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Impact Investing

Impact Investing

What is Impact Investing?

Impact Investing is a new trend in corporate philanthropy that blends investment strategies from the business sector with social and environmental impact strategies from the public sector. It allows social and environmental causes to tap into money and other resources that may otherwise be lacking. Simply put, impact investments are made into companies, organizations, and funds in order to generate positive social and environmental outcomes. Investors not only expect to create social value from their investments, but also to get a financial return on capital. Impact investments provide capital to support solutions that create positive impacts, rather than solutions meant to avoid harmful socio-environmental impacts, making them unique from other forms of "socially responsible investment." They also serve as unique catalysts to emerging and developed markets in social and environmental change, enabling recipients to harness the power of enterprise to achieve positive outcomes on a much larger scale than before.

More on Measurement

An important part of impact investing is measuring the social impact created by the organization, project, etc. of choice. There are a variety of approaches taken when measuring impact. Generally, measurement will closely relate to an investor's goals and intentions for their investments. The Global Impact Investing Network gives a general guide for impact measurement best practices (under "Core Characteristics of Impact Investing"):

  • Establishing and stating social and environmental objectives to relevant stakeholders
  • Setting performance metrics/targets related to these objectives using standardized metrics wherever possible
  • Monitoring and managing the performance of investments against these targets
  • Reporting on social and environmental performance to relevant stakeholders

Investments are evaluated to determine if the capital provided has been used as originally intended, has achieved the impact intended, and how any generated impact compares to earlier performance prior to the investment. Investors want to see reports that show hard evidence of the social or environmental value of the programs in which they invested. They also want to see an outlook on the future with consideration given to areas of growth and improvement, where future investments may be allocated.

More about Returns on Investment

For something to be deemed an impact investment, the investment must have a financial return that is at least equal to the principle invested, if not more. In the growing world of impact investing, there are three main providers of capital, or investors: professional investors, specialized funds, and governments.

Impact investors are socially motivated; they value the social or environmental outputs generated from the enterprises in which they invest, as well receiving a financial return from their investment. Investors vary in their expectations for financial returns. In their article, Unpacking the Impact in Impact Investing, Paul Brest and Kelly Born explain that "Non-concessionary investors are not willing to make any financial sacrifice to achieve their social goals," and "Concessionary investors are willing to make some financial sacrifice—by taking greater risks or accepting lower returns—to achieve their social goals."

Impact Investing is an innovating strategy for addressing some of the world's most pressing social and environmental issues. As organizations work to address causes and generate positive social and environmental impacts, socially responsible investing provides much needed capital to advancing these causes and driving stronger and farther reaching impacts. It is becoming widely acknowledged that the private and public sector will need to cooperate together to generate the tools, funding and intellectual resources necessary to truly address issues such as poverty, disease, and other issues affecting society and the world. Impact investing is one rapidly expanding approach to achieving widespread social and environmental impacts.

To learn more about impact investing, please visit the following resources:

The Rockefeller Foundation Innovative Finance The Rockefeller Foundation founded the concept of impact investing in 2007 and has since been expanding their reach and research in this area. Their website offers a number of publications about impact investing, social impact bonds, and an event page with information on upcoming forums as well as videos and summaries from past events.
Global Impact Investing Network The Global Impact Investing Network "is dedicated to increasing the scale and effectiveness of impact investing." Their community of impact investors is the largest in the world, including asset owners, managers and service providers engaged in impact investing. They provide access to a number of resources, from research publications, news articles, and event calendars, to investor tools and training information.
The U.S. National Advisory Board on Impact Investing "The group's purpose is to highlight key areas of focus for US policymakers in order to support the growth of impact investing and to provide counsel to the global policy discussion." Review their 2014 report: Private Capital, Public Good: How Smart Federal Policy Can Galvanize Impact Investing - and Why It's Urgent
Impact Investor UK Impact Investor UK is a portal providing users with in-depth information and content on: impact investing, measurement strategies, types of impact investments, opportunities for impact investing, and a wealth of related news articles and other media publications.

