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May 26, 2023 | Report
Corporate citizenship departments are often considered the business world’s equivalent of first responders in times of crisis.1 The combination of an economic slowdown, high inflation, geopolitical instability, social upheaval, and recurring natural and man-made disasters has created an environment of unpredictability and volatility that requires embedding resilience into every aspect of a company’s citizenship department.
Recent data from The Conference Board show that an economic downturn is the number one external factor that CEOs and C-suite executives around the globe expect to affect their businesses this year. The Conference Board forecasts that economic weakness will intensify and spread more widely throughout the US economy, with recession beginning in mid-2023.
During an economic downturn, one of the first responses is often to reduce spending in areas such as corporate citizenship. This in turn can negatively affect recipient communities and nonprofit partners. However, our survey of citizenship executives in early 2023 found that citizenship budget levels are generally holding firm compared to 2022, which suggests that CEOs recognize the value of corporate citizenship to their corporate brand.
Companies should nonetheless take this opportunity to bring greater discipline and develop a more convincing business case for citizenship and philanthropy that can withstand economic headwinds.
The first step is to identify the ways citizenship can enhance firm value, including reputation, products and services, employee engagement, and license to operate. The next step is to identify the business’s key performance indicators (KPIs) that connect to the six areas listed in the table below.
The third and critical step is more challenging: to measure the extent to which corporate citizenship contributes to success against these KPIs. Attributing a specific share of an increase in revenue, decrease in costs, or improvement in brand strength to corporate citizenship is not an exact science. However, it is possible to make reasonable estimates and allocations, and even rough calculations can be helpful. Encouraging a strong working relationship between citizenship and finance is essential in collecting and analyzing data, to ensure the consistency and reliability of the process.
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Areas where citizenship can affect firm value |
KPIs for each area |
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Strengthening brand loyalty and reputation |
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Launching and enhancing products and services |
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Increasing employee engagement and alignment |
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Expanding access to capital on favorable terms |
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Facilitating the firm’s license to operate |
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Strengthening a company’s ESG proposition |
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Source: The Impact of Corporate Citizenship on Shareholder Value, The Conference Board, 2023
An important arena of innovation is “societal impact investments”: that is, investments in various entities (for-profit, joint ventures, business incubation programs, social enterprises, nonprofits) that provide both societal and financial return. A 2022 poll by The Conference Board of 21 roundtable participants found that most companies surveyed are already making such investments (57 percent) or are considering doing so in future (33 percent).
Furthermore, by providing a return to the company and recycling funds into new opportunities, societal impact investments can be inherently more sustainable than traditional philanthropic donations. The market discipline of seeking a financial return can also help ensure funds are invested efficiently. Our poll results indicated 35 percent of firms are looking for a market- or above-market financial return.
The company’s mission and purpose should provide the guiding principles for entering the societal impact investment space. Investments are most impactful, and pose the least risk, when aligned with the company’s strategic priorities and market position.
In a time of multiple crises, internal partnerships can ensure buy-in to the work corporate citizenship functions are undertaking, pooling of resources, and more effective harnessing of the company’s capabilities for societal impact. While companies typically collaborate with nonprofit organizations to implement their social programs, collaboration between peer companies is rare—with firms tending to go it alone on important societal issues such as racial equality or natural disasters. In our Q2 2023 poll of disaster philanthropy practices, we found that less than one-third of companies have partnered with other for-profit corporations on disaster relief, and many have no plans to do so in the future.
Companies have an opportunity to increase their impact by working with each other, in addition to their collaboration with nonprofits, universities, and national and local public policymakers. Multistakeholder partnerships can provide efficiency and scale in tackling societal challenges, while reducing reliance on the financial resources of a single corporation. Our poll of roundtable participants at The Conference Board annual ESG Summit suggests that many companies are receptive to greater collaboration on citizenship issues.
According to The Conference Board C-Suite Outlook survey of CEOs and C-suite executives, the impact of geopolitical volatility on business is a rapidly rising concern for CEOs worldwide. The ongoing Russian invasion of Ukraine is a major driver of this geopolitical uncertainty.
