Community Engagement and Investment: Strategy and Management

Community engagement and investment is a multi-faceted activity that requires formal management and planning.  Working with and in the community is part of the broader corporate social responsibility (“CSR”) activities of the company and this means that management should begin at the top of the hierarchy with the board of directors or, in most cases, the committee of the board that has been delegated responsibility for overseeing CSR activities on behalf of all of the directors.  The CSR committee, working in collaboration with senior management of the company and specialists working specifically on community-related matters, should be tasked with developing strategies and policies relating to community engagement and investment; deciding on the optimal organizational structure for community-related activities, including perhaps the formation of an affiliated corporate foundation; ensure that procedures are in place for conducting due diligence on prospective recipients of grants and other resources from the company and potential partners in community development projects; development and approval of projects; overseeing implementation of projects, including preparation of definitive agreements with community partners, monitoring progress and measuring impact; and compiling and analyzing relevant information regarding community activities for presentation in the company’s sustainability reporting.

Strategy Development

The first step in the process of designing, implementing and managing the company’s community engagement and investment should be developing appropriate strategies and policies.  If the company’s activities are limited to occasional actions that fall into the realm of traditional philanthropy (i.e., small grants to local nonprofits and/or annual volunteering days) it may actually be that it has no specific strategy, which may be fine for a short period of time when the company is just launching and has scarce planning resources that need to be focused on other issues.  However, as companies take on more ambitious plans with respect to involvement with communities and tackle issues that cannot be solved with one act, such as addressing poor education and poverty in the community, long-term strategies that go out three to five years are appropriate since the company’s resources will need to be committed to the issue over an extended period of time.  Strategies should describe what the company expects to achieve over the planning period in relation to its vision, mission and goals with respect to community development and how it plans to achieve those goals in terms of organizing and committing its available resources.

The development of a strategy is the time for the CSR committee, and the company as a whole, to focus on three fundamental questions.  First, the company should decide on the group within their community that will be the primary target of the activities.  For example, many companies prefer to be involved in programs for young people in their communities, such as improving primary education and/or providing recreational spaces.  Other groups that might be targeted include older people, community members with disabilities and groups that have been marginalized and/or discriminated against due to gender or ethnicity.  The next thing that needs to be done is to determine whether activities should be focused on specific parts of the community, such as a particular neighborhood, or can and should be scaled to have an impact throughout the entire geographic area.  For most companies, the answer, at least initially, should be to concentrate on the areas surrounding the company’s facilities.  Finally, in order to have a strategy the company needs to decide on the sector and related issues on which the community-related activities will concentrate.  Sector refers to the broader community development area, such as education, health, the environment, job creation and/or some of the other topics discussed below.  Issues are specific aspects of the selected sector, such as early childhood education in the education sector, encouraging regular medical screenings and tests in the health sector and entrepreneurship training in the job creation sector.  Decisions regarding sector and related issues should be made with an eye toward how the company, with its specific resources and competencies, can make the greatest impact in alignment with its overall vision and mission.

As is the case generally when the task is strategic planning for a business, the CSR committee and others involved in the planning process need to review the past and current community-related activities of the company to assess whether they are in alignment with the vision, mission and goals that the company wishes to incorporate into its new strategy.  A study should be done of the practices and activities of comparable organizations and, most importantly, the plan should not be developed and implemented without extensive community engagement in order to understand the priorities and expectations among community members and anticipate how the community might react to a particular initiative or program.  When selecting the target groups, sectors and issues, reference should be made to technical guidance and standards that have been developed for community engagement.  Developing the strategic plan will initially be a time-consuming process; however, once the plan is in place it should be easier to review and modify to take into account changing circumstances.  Companies should expect to assess and update their plans no less frequently than annually during the planning period and wholesale revision of plans will usually be required every four to five years.

Selecting the Sector and Related Issues

As noted above, one of the fundamental questions that must be addressed at the very beginning of the development of a strategy for community engagement and investment is the selection of the sector(s) and related issues on which the company’s community-related activities will concentrate.  A sector is a broader community development area, such as those described below, and issues are specific problems or challenges within a sector upon which a company’s strategy, resources and competencies can be properly and effectively focused.  In many cases sectors will be selected on the basis of the personal priorities of the founders and other organizational leaders of the company and/or the core business activities of the company.  While relying on these inputs is helpful, companies should be careful not to settle upon sectors and issues without first conducting an assessment of the needs within the community and the expectations of community members regarding the company’s involvement and investment.  For example, the activities and geographic location of a company may dictate that prioritization be given to a specific sector, such as engagement with and support for indigenous peoples.   