Skills-Based Volunteerism, Part 2: Functional Coaching and Mentoring

Skillful & Knowledgeable Volunteers

Functional Coaching and Mentoring

Function coaching and mentoring can be defined as a for-profit business lending its employees to mentor and teach nonprofit partners essential skills and functional expertise. Does your company have individuals with expertise in change management, leadership development, or simply a knack for motivating others? If so, Functional Coaching and Mentoring may be an ideal route to go with for a Skills-Based Volunteering (SBV) program.

Functional Coaching and Mentoring Programs can focus on things like:

  • Diversity and inclusion
  • Transformational leadership
  • Change management
  • Assessing and utilizing organization/community assets
  • Strengths-based leadership
  • Working in groups and teams

The examples below show how businesses can provide coaching and mentoring to nonprofit partners, leaders of change, or groups that do mission-driven work.

Gap Inc. Leadership Initiative

In 2009, Gap launched their Gap Inc. Leadership Initiative, partnering with 25 nonprofit organizations each year to help leaders at these organizations learn skills to better manage their limited resources and manpower, and leverage their assets to create the most significant benefits for the communities they serve. Nonprofit leaders benefit from intensive learning workshops focused on a variety of things to increase partner skills, capacities, and effectiveness. Examples include: visionary leadership, staff development, and change management.

The mentoring Gap provides to its community partners is based on the leadership tools originally designed for training Gap Inc. executives. Their program is unique in that the mentoring provided is adapted to fit the needs of each individual community partner. "Moreover, the continuous nature of the relationships built between Gap Inc. leaders and the nonprofit program participants allows for a constant exchange of information and ideas in the context of a formal program" (Making Pro-Bono Work: 8 Proven Models for Community and Business Impact).

New York Needs You: Career Coaches

You do not have to create a program to get your employees involved in skills-based volunteering; there are many organizations that already employ volunteers for their specific skills, knowledge, and areas of expertise. New York Needs You (NYNY) offers a career-coaching program for college students across the city. Their "Fellow's Program Saturday Workshops" are a series of workshops where volunteer career coaches (professionals from a variety of disciplines and professional backgrounds) lead a structured career development curriculum for "Fellows," all first-generation college students.

Another opportunity for professionals to lend their specific knowledge and skills is through the Career Development Program (CDP) "Industry Insiders" Weeknight Seminars, where Career Coaches can teach students from community colleges about various routes to starting and securing a professional job and building a successful career. NYNY even offers their volunteers opportunities to contribute to young-adults professional development, without leaving the comfort of their homes. For their Technology Initiative's Online Program, "Career Coaches are part of an online pilot program to virtually help students with internship/job searches, resume review, and mock interviews" ("What is a Career Coach?").

Internal and External CSR

Internal & External Corporate Social Responsbility Flow

Our blog post on Good Corporate Citizenship was concerned with Corporate Social Responsibility (CSR), an important aspect of contemporary business given its role in determining reputations. We also discussed some of the top performing corporations in a Reputation Institute study focused on CSR practices. Emerging from a discussion about these top businesses is an understanding of the different forms CSR can take. Specifically, larger businesses have made CSR both an internal and external practice.

For example, Microsoft engages in many commendable forms of external corporate altruism. Their Technology for Good program has provided 62,000 nonprofits with affordable access to technology; and their Microsoft YouthSpark program has sought to provide hundreds of millions of youth with opportunities for education, employment, and entrepreneurship. But, they also apply CSR values in their internal operations. Their goal of becoming a carbon neutral company by applying an internal carbon fee is one such example. The actions of other large companies like IBM's "Smarter Planet" and "Smarter Cities" campaigns reflect this embracing of CSR principles in regular business operations.

In general, these examples are a reflection of the varied and customized applications of CSR and the exciting new ideas coming from this emerging field.

Governmental CSR Policies Around the Globe

Government & Business Corporate Social Responsibility

Corporate Social Responsibility (CSR) is becoming an integral part of many companies' policies. Given the benefits it inherently offers to workers and the community, it is often in the government's interest to encourage these programs. A few countries around the world have enacted CSR laws encouraging positive corporate citizenship. The results have been quite interesting and offer some important lessons about CSR.