In our survey of citizenship executives in early 2023, we found that 86 percent of companies responded to the war in Ukraine through their citizenship function—typically by drawing on existing disaster philanthropy resources or allocating new funding. The widespread response to Ukraine exemplifies how citizenship teams are called upon as the corporate equivalent of “first responders” to external crises.
The ongoing war in Ukraine is a reminder that companies should take a long-term and global perspective toward citizenship at a time of heightened geopolitical uncertainty. As The Conference Board has advised in a series of briefs, company leaders should encourage systematic analysis of “what if” scenarios to ensure citizenship functions can react in a proactive and timely matter when events unfold. While this kind of planning is often practiced in the risk management, crisis management, and strategic planning functions, it should become ingrained in citizenship as well. Indeed, corporate citizenship should participate in those other scenario planning exercises.
Our recent survey of corporate disaster philanthropy practices suggests there is significant room for improvement in this area: only 38 percent of companies undertake strategic planning and scenario analysis for man-made disasters, which include armed conflicts stemming from geopolitical fallout.
More generally, it is becoming harder for US and multinational companies to make citizenship and philanthropic investments in countries affected by diplomatic and geopolitical tensions. In particular, some multinationals are restructuring operations to reduce their physical and legal presence in countries such as China. Nonetheless, these companies may still wish to make philanthropic contributions to in-country nonprofit partners and community organizations.
Whatever the type of uncertainty being confronted—economic, geopolitical, social, environmental—it is vital for companies to be resilient.
Companies should assess how “resilient” their corporate citizenship efforts really are, recognizing that they will be better prepared for a future crisis when equipped with a citizenship function that values a culture of flexibility, realism, engagement, and purpose. This includes the human element of resilience, especially preventing employee burnout.
One aspect of a truly resilient organization is taking time to look back at a crisis, capture lessons learned, and put them into effect. For citizenship functions, incorporating and acting upon learnings is essential, as many programs and crisis response efforts involve multiple stakeholders, challenging environments, and high degrees of uncertainty. For example, many companies have learned from recent major natural disasters to support underfunded areas of the disaster life cycle (such as preparedness, risk reduction, and reconstruction). Adapting organizational practices to such learnings can improve resilience in dealing with future crises.
As documented in a recent series of briefs by The Conference Board, the governance and management of corporate citizenship have evolved in tandem with deeper shifts in how the function operates and engages. These changes in governance include increased integration across the wider business (often formalized through a cross-functional steering committee); closer relationships with the C-suite, CEO, and board of directors; new approaches to measuring and reporting on performance and impact; and closer coordination of employee engagement in societal impact work, such as volunteering or donations.
A key place companies can start to improve governance is their approach to natural disasters. The frequency, intensity, and complexity of disasters are steadily increasing in the US and globally. Citizenship executives are cognizant of these threats: in our recent survey of corporate disaster philanthropy, 91 percent of companies cited the increasing frequency of disasters as a major obstacle they expect their company to face over the next five years. Seventy-seven percent cited the increasing intensity of disasters.
It is essential that citizenship teams avoid the tendency to respond to all crises as soon as they unfold. Company leaders can help cultivate a more strategic mindset through practical steps:
Enlist the entire organization (not just corporate citizenship departments) in these efforts. Many business units and corporate functions—including sustainability, human resources, DEI, and operations—have an essential role and/or value-add in responding to major crises.
Even as companies focus on long-term sustainability, the events of the past three years have underscored how important it is for companies to remain resilient. This brief’s six insights—which focus on calculating corporate citizenship’s contribution to firm value, generating financial and social ROI, strengthening collaboration, adopting a long-term and global perspective, investing in internal resilience, and strengthening governance—point the way toward elevating the effectiveness, efficiency, and resilience of the citizenship function. Pursuing these avenues will benefit the company, its stakeholders, and society at large.
[1] The Conference Board tends to use the term “corporate citizenship” rather than “corporate social responsibility” or other names, as “corporate citizenship” is more globally accepted.
[2] Social impact-focused investing, or simply impact investing, is an investment strategy that seeks to achieve social and/or environmental goals with the explicit expectation of a financial return. This report uses the term “societal impact investments” to refer to corporate financial investments that seek to have a positive and measurable impact on society alongside a financial return.
