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February 10, 2023 | Report
The year ahead poses many challenges for corporate citizenship: an economic downturn, geopolitical instability, limitations on resources, and competing stakeholder demands. Yet, according to our recent survey of corporate citizenship executives at leading companies, 2023 also presents CEOs with an opportunity to elevate their citizenship team’s performance by focusing on innovative and cost-effective ways to invest in communities, improving the rigor of measuring and reporting on their societal and shareholder impact, and enhancing collaboration with internal and external partners.
Corporate Citizenship and Philanthropy: Corporate citizenship focuses on how the company conducts itself in a way that promotes societal welfare, with an emphasis on engagement with communities and society at large. Citizenship teams typically possess deep expertise in philanthropy, employee volunteering, community engagement, and societal impact programming. Corporate giving (through either the firm itself or an affiliated foundation) has traditionally taken the form of direct cash donations, employee volunteer time, and product and in-kind donations. More innovative forms of citizenship and philanthropy are also emerging, such as strengthening minority-owned suppliers and making impact investments that seek both societal and financial return.
Recent data from The Conference Board show that an economic downturn and recession is the number one external factor that CEOs and C-suite executives globally expect to affect their businesses in 2023.
Thirty percent of the corporate citizenship executives we surveyed in December tell us their citizenship resources and priorities are unlikely to be affected by a recession in 2023. However, 14 percent expect to decrease their giving levels, while 9 percent plan to increase their giving levels. Another 23 percent say that while they foresee a recession-related impact, they do not know the specifics at this time. A significant minority (9 percent) responded “other”: the most common explanation was that giving will remain flat in 2023 compared to the previous year (i.e., it will decrease in real terms).
As most companies (59 percent) expect their corporate citizenship giving levels in 2023 to be about the same as their 2022 actual, it appears citizenship teams will be relatively well resourced to address their focus areas in the coming year. The perceived strategic importance of citizenship in managing stakeholder expectations and safeguarding social license to operate may be a factor in this budget resilience.
The corporate commitment to citizenship and philanthropy is similar to current trends in corporate sustainability. In both cases, resilience stems from multiple factors that include:
In the context of economic slowdown, citizenship and philanthropy can contribute toward company value through such channels as strengthening brand loyalty and reputation, using philanthropic capital to test new markets, increasing employee engagement, expanding access to capital, and facilitating license to operate.
Some 86 percent of the surveyed companies used their citizenship and philanthropy function to respond to the war in Ukraine, exemplifying how citizenship teams are often called upon to act as corporate “first responders” to external events. Compared to natural disasters, the characteristics of how citizenship responds to armed conflicts such as Ukraine are both different (increased complexity and danger, greater reliance on international organizations, increased importance of cash donations) and similar (redirection of resources to respond, pressure from employees to help, a need for lasting partnerships).
According to our survey results, 29 percent of companies accessed new funding to finance their responses to Ukraine. The remainder drew on existing disaster relief budgets (39 percent) or reallocated funding from other budget areas (13 percent). This is a divergence from how citizenship teams responded to previous major crises such as the COVID-19 pandemic and societal upheaval of 2020, when significant new funding was unlocked. Drawing on or reallocating existing disaster philanthropy resources suggests that pivoting to Ukraine reduced the availability of philanthropic resources for responding to other major humanitarian disasters in 2022.
While the bulk of immediate corporate philanthropic commitments for Ukraine may have passed, the crisis is a reminder that companies need to take a long-term and global perspective. Looking ahead, corporate citizenship executives should consider “what if” scenarios so they are prepared to react in a timely manner as events unfold. While this kind of planning is often practiced in the risk management, crisis management, and strategic planning functions in companies, it should become ingrained in corporate citizenship as well.
Increased expectations come with challenges: 38 percent of surveyed corporate citizenship executives say their departments’ lack of resources—not just money, but also time and staff—poses the biggest obstacle to reaching their goals in 2023. This continues a trend from 2022.
Advancing citizenship agendas does not necessarily require increasing budgets or adding more staff, but instead requires harnessing broader resources across the organization, focusing on increased efficiency, and developing partnerships with other companies to maximize impact. Citizenship teams could also consider increasing their deployment of “societal impact investments”: corporate financial investments that seek to have a positive and measurable impact on society alongside a financial return. Societal impact investments can improve market discipline and efficiency while recycling returns into new programs, funds, and partners.
A significant number of executives also identify external pressure (19 percent) and internal pressure (15 percent) to respond to nonstrategic issues as major obstacles for citizenship goals in 2023. External pressure jumped as a perceived obstacle compared to the year before, reflecting how citizenship teams are under significant pressure from stakeholders to respond to a wide range of external issues that may not always be a strategic focus or priority area.