On December 16th, 2008, the Danish government officially approved the Act Amending the Danish Financial Statement Act (Accounting for CSR in Large Businesses). The law mandates that companies of a certain size must disclose their CSR practices in an annual report or disclose that they do not have a CSR policy. Specifically, companies are required to report on three topics: their CSR policies, including standards, guidelines, and principles; their plan of action to translate CSR policies into results, including all planned procedures and systems; and their evaluation of CSR achievements in the current financial year, as well as expected results of future plans. Recently, the Danish government has added provisions to the law that encourage companies to account for human rights policy and their climate impact. The law has also been applied to institutional investors, mutual funds, and financial businesses. The government believes these CSR laws help Danish businesses compete better internationally and encourages them to make positive contributions to the world.

Since its inception in 2009, the law has encouraged Danish businesses to be vocal advocates of their CSR initiatives. According to a Report from Financial Year 2011, completed with help from the Copenhagen Business School, 50% of companies reported their CSR activities for the first time in the three years since the law's inception. Furthermore, 97% of companies complied with the law. Of the companies that reported their CSR independently (i.e. not through a parent company), 94% said CSR was part of their company policy, while only 6% said they did not pursue CSR initiatives. Common topics that have been reported on include the environment and climate (91%) and social conditions at Danish workplaces (81%). The Danish government would like to see companies improve their reporting of CSR policy results (part 3 of the law) even if this act just entails a subjective analysis.

The law has created a climate conducive to CSR in Denmark. Danish companies are encouraged to think about how best to incorporate responsibility initiatives into their corporate structures. Some companies might focus on water conservation, while others focus on building sustainable supply chains. In general, the law has encouraged Danish companies to treat CSR as part of their business rather than as an extra task.

U.S. and India

Official CSR policies are present in other countries as well. India's Companies Act 2013 contains a clause that mandates companies formulate a CSR policy. It calls for companies to develop a CSR strategy and spend at least 2% of average net-profits over the last 3 years on CSR initiatives. The clause has received mixed reactions in the Indian business community.

The U.S. Department of State's Bureau of Economic and Business Affairs (EB) has a CSR team that encourages American companies to be responsible global citizens. The State Department sees business as an additional diplomatic and development resource. The EB serves as a source of guidance and support for American companies looking to develop positive CSR policies. It helps partner businesses with NGO's (Non-Governmental Organization) and other members of civil society looking to have a positive impact. The EB also helps businesses adhere to multinational business conduct guidelines like the Organization for Economic Cooperation and Development's Guidelines for Multinational Enterprises. To recognize outstanding global citizens, the EB is in charge of determining the Secretary of State's Award for Corporate Excellence.

Additional Lessons

Democracies are ultimately a reflection of their citizen's values. The emergence of CSR policies in nations around the world is reflective of an increase in the number of CSR conscious citizens. Smart companies understand that gains can be made from recognizing these concerns. By voluntarily reporting their CSR policies and results, companies can demonstrate an awareness of positive corporate citizenship. Such an act can serve as both great publicity and as an effective risk management tool. Companies that have established great reputations with consumers and the government for socially responsible behavior are better positioned to survive unexpected crises or accidents. Chronicling CSR policies can also serve as a great exercise in self-reflection. Companies have the opportunity to examine their long-term strategy, identity, and place in the community by ingraining CSR as part of the business. In general, developing CSR initiatives and reporting their benefits are a great way to earn the respect of global peers.

Mistakes to Avoid When Creating a CSR Program

CSR Initiatives Successes or Failures

When dealing with something as beneficial as a CSR (Corporate Social Responsibility) program, it becomes important to discuss how these programs can go wrong, and how people can go about creating them in the right way.

