By Lonneke Roza & Karoline Heitmann
Lonneke Roza was an Assistant Professor of Business-Society Management at Rotterdam School of Management, Erasmus University, (RSM) and is now Community Investment Manager International for international asset manager NN. Dr Roza’s research is mainly focused on employee engagement in corporate citizenship and corporate social investments.
It’s no secret that corporations have started to understand the role they must play in our wider society. The current pandemic has further accelerated this awareness, shining an undeniable spotlight on the interconnectedness of business and societal well-being. Sustainability and Corporate Social Responsibility (CSR) have taken on more importance in the daily operations of companies globally, often cascading throughout organizations and accompanied by a more prominent position in annual reports and other corporate communications.
However, most of these activities to date have been closely tied to the concept of shared value and the subsequent search for the sweet spot in which business success and social impact go hand in hand. Yet, is this really the best and only way to help society? The answer is no – these strategies inherently deprioritize social investments that have no clear business case (yet), independent of their societal importance. For this reason, we are now seeing a growing prioritization of corporate social investment strategies in which social impact is the main decision-making factor. And this type of strategy is best exemplified by looking at corporate foundations.
Social impact at the very core
Sustainability and socially responsible initiatives often marginalize social impact to financially interesting activities for companies. Corporate foundations, however, have social impact at their very core by choice and by design, including their fiscal and legal status. They are focused on public benefit instead of private benefit. At the same time, corporate foundations have an inherent relationship with their founding company. They may share the same name, and they may have inter-related trustees, administration and even employee secondment. But they operate independently from the company’s business interests. This enables them to leverage corporate resources such as funding, expertise, networks or time in a manner that best serves society.
Corporate foundations therefore provide a unique contribution to the UN’s Sustainable Development Goals, making a real effort to fight the largest global challenges such as poverty, human rights and the environment. They provide social purpose organizations such as non-profits, charities and/or social enterprises with tailored financing (in the form of grants and soft loans), and non-financial support (such as corporate volunteers, corporate knowledge, expertise and technology). They also manage and measure their impact.
Increased agility and collaborative solutions
It’s true that companies have been setting up corporate foundations for years, and that this is nothing new. What is changing is the role that these foundations take in companies’ overall impact strategies. For some companies, a foundation represents their overall moral conviction to give back to society, especially to the most marginalized and vulnerable. For example, Lloyds Bank Foundation aims to help Britain prosper – aligned with the purpose of the bank.
It addresses the most pressing and complex social issues in Britain and Wales, such as domestic abuse, homelessness and mental health. These issues will never be truly solved by market-based solutions. Nor are these issues of direct interest to the bank. However, they are at the core of societal well-being. For other companies, a corporate foundation is a strategic partner that can pioneer bold and transformative social solutions that may even have potential long-term business relevance. An example here is Syngenta Foundation for Sustainable Agriculture, which used expertise from the related company to develop a new and innovative farming technique for pre-commercial smallholder farmers in Africa. This helped strengthen their financial self-sufficiency while contributing to stable food security. The foundation operates in areas that have no business value yet. However, it strengthens smallholder farmers’ overall position in the agricultural ecosystem, which is of long-term relevance to the industry in which the business operates.
Independent, yet aligned
Many companies and corporate foundations increasingly align on key strategic themes while focusing on stakeholders that lie beyond the company’s direct focus. KPN Mooiste Contact Fonds (KPN Foundation) is a great example here. The foundation is related to the telecommunications company KPN, and aligns on the overall aim of the company to make human connections. They collaborate with schools across the Netherlands to make sure that all children with long-term illnesses in the country can have a real-class experience with their classmates, so they don’t feel isolated and lonely. When financial institution ING transitioned their business model towards digitalization, the ING Netherlands Foundation committed to supporting the inclusion of those who have difficulties keeping up with a digitalized society beyond the
company’s core business and interests. Likewise, the foundation of insurance and asset management firm NN Group supports those who have problematic debts. In all cases, corporate foundations go beyond the direct stakeholders of the company. Serving direct business interests is strategically and legally beyond their scope.
Expertise and experience at the helm a must
Companies who wish to emulate these approaches must understand that they require real expertise and experience to succeed. They can’t simply rely on an empathetic employee who wants to “try something new” or “do something meaningful” to run their corporate foundation. Yes, these types of motivated employees are invaluable for staffing, but a successful foundation will have people at the helm who are
comfortable in bridging the commercial world with the social sector, NGOs, charities, governments and more. They must be able to operate in a hybrid world between the market and society, with sometimes conflicting needs and timelines.
Businesses are accountable for societal resilience
As the global business community gains an increasing awareness that resources are finite and that unlimited growth is a myth, companies are starting to see that marginalizing society is not good for business. Times are changing. Businesses that want to flourish in this new society must increasingly acknowledge that they are equally responsible for investing in its resiliency. They need to go beyond commercial impact strategies to embrace those that demonstrate more social impact.
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