Why do corporations “give back” to the community? Is it blatant PR, designed to build an image of caring that bolsters the bottom line? Or is it out of a sense of responsibility for the community, a sense that each corporation must play a role in bettering world of its employees and customers? Does it matter? Not really, says Benn Konsynski, professor of decision and information analysis at Emory University’s Goizueta Business School. What does matter is that Americans are clearly expecting stronger community involvement from corporations than before the events of September 11, 2001, and the implications of negative corporate citizenship may be profound. This trend now has many corporations evaluating their “sustainability” in the marketplace.

 

According to the 2002 Cone Corporate Citizenship Study, 89% of Americans say that in light of the Enron collapse and WorldCom financial situation, it is more important than ever for companies to be socially responsible. “Clearly we were renewed in our social vigilance by the events of September 11^th and enraged by the excess of corporate greed that manifest itself in the halls of Enron, WorldCom, and other corporate environments,” says Konsynski.

 

In the Cone study, a full 91% of those interviewed stated that if a company has a negative reputation for corporate citizenship, they would consider switching to another company’s products or services. More than 80 percent would speak out against the company among family and friends, refuse to invest in that company’s stock, and refuse to work at that company.

 

In contrast, a reputation for community involvement brings forth a host of benefits: improved employee skills and training, increased employee teamwork, development of employee leadership skills, development of the local labor pool, the ability to better recruit and retain employees. Professor Konsynski notes that no impact is greater than the influence on corporate reputation. For these, and other reasons, corporate social responsibility is weaving its way into more and more business plans. Volunteerism is the primary method used by corporations to enhance their brand in the community. But Konsynski adds that the services and volunteer work should be the byproduct of the company culture. “Let the culture be the story,” he says.

 

Volunteerism at Work

 

The General Electric Company is one corporation that has long followed this path. According to the company’s Web site, GE contributed more than $120 million and more than one million volunteer hours in 2002. This includes involvement from the GE Foundation and GE Elfun, a community service organization of 40,000 GE employees and retirees in more than 90 communities worldwide.

 

“We really haven’t made any changes to how we’re doing business today, in relation to how we were a couple of years ago,” says Donald R. Ramon, president and chief executive officer of Monogram Credit Bank of Georgia, part of GE Consumer Finance, a unit of General Electric Company. “It’s always been a major push from a GE perspective, especially from the Consumer Finance group in which we operate.”

 

“The business plan is one reason,” he continues. “But it has been proven through our data surveys and so forth that our employees respect and really like the fact that we are active in the communities in which we operate. That is on a global basis—it always shows up as something that is important to the organization. The second piece is, being an active part of the community helps get our word out there to everybody and basically helps our brand image. It helps us to be a global employer of choice. People look at us as a company that cares, so people want to work for us.”

 

Because GE’s Monogram is an FDIC insured bank, it has responsibilities to the U.S. government’s Community Reinvestment Act (CRA) that reach beyond volunteerism. CRA was established in 1977 to encourage depository institutions to help meet the credit needs of the communities in which they operate. As with any government act, it requires extensive record keeping.

 

Ramon says his company doesn’t see this as a hindrance. “I think a company could see it that way. But if you have corporate citizenship basically woven into the DNA of your business, it is really not a challenge at all to go out and meet the needs of your community.”

 

“From a corporate investment perspective, it gives us an opportunity to broaden our reach,” says Brenda Hillman, vice president of Community Reinvestment for GE Consumer Finance’s division. GE has traditionally been a strong advocate of education. “We looked at education in these communities and discovered that financial education is critical,” says Hillman.

 

“One of our key partners is Habitat for Humanity,” Hillman continues. We go beyond constructing the house with volunteers. We also provide financial instruction for the family from a holistic standpoint. It includes the entire process of understanding money and how money works: how to interface with financial institutions, how to understand the role that banks play in our lives and the benefits.” The company also works with high school students, hoping to instill strong credit practices before they become young adults.

 

Atlanta-based ChoicePoint also integrates its business plan with its community work. The company, which provides decision-making intelligence to businesses and government, takes advantage of the technology it already has in place to help nonprofits better serve their communities.

 

“We’re very unique in how strategic we are,” says Lauren Waits, vice president of Corporate Giving at ChoicePoint. “Many companies say that they are deploying their charitable resources in a way that is aligned with their business interests, but only a few of them have been able to get as specific as we have. That’s really because we have unique information skills. We feel we have a special responsibility to contribute the things that only ChoicePoint is able to contribute.”

 

ChoicePoint Cares is the umbrella term the company uses to describe a toolkit comprised of three different initiatives: modest cash grantmaking, an employee volunteer program, and the largest program--the inkind contribution of information products and services to nonprofit organizations.

