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Driving change through business CSI
Driving change through business CSI
Over the last 25 years, South African companies have spent around R22-billion on corporate social investment (CSI) projects and today they are increasingly financing projects that uplift South Africans.
Not only does this empower local communities, but it also makes smart business sense for local companies.
While CSI is not directly related to a company’s purpose, the two can be closely aligned. An effective CSI programme has the ability to impact the community it serves, the business that backs it and the employees who drive it.
What companies are investing in
Despite the efforts to recover from the economic shock brought on by the COVID-19 pandemic, South African businesses spent almost R11-billion on CSI projects in the 2022 financial year, according to the Trialogue Business in Society Handbook.
The 2022 CSI spend saw a 6% increase year-on-year, with indications showing that the upward trend could continue into 2023.
According to the report, most companies have indicated a willingness to increase CSI spending over the next two years, with around 60% predicting there would be an increase in resources and budget for CSI.
Some of the favourite causes South African businesses supported were in the education sector. More than 98% of companies gave 44% of CSI expenditure towards education.
Social and community development was the second-most supported sector, receiving 13% of CSI expenditure, with food security and agriculture ranked third with 10% of the CSI spend.
The causes chosen by companies reflected the concerns South Africa faced during the year, said Trialogue Director, Cathy Duff. This included the impact of the pandemic and natural disasters, with many companies focusing on supporting disaster relief and food security projects. Projects with a national footprint were most likely to be allocated funding, receiving 68% of CSI funding, followed by projects in Gauteng (31% of companies directed funding to projects in the province) and KwaZulu-Natal (supported by 28% of companies). None of the companies surveyed supported international projects, down 7% compared to 2021.
“As social investments become more strategic, we can expect to see increasingly localised expenditure, where companies invest heavily in geographies around their operations, alongside more national expenditure that aims to have a systemic impact,” Duff explains.
Why companies are spending on CSI CSI programmes can contribute significantly to the upliftment of the community a business serves, by creating jobs, improving education opportunities, and empowering people through skills development.
CSI programmes are not intended to drive company profit, but they can create benefits for a company. For example, they could lead to an increase in brand recognition, improve a company’s reputation, increase customer loyalty, attract top talent and foster a sense of purpose within the business.
Half of the surveyed businesses said their top reason for CSI spending was a moral imperative, while three-quarters ranked it as among their top three reasons.
The second biggest reason for supporting CSI projects was to meet B-BBEE codes (with 54% of respondents including it as a top-three reason) and thirdly, companies said the programmes improved their reputation (44% of respondents).
However, one of the most valuable benefits of CSI programmes is fostering a sense of purpose in the business. This has been shown to drive measurable economic results, by giving employees a sense of purpose that helps motivate them in the workplace.
In 2022, there was an increase in the number of companies that had employee volunteer programmes (EVPs). Three-quarters of companies (75%) said they had an EVP in 2022 compared to the 71% in the previous year. These programmes consisted of company-organised volunteering initiatives (93%), fundraising and collection drives (83%), and time off for individuals during work hours (72%).
However, a third of companies said their volunteer programmes had been stopped or put on hold in 2022 due to the COVID-19 pandemic.
South African businesses have always played a significant role in contributing to socio-economic upliftment. Increased support of CSI projects has aided in bringing about systemic change and will benefit millions of South Africans in years to come.
INCREASED FOCUS ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) ISSUES
South African businesses are increasingly prioritising environmental, social and governance (ESG) in their business strategy. In 2022, 69% of South African respondents said their company’s overall business strategy responds to ESG issues. This amount sits at 80% internationally.
In addition, 51% of South African companies increased the amount of public ESG reporting they did in 2022.
ESG is a way for investors to assess a company’s likelihood of creating, preserving or eroding their enterprise value creation, along with the larger impact they have on the world. Investors are better able to allocate their capital when evaluating ESG risks as they have an understanding of the long-term resilience of companies.
While ESG has become popular over the last three decades, the concept first gained traction in the 1960s when socially responsible investing was implemented to reduce support for companies aiding the Vietnam War, apartheid in South Africa or unethical industries. In 1997, investors and environmentalists came together in response to the 1989 Exxon Valdez oil spill to create the first accountability mechanism to ensure companies adhere to responsible environmental conduct principles. ESG issues were then included in the 2006 UN Principles for Responsible Investment (PRI) report, where ESG criteria were required by companies.
