Budget must be aligned to vision and goals

It seems commonplace now that during an election year, even in the most-developed democracies, there are increasing allegations made by opposing political parties relating to over-spending, governance concerns, accountability and corruption.

So much so that recently in Trinidad and Tobago, it seems that we have become immune to the news of the latest “scandal.”

In my line of business, however, when that news relates to Corporate Social Responsibility (CSR — otherwise called Corporate Social Investment, or CSI), my interest is piqued.

Not surprisingly, therefore, the recent allegations of overspending by National Gas Company on their CSI and related activities has had my undivided attention.

From where I sit, the irony of the situation is that the usual story we hear is of communities wanting organisations to spend more on CSR, but here we are with an allegation of an organisation spending too much. But too much for what?

Further to this, CSR speaks to ethical and responsible behaviour, so the thought of governance and accountability concerns related to the CSR spending is somewhat of an oxymoron.

Without making any allegations about what has been done or what should have been done, I think that this situation highlights some important questions which need to be asked, questions that also face CSR professionals, when it comes to CSR spending.

I hope here to provide some general guidance in addressing the issues which arise, and perhaps some guidance specific to navigating this current debacle.

What is the CSR budget being spent on?

A starting point in addressing this particular question is the recognition that the items included in every organisation’s CSR budget will be different, and despite what some may label as defined models and frameworks, in the real world, there is no “one size fits all” approach to developing the CSR budget.

There are, however, some basics that are worth noting: CSR or CSI is not marketing, advertising or promotion, and I continue to be amazed as to what some organisations classify as CSR spending.

Very broadly, CSR is grounded in an understanding that organisations (public and private) are an important part of the societies in which they operate and therefore have some level of responsibility toward ensuring that these societies (consisting of a variety of stakeholders) are stable and well-functioning — socially, environmentally and economically.

How this translates into specific items included in the CSR budget will, therefore, be different for every organisation. To make any sense at all, these budget items must be aligned with the overall vision of the organisation and be guided by its values.

This, together with an objective assessment of community needs, ideally involving the stakeholders themselves, should help to inform what is included in the CSR budget.

Another important consideration is the nature of the organisation’s business and what items are material to the organisation from a social, environmental and economic perspective. For example, it would be no surprise for a manufacturer/distributor of bottled water to be involved in a plastic recycling initiative, or a clothing manufacturer to be concerned about fair-trade cotton.

This is not to say that these organisations’ CSR spending cannot include other items, but a “materiality test” can often identify irregularities.

A materiality test looks at those items that have an impact, either directly or indirectly, on the ability of an organisation to generate, maintain or reduce social, economic or environmental value for itself, society and its stakeholders.

What is the geographical reach of the CSR spending? Again, no clear-cut answer exists. For example, when considering a public company versus a private one, there is often an expectation that the reach of the public company would be nationwide.

Even a large private company with operations throughout the country may have a wider geographic reach with respect to the impact of its CSR activities than a company with operations primarily in one community.

Again, the nature of the organisation’s activities are also important. In the oil and gas sector, for example, given the extractive nature of the industry and the fact that fence-line communities are often the first ones to experience any negative consequences from operations, CSR efforts in these locations tend to be focussed on “return” for a “social license to operate.”

Nevertheless, the answer to this question still comes back to whether there is an alignment between what the organisation represents and where the CSR funding is spent.

Locally, one of the most overlooked areas when it comes to CSR spending is the issue of impact. Organisations continue to spend large sums of money under the guise of CSR, but no one is looking at what impact this spending is having.

This is another litmus test of whether the CSR spending is really related to CSR. The impact of the spending must be monitored and measured to ensure that it is having the desired effect — socially, environmentally and/or economically.

In my view, if the impact is not monitored and measured, and if no impact can be determined as a result of the CSR spending, then I wonder if the spending is really CSR-related at all.