Lawrence Nicholson For family businesses, corporate citizenship should be more than philanthropy
December and Christmas in Jamaica are about sharing, and there are usually long lines of various entities, charities and individuals expecting to be the beneficiaries of the generosity of businesses.
Many family-owned businesses, FOBs, in Jamaica consider their giving at Christmas as the sum total of their corporate social responsibility, or CSR. This has led to many measuring the contributions of FOBs mainly by their ‘handouts’ or philanthropic giving during this time.
This is unfortunate and must be corrected. A closer look shows that this perception is perpetuated due to the unstructured and ad hoc approach to CSR by too many FOBs. As important and gratifying as handouts or philanthropic giving is, CSR is more than this, and it’s time for FOBs to take a more strategic and structured approach in an era where CSR has moved from a ‘nice to have’ to a ‘need to have’ component of successful businesses.
Corporate social responsibility, also called corporate citizenship, refers to a self-regulating business model employed by a business to guide social accountability to itself and its stakeholders. CSR spans four imperatives: economic, environmental, social and ethical.
The European Commission defines CSR as “the voluntary integration by companies of social and environmental concerns in their business operations and in their interaction with their stakeholders”.
A 2011 revision of this definition places emphasis on the need for companies to “integrate social, environmental and ethical concerns, in relation with human rights, and consumer concerns in their business operations and core strategy”. It is clear from this that CSR is expected to be integral to the strategic framework of the company, and not treated as an add-on, unrelated to its overall mission and vision.
While there are FOBs that have taken a structured and strategic approach to CSR, too many have adopted an ad hoc and unstructured approach, thus denying themselves the benefits that can be gained. This is not to suggest that there are no downsides to CSR, but researchers agree that the benefits outweigh them.
The disadvantages of CSR include the high cost that is needed to implement a successful programme, the resistance from family interests and other stakeholders, the chance of losing sight of the core areas of the business, possible damage to public image if not properly implemented, and the danger of promoting ‘greenwashing’. However, the disadvantages can be neutralised with a strategic and structured approach to corporate citizenship.
There is a long list of benefits to FOBs that can be gained if a structured and strategic approach to CSR is adopted. These include the following interrelated benefits:
o increased profitability and value;
o improved visibility, image and branding;
o increased employee engagement;
o positive business reputation;
o increased opportunities for investment;
o increased scope to attract and retain qualified employees;
o operational costs savings;
o increased customer retention and loyalty; and
o easier access to capital.
It’s instructive to have a closer look at three of these benefits:
Increased profitability and value: Having a policy that targets energy efficiencies and waste recycling can lead to reduction in operational costs, and benefits the environment. Given the current trend of preserving the environment, this could lead to increased external interest and investment in the business, and result in a gain in stock value.
Improved visibility, image and branding of business: CSR activities usually reflect positively on the image and branding of a business, leading to increased goodwill that arises from consumers choosing to be aligned to businesses based on their social and environmental impact. This can lead to competitive advantage for the business in an age where customers are insisting on businesses having policies that address environmental, social and human-rights issues. Brand recognition is critical in the era of social media.
Attracting and retaining qualified employees: A number of FOBs have had the challenge of attracting and retaining qualified employees, due, in part, to the misconception that family-owned businesses are only internally focused and eschew external engagement. A well-coordinated CSR programme can help to erase this false narrative and help lead to greater employee engagement.
The more engaged employees are, the greater likelihood of wanting to remain with a business that gives them opportunities to contribute beyond their core responsibilities as defined by their job descriptions. A United States-based study shows that benefits from engaged employees include a 17 per cent increase in productivity, 21 per cent increase in profitability, and can lead to 41 per cent lower absenteeism.
This is a call for FOBs to seize the opportunity to maximise the benefits of CSR, which cannot be accomplished by the ad hoc and unstructured approach being adopted by too many family businesses in Jamaica. Kudos to those FOBs that are up and running with a strategic approach to corporate citizenship.
More anon!
Lawrence Nicholson, PhD, is a senior lecturer at the Mona School of Business & Management, University of the West Indies, author of Understanding the Caribbean Enterprise: Insights from MSMEs and Family-Owned Businesses, and a director of the RJRGLEANER Communications Group.Email: lawrence.n.08@gmail.com