 

A program known as VolunteerSelect offers a 90% price reduction on comprehensive 50 state background checks in order to ensure that potential volunteers have no history of dangerous offenses or convictions. “Since 2002, we have screened more than 650,000 volunteers across the country,” says Waits. “Of those, we identified more than 15,400 felony criminal convictions; 750 of those were violent assaults of one form or another. We found 41 registered sex offenders and were able to keep those people away from children.”

 

Another ChoicePoint information program provides DNA testing for backlogged rape evidence collection kits. “While we’re not doing this one pro bono,” says Waits, “we have organized a private fund to pay for testing of evidence kits by making grants to police departments and crime laboratories across the country. There are at least 350,000 DNA evidence kits stored on police department and lab shelves in the United States. We believe if all of those were tested, approximately 70,000 criminals would be identified today.”

 

ChoicePoint also works with the Georgia Innocence Project to help free the wrongly convicted, and partners with the National Center for Missing and Exploited Children. “By contributing our data, we helped bring home more than 800 missing kids,” says Waits.

 

“We hope we’re setting a model for other companies,” she continues. “Given the massive volume of information and data sources that are being stored and managed in the United States, we really hope that this is just the beginning of a much larger effort to make that information relevant on a charitable basis. We hope that we’ve proven that it can be done. Next, we want to understand what the ultimate effect will be over time.”

 

The Triple Bottom Line

 

The trend toward sustainability, says Professor Konsynski, reaches much further than volunteerism. It recognizes a triple bottom line: economic, environmental, and social values. A recent survey by PricewaterhouseCoopers LLP (PwC) examined the U.S. business community’s understanding and development of sustainable business practice. PwC revealed, “the ‘triple bottom line’ approach is rapidly taking its place along the financial one, and will increasingly be regarded as an important measure of value.”

 

Indeed, 70% of the survey respondents indicated they were currently reviewing their corporate governance or ethics programs. “Responsible corporate behavior—whether defined to include sustainability or not—is based on effective corporate governance. A company cannot hope to behave responsibly, or sustainably, if it does not have effective internal controls—the programs and processes, checks and balances—to identify and systematically achieve responsible, sustainable outcomes,” PwC reports.

 

Three-quarters of the survey’s respondents indicated that they have adopted sustainable business practices. Their top three reasons were: enhanced reputation (90%); competitive advantages (75%); and cost savings (73%). Of the quarter saying they have not adopted sustainable business practices, the top three reasons were: no clear business case (82%); lack of key stakeholder interest (62%); and lack of senior management commitment (53%).

 

“The PwC report is one of the leading guideposts in helping companies get a handle on how to approach preparation for sustainability,” says Konsynski. “It is also a bellwether on attention and interest, and clearly to this point the attention has been in the large organizations. Those that have an immediate perceived need to communicate what they do are either reflecting from pressure in the market, or perceived potential in the market.”

 

The larger corporations are leading this movement, says Konsynski, including companies like General Electric and UPS. These are the mature reports. Many more corporations will issue their own reports on sustainability, a tricky process because such transparency invites distracting scrutiny. “Typically, first versions of these reports are grabbing the obvious,” he says. “You go through phases. The first phase is taking the low hanging fruit, and that may not be a comprehensive understanding and appreciation of who they are and what they do, nor is first issue a reflective or cathartic assessment.

 

“So the next round—the second, third, and fourth rounds— drill ever deeper into the true dimensions of contribution and neglect as well. Whether it is self-reported is less relevant than the fact that they are made aware of it inside their own enterprise. The process is more important than the product. The end game of the sustainability report is much less important than the fact that it is raising the consciousness and inquiry of the enterprise and the boards, the senior management team, the managers, and the workers and shareholders.  Everyone wins.

 

Steve Walton, professor in the practice of decision and information analysis at Goizueta, compares the sustainability movement to that of the quality movement in the 1980s. “A lot of the arguments that are taking place right now about the environment are the same arguments that took place about 15-20 years ago about quality. If you just change the word quality to environment, that pretty well describes the way people are thinking now,” he says. “It took almost an industrial crisis—the Japanese auto industry—coming in and cleaning our clock before we recognized that quality could be done in a fashion that was both good for the customer and good for the company. That same sort of crisis hasn’t taken place in American business yet.”

 

Konsynski adds that there is a long way to go, as most businesses are just getting started. “Right now it is perceived as an onerous task. And in the future I think it will be perceived as a byproduct of strategy and a byproduct of strategic thinking and a byproduct of reporting on execution of strategy. Delivery of strategy. In many companies it is going to start as reflective reporting, and it will move over to be a parallel part of the forward view.”