Citizenship leaders can better manage these pressures and resource limitations by maintaining a consistent approach that focuses on themes tied to the company’s mission, business, and strategy. Citizenship executives should also lead in driving new levels of rigor for tracking, measuring, and disclosing the impact of their efforts—on society at large, but also on the firm’s bottom line and value.
A notable minority (10 percent) of companies also responded “other” for the biggest obstacle they expect to face in 2023. While explanations varied, they included challenges with measuring societal impact, lack of awareness by internal stakeholders of changing societal expectations on companies, and geopolitical concerns.
Eighty percent of surveyed companies spent less on COVID-19-related issues in 2022 than in 2021—continuing a trend from the previous year. The Conference Board’s recent survey of CEOs and C-suite executives similarly finds that COVID-19 disruptions are largely in the rearview mirror for CEOs in the US and Europe. While the receding of COVID-19 is a welcome development, companies should remain vigilant for future risks, including spikes in infections, new variants, and ongoing issues outside of the US (notably in China).
By contrast, an emphatic 93 percent of surveyed companies either maintained or increased their financial contributions toward addressing equality of opportunity for all races in 2022, compared to 2021. Their responses underscore that providing equal opportunity for all is an enduring priority area for prominent companies. Indeed, US CEOs and global C-suite executives all rank racial equality as a top-three social priority.
These findings indicate that companies' public pronouncements in support of equal opportunity for all races are being translated into substantial corporate financial commitments to address the issue. To make further meaningful progress on racial equality, companies should collaborate with other institutions to conduct needs assessments, evaluate the multiple ways they can address key issues, set measurable goals, and commit to reporting impact.
Issues such as declining trust in government, increasing focus by large investors on social and environmental risks, and a generational shift in the workforce have elevated expectations of the role of the corporation in society and encouraged a reevaluation of strategy. Determining the “appropriate” allocation of corporate resources toward citizenship and philanthropy efforts in this changing environment is a challenge many companies are currently grappling with—while also balancing the expectations of other stakeholder groups (including investors, employees, and customers).
We found that more than a third (36 percent) of companies determine their annual giving levels using a “percentage of”approach—ring-fencing a certain percentage of firm revenue or pretax profits for citizenship and philanthropic efforts (as opposed to a fixed annual budget). There are advantages to this approach, including streamlined messaging, more overt alignment with corporate performance and strategy, and increased resources during profitable years. Disadvantages include that annual planning and forecasting is more challenging, and giving levels drop when the company or market underperforms. It is notable, however, that several respondents identified no significant disadvantages to the “percentage of” model.
The survey results also show that 55 percent of companies are currently reevaluating how they determine their annual giving levels. Given the evolving nature of corporate citizenship’s role, in a wider context of fundamental changes in how companies serve multiple stakeholders, companies may be taking the opportunity to reconfigure their giving budgets and to redefine what falls under the umbrella of “citizenship” (including impact investments that seek both societal and financial return).
This strategic exercise is typically undertaken in collaboration with senior leaders and other functions across the business, including DEI, ESG, finance, human resources, and strategic planning. Benchmarking peer companies and industries is a popular approach to determining new corporate giving levels. Ultimately, however companies determine their citizenship budgets and giving levels, it is important they assess how citizenship initiatives are generating a return on investment and affecting the firm’s bottom line.
During an economic downturn, the easy answer is often simply to reduce spending in areas such as corporate citizenship. The Conference Board 2023 C-Suite Outlook report reveals that CEOs are taking a more creative and multifaceted approach to the current economic climate—with the long term in mind. Indeed, as illustrated by the ESG Center’s survey of corporate citizenship executives, 2023 provides an opportunity for citizenship to gain new momentum through investing in innovation, increasing rigor in measuring societal and shareholder impact, collaborating with a wider range of internal and external partners, and rethinking funding levels and approaches.
In December 2022, The Conference Board ESG Center conducted its annual corporate giving survey. We asked corporate citizenship executives at 56 leading public and private companies—including one-fifth of the Fortune 100—how their giving and volunteering played out in practice in 2022; what their giving priorities, expectations, and resource allocations are for 2023; and what internal processes determine their giving levels and strategies.
This report presents key insights from the survey results and accompanying discussions with Members of The Conference Board. This includes input from The Conference Board Corporate Citizenship Councils, at which senior executives come together to share expertise and collaboratively explore solutions to pressing issues.
The author would like to thank Paul Washington, Jeff Hoffman, and Chuck Mitchell for their vital contributions to this report. Many thanks also to the 56 corporate citizenship executives who participated in our survey and follow-up discussions.
