Citizenship Becoming Strategic Issue at Leading Companies
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Citizenship Becoming Strategic Issue at Leading Companies

Once seen as a purely philanthropic activity—a source of general goodwill, with no bottom-line consequence—citizenship is becoming a central concern at leading companies, according to a new report released by The Conference Board.

Paul Holmes

Once seen as a purely philanthropic activity—a source of general goodwill, with no bottom-line consequence—citizenship is becoming a central concern at leading companies, according to a new report released by The Conference Board.

More and more companies are accepting corporate citizenship as a new strategic and managerial function, with bottom-line repercussions, that requires their attention.

Nearly 90 percent of corporate managers report that their companies have a citizenship goal as part of a statement of core values or business principles. And while traditional corporate relations, community affairs, and contributions programs predominate, an emphasis on a broader citizenship approach, including the environment and sustainable development, is emerging as a new model.

The reasons include globalization as a result of the worldwide expansion of business, private enterprise, and the market economy; and heightened expectations from consumers and society that business can and should fill needs formerly left to governments, and should better align shareholder and stakeholder interests.

“In the U.S., citizenship had often been viewed as synonymous with corporate contributions and philanthropy,” says Sophia Muirhead, senior research associate at The Conference Board and author of the report. “In countries where there is not as much of a contributions infrastructure and tradition, however, corporate citizenship is viewed and practiced from the perspective of how business operations and citizenship performance interact.”

Managers report that their top citizenship priorities around the world are employee health and safety, sustainability, equal opportunities/global diversity, and globalization of contributions. About 60 percent of managers say that these and other citizenship activities have led to goodwill that opens doors in local communities, and an enhanced reputation with consumers.

As U.S.-based corporations expand globally, their contribution programs are struggling to find a new balance between the traditional focus on local community programming and the need to establish a global presence. Forty-two percent of surveyed companies currently have an international giving program and another 10 percent plan to implement a program in the next three years.

However, CEOs are divided about what roles their companies should take. Forty-two percent of CEOs surveyed expressed preferences that their companies be a partner in citizenship programs, 33 percent said they’d like their firm to be a leader in such efforts, and 25 percent said their organizations should be simply supporters of the programs.

Although 68 percent of managers cited the link between citizenship and performance appraisal as “increasingly important,” 57 percent of managers say their companies do not yet have appraisal systems built around their professed recognition of citizenship’s significance.

Although most companies report established ties with at least some stakeholders, the trend is toward more systematic and open relationships, especially as the bar of expectations for social responsibility and sustainability goes higher. The tradition of “managing” stakeholders is giving way to a new model that focuses on “meaningful engagement,” according to the report.

Responding to the public’s interest in corporate social and environmental activities, a growing number of international organizations, industry associations, NGOs, and citizens’ groups have developed codes, principles, standards and guidelines—such as the UN Global Compact or the Sullivan Principles—designed to encourage particular types of corporate conduct.

While some companies view the proliferation of codes as onerous, inefficient, and potentially costly, advocates say that by embracing such standards, companies can protect and enhance their reputations, insulate themselves from demands to sign other statements, establish management’s commitment to stakeholder confidence in the company, and demonstrate their emphasis on prevention rather than corrective action.

Only 20 percent of responding managers answered questions relating to global business conduct standards. The remaining 80 percent ignored them. Accoding to Muirhead, “This suggests that only a small number of participating companies have seriously considered endorsing the major global citizenship or business conduct standards. In fact, while companies are willing to endorse or support a set of principles, statements of adherence—particularly those requiring third-party verification—are much more rare, as are formal declines.”

Managers say citizenship challenges during the next three years will include growing one global identity, integrating with business decision making, and measuring results.

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