed, to decide if these expenses are wasteful or an example of ambition to expand the reach of its mission.
Think long term
The chance to use your company's expertise to deliver projects over longer periods may prove irresistible as a showcase for the unique skills your company can offer, as well as provide an opportunity to engage more meaningfully with a charity's work.
Beth McLoughlin is a freelance writer based in the UK.