Business needs charity as much as charity needs business. While corporate South Africa grapples with what it really means to run a business in an economy that has been downgraded to ‘junk status’, non-profit organisations are taking a closer look at what impact the tightening of belts will have on communities who rely heavily on charitable support to get by.
“While the knee-jerk reaction may be to reign in CSI spend, when times are financially tight you also don’t want to alienate business partners, consumers or employees - in fact research shows that meaningful brands on average gain 46% more share of wallet,” says Michelle Govender, GM: Strategic Marketing at B-Cause, a consultancy focused on cause-related marketing. It may sound soft – but meaningfulness matters in 2017. In fact, meaningful brands outperform the stock market by 133%.
Businesses spent R8.1 billion on corporate social investment (CSI) in South Africa during the 2014/15 financial year. Alarmingly this amounted to zero growth in total corporate expenditure on social development from the previous year. The knock-on effect of junk status and a weaker rand could further flatten corporate allocations to communities in need.
“To the people on the ground, this could have a potentially devastating effect,” says Michelle. “Business is getting tougher, margins are shrinking, and the usual starting place for budget cuts is on charitable giving. However, corporate SA has a lot to gain by maintaining a high profile CSI strategy,” she adds.
The positive impact of CSI for business
In the past 12 months, consumers indicated that 63% bought a product with a social benefit, 53% of people boycotted companies that behaved irresponsibly and 37% researched a company’s support for social issues.
“Junk status means there will be less money for government spending on education‚ health‚ national debt‚ social grants and infrastructure. This is why B-Cause is lobbying for corporates to continue their much needed funding of NGOs during tough economic times. Meaningful brands deliver 100% more outcomes on the key performance indicators (KPIs) and that’s certainly worth considering before slashing CSI budgets,” says Michelle.
It’s a two-way street
“Many social issues are increasing, not decreasing, yet CSI budgets seem to be getting smaller and smaller,” says Richard Allen, CEO of Door of Hope, one of the foremost homes in Johannesburg for abandoned, abused and orphaned babies. “It may still be a little early to tell how the junk status is impacting available budgets, but it would not be a stretch to say that is certainly will.” Non-government organisations (NGOs) realise that gaining share of corporate wallets is a two-way street – the NGOs need to meet the needs of the funder, so that the funder can meet the needs of social development.
Buhle Phiri, Corporate Partnerships Manager of Save the Children South Africa agrees: “We haven’t felt the impact of the downgrade to junk status yet because current budgets are in place, however next year we could feel the pinch – NGOs definitely have their work cut out in coming months. It is vital to show that we are capable and can be trusted. Having good, professional governance and financial practice goes a long way.”
A positive flip-side
Staying positive in the face of adversity is a visible trait of NGOs and their common forward thinking approach is refreshingly upbeat. Many corporates are moving over to the Triple Bottom Line evaluation structure to measure their success by using social, environmental and financial metrics.
“Interestingly, it is the corporate donor that is showing greater integrity and responsibility to the world and its people, that is finding resonance with customers and noticing that their business is well supported because of it,” says Door of Hope’s Richard Allen. He says there is a need for more creativity and innovation in fundraising efforts – “which isn’t easy when you don’t have the manpower, resources, skills or finance to secure such necessities. However, the NGOs that are going to succeed, I believe, are the ones who will find a way to do this and do it well.”
Transparency in the way that funds are used is a major part of negotiating corporate funding partnerships. “We find that funders want their money to go to specific programmes and projects, so that they can see real impact and value in their contribution,” says Buhle Phiri of Save the Children. “In negotiating we often provide a ratio or split in funding according to the request of the funder. For instance, 70% goes to the project and 30% to operating costs. We understand why this is important to them and try as best we can to tailor each project and work with each corporate’s funding requirement,” she says.
Door of Hope stresses that the challenge with operational costs is that they are so critical to the organisation’s success – “we look after babies 24/7 and our biggest expense is salaries for our care-givers who love and care for them, but these costs are often overlooked when it comes to donor funding.” Water, lights, maintenance, insurance and salaries tend to be the biggest funding challenge.
No matter the economic outlook: “We can’t give up,” says Phiri, “it is tough for people in communities out there, so the more hands on deck the better!” She says that the younger generation is very much in tune with the greater good. “We need to tap into these pockets of people who are coming up in the ranks as the world shifts and social media creates platforms for social consciousness more than ever before.”
CSI – a test of business character
The pressure is on for business SA to develop well-managed CSI strategies that deliver social currency, and uplift and empower beneficiaries on a sustainable basis. “This is particularly relevant given South Africa’s massive social challenges and economic disparities,” says Michelle Govender of B-Cause. She says it is important that CSI strategies support business objectives by enhancing relationships with key stakeholders and customers. “There is an opportunity to do good that has real impact and effect, and at the same time, provides the business with a distinct competitive advantage in a parity market,” explains Govender.
In South Africa the corporate sector needs to take a hard look at what defines a successful company and how the CSI budget fits in to reflect this – in these tougher economic times it is a true test of brand and reputational character.