The Purpose-Driven Corporation

The economic downturn hasn't dampened companies' commitments to corporate social responsibility (CSR or CR) programs. Despite a decrease in economic and business optimism, executives expect that more resources will be allocated to corporate responsibility initiatives because they believe that the programs improve profitability, according to a recent Grant Thornton survey of manufacturing executives. Survey respondents say that corporate responsibility is important to achieving strategic goals in terms of new products, services, and processes; customer retention and loyalty; applying and leveraging technology; cost containment and reduction initiatives; and performance management initiatives.

"Today, corporate responsibility programs are a large part of what customers demand," says Jim Maurer, Grant Thornton's national managing partner for their consumer and industrial products practice. "Corporate responsibility programs have moved out of the realm of public relations to become real tools for improving the bottom line. Companies are realizing that strong investment in corporate responsibility programs is both a civic obligation and a successful business strategy."

Corporate philanthropy -- donating money and employee time to support specific causes -- is a keystone of corporate responsibility that, if executed strategically and supported by best practices, can benefit shareholders, employees, and society while at the same time building corporate reputation and sustainability.

"The reality is that capitalism has to be seen in the broader social context and not defined just by economic capital but also by human and social capital," writes Marc Benioff, chairman and CEO, Salesforce.com (The Business of Changing the World, McGraw-Hill, 2007). "Of course, as a responsible company, we must try to maximize shareholder value -- we must, however, approach it with a long-term view in mind. Part of the long-term maximization of shareholder value is having and running a profitable business; the other part consists of investing for the future."

However, for corporate philanthropy to be effective, companies must walk a fine line between exploiting the public relations benefit and doing good work. "One of the burning debates of corporate philanthropy has always been how much to exploit the public relations benefit of doing good," writes Benioff. "Some companies prefer to do what they call 'pure philanthropy,' which they define as philanthropy that doesn't have a marketing component built in. Others go to the other extreme with cause-related marketing, backing high-profile popular events such as the Olympics. And there are gradations in between."

Benioff advises companies that strive to exemplify best practices in corporate responsibility to pick a problem they can take ownership of and solve. Fireman's Fund, a property and casualty insurer and division of Munich-based Allianz SE, won an American Business Award, The Stevie, for best corporate social responsibility program in North America. Its Heritage Program, a multitiered effort designed to support firefighters in making communities safer by giving grants to fire departments for new equipment and creating outreach initiatives to raise attention to the needs of the fire service, supports the company's founding mission.

"We wanted, of course, to support communities and make them safer, but we also wanted to build our brand, to drive business within the company, and to help to attract and retain the best employees," says Danielle Cagan, director of corporate responsibility. "We've set up our corporate philanthropy program here as a differentiator that sets us apart from our competitors."

The 4-year-old program has given out more than $18 million in grants. "The way it works is that our agents are able to direct grants based on their business performance, so as they grow, we give back in those communities and then we provide marketing support for each of these grants, helping them to build their profile in their local communities," says Cagan. "The other primary way in which our grants are awarded is through our employees. Any employee can nominate a fire department for a grant; they compete with each other and with employees in different parts of the company for funding. The size of the funding pool is based on company performance."

Fireman's Fund has extensive metrics in place to monitor the program. "We look at the retention rates of employees who are engaged with the program vs. those of people who are not engaged, and we see a strong positive impact," says Cagan. "From an agent perspective, we see a strong correlation toward better performance with those independent agents who are engaged. We're also looking at how we can engage our end customer -- the policy holders."

The program has been so successful that the company is expanding it to a sister organization, Allianz Life. "The Heritage program brings continued value to our company -- not only quantitatively, but from a morale-boosting perspective as well," says Jill Paterson, executive vice president and chief financial officer. "Our independent agents who are actively engaged in the program tend to have better business results with us. Employees who attend donation events and are involved in the program have a lower turnover rate than those who don't participate."