On the website MarketingProfs, Alyssa Dver posted the article, "Irresponsible Corporate Responsibility: Doing Good Isn't Always Done Well." She notes that often corporations will focus on only one aspect of CSR. It is important to be well-rounded in the social responsibilities that the company has taken on. For example, if a company aligns more with saving the planet and being environmentally friendly, while noble, it is important to make sure that this does not deter from donating to certain charities or respecting human rights issues. Another issue is a misalignment of the cause with the company. For instance, it would be strange if an animal slaughterhouse were to donate charity money to a vegan non-profit. While an exaggerated example, the point is that it is much more effective to align with a non-profit that can utilize the skills of your workforce.  FedEx does this by allowing for disaster relief and organ transportation programs to make use of their transportation services during emergency situations.

Another issue that often transpires within failed CSR initiatives is the lack of internal communication. If none of the employees know about opportunities to volunteer or the companies' different CSR initiatives, then the initiatives will not be sustainable. The article states that the best companies use different techniques from putting notices on paystubs, newsletters, voicemails and even text messages. This way, different demographics, sectors and levels of employees are all aware of volunteer opportunities. Moreover, besides internal communication, ineffective external communication can be problematic as well. Communication with stakeholders and customers should be transparent and have depth. There are multiple avenues to go about accomplishing this, via websites, web videos, billboards and increasingly social media.

With most initiatives, it is fatal to not have a plan with milestones and general goals. Many parts encompass CSR initiatives, like branding, marketing and strategy, so that if there is not a clear path that the initiative is on, important components of the initiative are going to be left out, creating an unsustainable program. Along with this comes giving without any rules. It may seem like a good idea to just donate to multiple charities, or to donate a large amount to a charity that the CEO is personally aligned with, but this can lead to larger issues within the company. If the best customer of a corporation makes a statement about their favorite charity, it will be difficult for the company to say no if there are not any clear guidelines on how and to whom donations will be made out. Creating rules will make it clearer on how best to make these decisions.

Entrepreneur also has ideas on how CSR initiatives should be created. Lain Hensley wrote the article, "Corporate Social Responsibility Done Right: 5 Ways to Help Your Company Shine." One of the ideas that Hensley found invaluable is that more effective CSR initiatives crowdsource ideas. It is important for CSR initiatives to be backed by the CEO and top management because employees are more willing to care if they can plainly see that top management is interested in social responsibility. At the same time though, top management cannot generate all of the ideas, an issue which can be solved by soliciting employee ideas on what the goals of the initiative should be, which will lead to more employee participation as well. Further, combining philanthropy and corporate training, having philanthropy strongly interwoven into the identity of the company, will keep the company from missing out on opportunities to give and grow.

CSR initiatives can help and be effective and worthwhile, and so it is important to be aware of the traps that will cause an initiative to fail.

Skills-Based Volunteerism, Part 1

Skillful & Knowledgeable Volunteers

What is Skills Based Volunteerism?

Put simply, skills-based volunteerism is when an organization utilizes volunteers for their specific and unique talents, skills and knowledge. Skills-based volunteerism is often compared to pro-bono services and consulting. Philanthropic causes, events, programs or initiatives can reap great rewards by skilled volunteers contributing tools, knowledge, and resources that can help to increase the impact and scale of a cause; refine internal standard operating procedures; implement tools and technology to streamline an organization's functions; and much more. Skills-based volunteerism is a rapidly growing strategy for improving volunteer engagement. According to the Committee to Encourage Corporate Philanthropy's Giving in Numbers: 2014, businesses employing pro-bono/skills based volunteerism has increased from 30% to over 50% in six years.

When done right, skills-based volunteerism has significant long-term benefits for the nonprofits and organizations or programs employing this strategy. Taproot Foundation's guide, Making Pro-Bono Work: 8 Proven Models for Community and Business Impact, states, "The true value of pro bono service is its ability to deliver to nonprofit organizations the powerful resources that help make private sector businesses successful." It also increases volunteer retention. When volunteers are able to more readily realize how their work and contributions are making a difference, they are more likely to continue to volunteer. Continued volunteerism allows for volunteers to foster deeper relationships and bonds with the organization with which they work, and deeper commitment to the organization's purpose.

