Citizenship Gaining Steam Among CEOs, Survey Finds

Citizenship Gaining Steam Among CEOs, Survey Finds

Once seen as a purely philanthropic activity -- a source of general goodwill, with no bottom-line consequence -- citizenship is becoming a central concern at leading companies, according to a report released today by The Conference Board.

More and more companies are accepting corporate citizenship as a new strategic and managerial function, with bottom-line repercussions, that requires their attention.

Nearly 90% of corporate managers report that their companies have a citizenship goal as part of a statement of core values or business principles. The study found that these goals have been in place an average of 14 years. While traditional corporate relations, community affairs, and contributions programs predominate, an emphasis on a broader citizenship approach, including the environment and sustainable development, is emerging as a new model. The reasons include:

  • Globalization as a result of the worldwide expansion of business, private enterprise, and the market economy.

  • Heightened expectations from consumers and society that business can and should fill needs formerly left to governments, and should better align shareholder and stakeholder interests.

    The report is based on three global surveys conducted by The Conference Board of corporate managers of citizenship programs, CEOs and board members.

    "In the U.S., citizenship had often been viewed as synonymous with corporate contributions and philanthropy," says Sophia A. Muirhead, senior research associate at The Conference Board, and author of the report. "In countries where there is not as much of a contributions infrastructure and tradition, however, corporate citizenship is viewed and practiced from the perspective of how business operations and citizenship performance interact."

    Companies around the world are beginning to place even greater emphasis on citizenship activities that do not rely exclusively on philanthropy. Managers report that their top citizenship priorities are employee health and safety, sustainability, equal opportunities/global diversity, and globalization of contributions. About 60% of managers say that these and other citizenship activities have led to goodwill that opens doors in local communities, and an enhanced reputation with consumers.

    As U.S.-based corporations expand globally, their contribution programs are struggling to find a new balance between the traditional focus on geographically defined community programming and the need to establish a global presence. The contributions programs emerge as an increasingly significant component in grantmaking strategies. Forty-two percent of surveyed companies currently have an international giving program and 10% plan to implement a program in the next three years. Managers ranked North America, Europe, and Asia as the top three recipient regions.

    The role of the CEO and other managers

    Although companies that integrate these elements into their citizenship programs, and those pursuing more aggressive citizenship agendas on the whole, regard CEO initiative and leadership as crucial, CEOs themselves are divided about what roles their companies should take in creating a business environment based on these insights. Forty-two% of CEOs surveyed expressed preferences that their companies be a partner in citizenship programs, 33% said they'd like their firm to be a leader in such efforts, and 25% said their organizations should be simply supporters of the programs. Among those preferring not to be leaders, 56% of CEOs prefer to work alongside government, while 28% prefer to work with business associations.

    Citizenship-specific management structures, such as job titles, performance incentives, training, and other indicators of organizational responsiveness and mainstreaming, are still emerging. Thirty% of managers surveyed report that the accountability for citizenship remains associated with the manager/director in a corporate community or public affairs department.

    Although 68% of managers cited the link between citizenship and performance appraisal as "increasingly important," 57% of managers say their companies do not yet have appraisal systems built around their professed recognition of citizenship's significance.

    Stakeholders, NGOs, and codes

    Although most companies report established ties with at least some stakeholders, the trend is toward more systematic and open relationships, especially as the bar of expectations for social responsibility and sustainability goes higher. The tradition of managing stakeholders is giving way. Meaningfully engaging them is now the key to achieving a credible citizenship focus.

    While 58% of companies have a structured program to engage stakeholders that typically include employee/labor groups and local communities, only 25% do not have relationships with non-governmental organizations. Among those that do, one in five relationships are with environmental groups and 15% are with labor groups. The relative dominance of relationships with environmental NGOs is unsurprising, since the environment -- and groups representing it -- became an active concern for companies earlier than other citizenship issues. Of the four NGOs that had more than one or two companies indicating relationships, three -- The Nature Conservancy, the World Business Council for Sustainable Development, and The Coalition for Environmentally Responsible Economies (the other was Amnesty International) -- are environmental groups, further underscoring the relative significance of that area of interest.

    Responding to the public's interest in the social and environmental behavior of business, a growing number of international organizations, industry associations, NGOs, and citizens' groups have developed codes, principles, standards and guidelines designed to encourage particular types of corporate conduct or performance on issues ranging from labor to human rights to sustainability. Examples of these maps of corporate conduct include the UN Global Compact and the Global Sullivan Principles.

    While some companies view the proliferation of codes -- what some call "codemania" -- as an onerous, inefficient, and potentially costly distraction promoted by non-business entities, advocates say that by embracing such standards, companies can protect and enhance their reputations, insulate themselves from demands to sign other statements, establish management's commitment to stakeholder confidence in the company, and demonstrate their emphasis on prevention rather than corrective action. Companies' tactical decisions to adopt citizenship or sustainability approaches in corporate reporting, or to endorse external codes and guidelines, often lead to broader company self-assessments on citizenship strategy.

    But the issue of codes remains sensitive. Only 20% of responding managers answered questions relating to global business conduct standards. The remaining 80% ignored them. This suggests that only a small number of participating companies have seriously considered endorsing the major global citizenship or business conduct standards. In fact, while companies are willing to endorse or support a set of principles, statements of "adherence" -- particularly those requiring third-party verification -- are much more rare, as are formal declines. Most managers prefer to say that such matters are "under review" at their companies. By far the largest number of companies say that they were not approached, or did not answer the question.

    What’s ahead

    Managers say citizenship challenges during the next three years will include growing one global identity, integrating with business decision making, and measuring results.

    In assessing what will be necessary to assure a more successful business future, CEOs are split between internal factors, such as better managing their external relationships and creating industry-led guidelines, and external factors, such as clearer leadership from government and clearer consensus in civil society about solutions to critical challenges.

    As globalization progresses, business is being drawn toward greater participation in nontraditional areas of accountability. Many businesses appear to accept this trend, but have yet to come fully to grips with it.