In today’s highly competitive corporate environment, Corporate Social Responsibility (CSR) as a business approach and corporate strategy has been thrust onto every corporate agenda of every business from corporate giants to standard sized businesses.

This identifiable trend can be attributed to the fact that the 21st century consumer has become spoilt for choice with a broad variety of products and services from which to choose. As a result consumers are looking more and more for differentiation to underpin their buying choices and are in a position to demand more from the companies from which they purchase their products and services. It is this freedom of choice that has generated a change in social expectations and has resulted in an increase in CSR initiatives embarked on by companies, whether through the giving of donations, green initiatives, community development projects, healthcare, or loyalty cards funding contributions to recognised charities, to name but a few.

The consumer is in the driver seat and can choose to do business with or buy products from companies whose CSR initiatives are in line with their own. A company’s campaign to invest in its local community or focus on sustainable development practices could be the very differentiation that a consumer is looking for and helps him decide to choose one brand over another.

Many consumers in developed as well as developing countries can also afford to be picky when it comes to the products that they choose to buy. In the same way, it can be said that an increase in affluence of the general populace of South Africa (and many countries globally) is a contributor to the increased significance of CSR on the corporate agenda both nationally and abroad.

Another contributor to CSR becoming increasingly prominent can be attributed to the media and its growing influence on today’s society. Corporate blunders take centre stage in the media and are brought to the attention of consumers and society as they happen. The phrase “big brother is watching” has never been more evident with public forums such as internet chat rooms and blogs that have become easily accessible to consumers and groups who are on the same wave length, giving them the power to get their message out globally and further to organise joint action, such as “product boycotts”.

By undertaking CSR initiatives businesses try to pre-emptively address their public image and generate positive support from consumers towards their brand. Brands are built on stakeholder values and demands which are more often than not based on perceptions, ideals and concepts that appeal to higher values than simple profit making. As such CSR is correctly being recognised as an important contributor to and differentiator of a company’s brand.

But does CSR belong to the arena of big business only, or is it relevant to all businesses? In a South African context, Government has established that CSR is also the responsibility of the medium sized business and has recognised the contributions these companies can make towards community development and upliftment programmes by including a Socio-Economic Development element in the BEE Score Card published as part of the Department of Trade and Industry’s BEE Codes of Conduct.

The inclusion of this element on the BEE Score Card has pushed CSR to the forefront of corporate agenda in South Africa as a mechanism for South African companies to increase their overall BEE scores and address their CSR responsibilities. The greater the contribution by a company towards qualifying socio-economic development initiatives, the greater the benefit to their BEE scorecard, which in turn provides preferential value for clients seeking BEE compliant suppliers and service providers, thereby providing a differentiated edge for a company in a highly competitive environment.

CSR has undoubtedly become an unavoidable phenomenon and is increasingly important as a way of creating support by a new breed of consumer looking to spend their buck with a socially responsible organisation. Whether you view CSR as a means of brand differentiation, moral obligation or compliance only, one thing is certain – fail to recognise the importance of CSR at your own peril.

CSR must however be implemented correctly and with due recognition of BEE requirements, regulatory issues and tax benefits which can be gained. As such it is advisable that you consult your attorney for assistance in developing an appropriate CSR policy which will guide your efforts in this regard and ensure that what you give is strategically and financially sound.

Written by Shawn Phillips
Associate, Litigation Department, Phatshoane Henney Attorneys