Types of Skills-Based Volunteerism

Part 1: Loaned Employee

A loaned employee is when a company grants an employee a sanctioned and compensated leave of absence to pursue skills-based/pro-bono volunteerism for a mission-driven organization, project, etc.

Loaned employees can offer their skills and expertise for a variety of things, such as:

  • Creating strategic models aimed at improving a program's impact and scale
  • Streamlining organizational operating procedures to improve efficiency
  • Leading trainings to teach non-profit employees new skills (e.g. book-keeping or budgeting) and competencies (e.g. using CRM software)
  • Providing executive oversight on a project.

Many successful loaned employee programs deploy more than a single employee to do SBV for a non-profit, as you will notice from the two examples below.

Example 1: IBM's Corporate Service Corps

IBM's Corporate Service Corps is pro-bono volunteerism program that sends out 500 "IBMers" each year to take part in 6-month long community-engagement projects that provide assistance to local governments and community organizations. The program helps communities around the world to solve critical problems while providing IBM employees unique leadership development opportunities. By sending groups of 10-15 individuals to different countries for community-based assignments in emerging markets, the program has helped over 140,000 people since its inception.

Example 2: Pfizer, Inc. Global Health Fellows Program

Pfizer is an American multinational pharmaceutical corporation that established their Global Health Fellows Program in 2002. The program places Pfizer colleagues and teams on 3-6 month assignments with leading international development organizations. Global Health fellows contribute their skills toward improving health outcomes in underserved areas in the U.S. and abroad, transferring "their professional medical and business expertise in ways that promote access, quality and efficiency of health services for people in greatest need" ("Global Health Fellows: Overview").

Business Benefits of CSR for SMEs (Small/Medium Enterprises)

Business & Community Working Together

In this blog, Giva has detailed some of the business benefits of Corporate Social Responsibility (CSR). Implicit in much of this analysis is the assumption that the company being addressed is quite large and has the resources to implement certain policies. One is right to ponder whether these business benefits of CSR are the same for Small and Medium Enterprises (SME). A report titled "Opportunity and Responsibility" compiled by the European Commission helps answer this question. It details some of the most effective CSR investments for SMEs and highlights the benefits that can only be achieved with scale.

As one might expect, many of the business benefits of CSR are the same for firms of all sizes. Companies stand to gain engaged staff, an enhanced reputation, and lower long-run costs. But, small businesses in particular may be interested in some other benefits. For instance, SMEs with great CSR policies (particularly strong sustainability measures and labor practices) may be more likely to win contracts from larger businesses. Those with strong CSR reputations are poised for success as more and more large companies hold their entire supply chain accountable to certain ethical standards. In general, small businesses may find that investors are partial to companies with great corporate citizenship policies.

SMEs in the same industry are much more likely to cooperate with one another on a CSR initiative. Unlike their larger brethren who might tend to avoid this kind of cooperation, small businesses are more comfortable working together to solve a community problem. In one instance, a group of 77 shop owners in a section of Copenhagen worked with the Ministry of Education to design an apprenticeship program for young people. The program was designed to confront a rise in youth crime while having the added benefit of increasing the number of skilled retail workers. These kind of joint initiatives give small businesses the opportunity to have an impact comparable in size to that of large multinational enterprises. They are often community focused and help to improve the local business climate.

Moreover, thinking of creative CSR policies and social entrepreneurship can spur incredible innovation. Today's economy is increasingly knowledge driven. Companies of all sizes are reliant on their employee's creativity. For a small business that does not have an extensive research and development team, thinking about CSR can be a great way to transform the business and its products with fresh ideas.

Surveys continue to indicate that ethics and morals are the primary drivers of CSR in small business. This finding is important. Ultimately, great CSR is born from great ethics. But, that does not exclude CSR from being great for business. Corporate Social Responsibility can improve local communities, lead to new business partnerships, and spur innovation. Ultimately, these benefits improve the business.

Context-Focused Giving, Part 2

Business & Communities Philanthropic Partners

In part 1, we introduced context-focused giving as corporate philanthropy and strategy combining to achieve both social and economic gains, examining how this can be done by analyzing various factors, based on the Harvard Business Review publication, "The Competitive Advantage of Corporate Philanthropy," by Michael E. Porter and Mark R. Kramer, last time including factor conditions and demand conditions. Here, we continue on with the other two elements: context for strategy and rivalry and related and supporting industries.

Context for strategy and rivalry has to do with the rules of business engagement in which a company operates. A context-focused giving strategy that works to open local markets to trade, that is governed by policies that reward fair competition and deter corruption, has a clear and widespread social impact that benefits communities and citizens as well as the economic benefit of operating in an amenable business environment. Twenty-six U.S. corporations have engaged in giving targeted toward improving their context for strategy and rivalry by joining forces with Transparency International in their fight to end corruption and create an intersection of business, government and society that places a high value on transparency and accountability. Their work and corporate partnerships has a significant and far-reaching impact on society and the economy.

Companies rely on other related and supporting industries to operate. Philanthropy that is focused on generating benefits and improvements for related businesses or local suppliers allows for corporate growth and partnership opportunities, along with a better use of time and resources: "Proximity enhances responsiveness, exchange of information, and innovation, in addition to lowering transportation and inventory costs" (Porter and Kramer, 5). American Express has used context-focused giving to identify the travel industry as an important related industry where efforts and resources could be used to generate social benefits and economic gains for American Express. They have provided significant funding to Travel and Tourism Academies that train students for careers with travel-related companies such as airlines, hotels, and restaurants. Their program has improved educational and job opportunities for people in communities served, as well as a competitive advantage for local travel clusters. Because American Express relies heavily on travel-spending, their global brand is also a part of local travel clusters, and they have a stake in these clusters' success.

Shifting your corporate giving strategy to context-focused giving is a rigorous process that should seek and consider input from management throughout your company in identifying a corporate giving strategy aimed toward improving competitive context. One question to ask when examining your company's competitive context is, "What constraints, tangible or intangible, prevent or limit our productivity and growth?" The more specific you can get when identifying areas for improved context, the better foundation you will have for beginning to research, plan and implement a successful context-focused giving strategy. Porter and Kramer stress the importance of rigorously tracking and recording the results of your initiative, both socially and economically, to provide a framework for creating evidence-based improvements and modifications in your initiative. They also encourage forming partnerships with other stakeholders, the benefits of collective action being enhanced efficacy and shared costs.

Businesses thrive from good strategy; there is no reason why the extensive research and planning that goes into other areas of corporate strategy should not be applied to corporate philanthropy. Corporations have more financial and intellectual resources than most non-profits that can provide unique perspectives and solutions to societal issues. Corporate Social Responsibility does not have to be separate from Corporate Strategy; context-focused giving is a framework for developing philanthropic initiatives with clear social and economic benefits.

United Nations' Views on CSR

United Nations Volunteerism

Large and multinational enterprises are in a unique position to address many of the world's challenges. Their global reach and access to a variety of resources make them an important partner in an evolving global landscape. The United Nations (UN) has recognized this trend and has taken a variety of steps to inform large enterprises of their potential impact on the global community. Recently, a 2011 UN study on the State of the World's Volunteerism shed some light on the importance of Corporate Social Responsibility (CSR) in the private sector. The study concluded that corporate volunteering and ethical governance have the power to improve social cohesion and address many of the Millennium Development Goals (MDGs). Understanding the significant impact of the private sector on communities around the globe the United Nations established the UN Global Compact, a forum designed to align the values of several of the world's largest companies. Accounts of activities within this forum highlight the significant role CSR can play in the contemporary global economy. The United Nations has recognized a number of goals it would like to achieve by the end of this century. It has also recognized some important partners in ensuring these goals are accomplished.

As previously mentioned, The United Nations Global Compact is the hallmark of the UN's policy on CSR. It is a partnership that commits companies to pursue policies of ethical governance by agreeing to certain principles. All members are required to report their positions on a variety of topics from human rights and labor practices to environmental sustainability and corruption. The Compact has allowed companies to introspectively consider the impact of their policies throughout their supply chains. Recently, it has also begun to encourage companies to pursue some MDGs, and companies have already begun to undertake these initiatives. Their work is an affirmation of the power of skills-based volunteering and a sign of the growing importance of the Compact.

One of the companies currently helping the UN with MDG 7 (Environmental Sustainability) and featured prominently in the aforementioned study is SUEZ, the French-based industrial utilities provider. It has established a corporate volunteering program that takes advantage of its employee engineering expertise. The company has formed two groups; Aquassistance and Energy Assistance. Aquassistance volunteers have carried out waste management assessments around the globe in countries like Albania, Niger, Senegal and Guinea Bissaul. Energy Assistance volunteers have assessed power distribution in Honduras, conducted an analysis of pollution in the Galapagos Islands, and performed a review of an electrical plant in East Timor. The work of SUEZ employees is ensuring that all areas of the globe are subject to the rigorous environmental analyses they deserve. They continue to provide areas with a standard for environmental sustainability.

The SUEZ partnership and others like it are exemplary of an increasingly important trend in CSR: International volunteer initiatives. Multinational companies are attempting to help a broad range of communities and earn an international reputation for corporate responsibility.

Adapting CSR for Small Business

Businessman Giving to the Community

Discussions about corporate social responsibility (CSR) are often reserved for large multinational companies. Their size and durability gives them an opportunity to tackle some long-term societal challenges. However, it is false to conclude that corporate citizenship is exclusively the domain of larger enterprises. In fact, many small companies do more for their local communities per capita than their larger brethren. CSR occupies a different place in these firms. Many practices, from starting a CSR initiative to tracking results, are done quite differently in small enterprises. Regardless, corporate citizenship continues to be an important part of the small business community. It is worth examining in some detail.

First Steps

For many small businesses, the idea of implementing a set of CSR policies seems daunting. What is often forgotten is how ingrained many of these policies already are in the companies' structures. Paul Hohnen for International Institute for Sustainable Development in the document "Corporate Social Responsibility: An Implementation Guide for Business" has compiled a checklist and set of reminders (pg 40) for small businesses thinking about their CSR policies. The document recommends assigning an individual, perhaps a student or consultant, to gather relevant information. It is important for small businesses to examine their policies from implementation to evaluation. Their small size actually makes tracking easier. The close relationship many employees have with the company's stakeholders (in particular consumers and suppliers) simplifies the examination process considerably. Understanding what can be considered CSR is an important first step for many small firms.

Hohnen offers some interesting examples of small CSR initiatives that might be easy to adopt. These suggestions include implementing an environmental management system, making some services or products free for local nonprofits, and sharing CSR lessons with other small businesses. Even something as simple as improving the company's recycling policies can be considered CSR. It is important for small firms to remember that the absence of a detailed CSR report does not mean the company is neglecting CSR; certain aspects of corporate citizenship might simply be taken for granted.

Identifying Relevance

It is increasingly evident that CSR means something very different for small businesses. An interesting article in Forbes by N. Craig Smith titled "When it Comes to CSR, Size Matters" offers an interesting perspective on why this difference arises. The author suggests that because company founders are often still running their businesses, CSR is a more personal matter for small companies. Ensuring commitment from management is thus not as big a challenge. Small companies and their employees also tend to have a more personal stake in the community. This notion makes programs like job training and infrastructure improvements quite relevant to the business. Small firms are less concerned with reputation-related pressures and more focused on ensuring a positive local environment.


Ultimately, small businesses should be reminded that they are often pursuing CSR initiatives even if they are not explicitly defined that way. It can be very beneficial to identify these policies if the company is in a position to do so. The goal does not have to be to tackle a major societal challenge like a multinational company. Rather, small businesses should be focused on identifying projects that lend themselves to the company's expertise. Small businesses are affected by many of the same CSR trends as their larger counterparts. Their challenge is to adapt solutions to their particular situations.


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