Companies can look to a variety of sources to assist them in compiling a list of sectors and related issues from which choices can be made including the ISO 26000 Guidance on Social Responsibility developed by the International Organization for Standardization[1], the Future-Fit Business Framework, the OECD Guidelines for Multinational Enterprises, the STAR Community Rating System framework (“STAR”)[2] and the United Nations Sustainable Development Goals (“SDGs”) of the 2030 Agenda for Sustainable Development[3].  For those companies interested in participating in addressing one or more of the SDGs at the community level, reference can be made to the resources available through SDG Funders in order to gain a better understanding of how businesses, non-profits and other types of organizations have been supporting initiatives focused on one or more of the SDGs.  Among other things, the SDG Indicator Wizard is a simple and innovative tool that organizations to identify which of the SDGs are most closely aligned with its existing strategic priorities as declared in organizational mission statements and then use that information to create an SDG-compatible framework that includes relevant goals, targets and indicators.  Additional guidance for businesses on creating strategies that will allow them to contribute to progress on the SDGs is provided by the SDG Compass and addresses defining priorities, setting goals, integration and reporting and communications. 

Another resource for gathering ideas is the sustainability reports of comparable businesses, particularly the sectors highlighted in those reports and any related case studies that provide insights on specific issues and the programs and initiatives developed to address those issues.  A research report on reporting practices relating to community impacts prepared in 2008 by the Global Reporting Initiative, working in collaboration with the University of Hong Kong and CSR Asia, is mentioned in the following sections.[4]  The conclusions in the report, referred to herein as the “GRI Community Impact Reporting Survey”, were based on a review and analysis of 72 sustainability reports, and the report identified 17 categories of topics that were covered in reports, although acknowledging some overlap.  Some of the topics were process-oriented, such as philanthropy and charitable giving, community dialogue and engagement, partnering with non-governmental and local organizations and public policy; however, most of the topics could be appropriate characterized as “sectors” and provides much of the basis for the sections that follow (which also include ideas regarding specific issues and programs that businesses have developed for each of them).

Building the Business Case

While many hope that community engagement and investment initiatives will be compelling in their own right because of the need for businesses to participating in addressing significant challenges, needs and threats in their local communities, the reality is that executives and managers proposing community projects must be prepared to demonstrate a strong business case for those initiatives in order to mobilize sustained commitment to them throughout the organization and ensure that the appropriate resources are allocated to the initiative and that the necessary changes are made to company’s measurement, management, recognition and reward systems.[5]  As evidence for the importance of the business case, Willard, who has written extensively on best practices among companies with respect to sustainability, pointed to a report by Bain & Company, “Achieving Breakthrough Results in Sustainability”, that was based on a survey of over 300 large companies engaged in sustainability efforts and found that 98% of their sustainability initiatives had failed.[6]  According to Bain & Company, one of the five reasons for this dismal failure rate was “lack of a compelling business case”. 

While the results of its survey were discouraging, Bain & Company believed that companies could improve their performance with respect to sustainability initiatives by following four guidelines: “make a public commitment”, “lead by example at the top”, “highlight the business case” and “hardwire change through incentives and processes”.  Willard argued that a compelling business case should be seen as the prerequisite for the other three guidelines since executives could not reasonably be expected to do any of the other things unless they were convinced that the initiative was good for the company and its direct stakeholders (i.e., investors, employees and customers), as well as good for the environment and for society as a whole.  Willard also pointed out that “strong leadership support”, cited by Bain & Company as one of five factors that contributed to successful sustainability initiatives, could only be expected if the business case was strong enough to earn the endorsement, engagement and proactive support of company executives and senior managers and that such support paved the way for the other success factors mentioned by Bain & Company: “employee engagement and interest,” “clear goals and metrics,” “effective internal communication,” and “introduction of environmentally friendly policies/processes.”  Willard made his pragmatic case for focusing on the business case for sustainability initiatives as follows:

“We need to meet executives where they are and honor their need for compelling ROI information when they assess proposals. If an initiative improves the company’s reputation, grows revenue, saves expenses, engages employees, helps win the war for talent, spurs innovation, meets company norms for payback periods, provides a good internal return on investment, increases the value of company assets, and / or contributes to higher share prices, of course executives will support it.”[7]

There are a number of different methods that can be used to develop a business case; however, Willard has developed a customized approach that he recommends for sustainability executives and managers looking to build the business case for sustainability initiatives.  Willard’s “sustainability return on investment” workbook “provides a comprehensive cost-benefit analysis framework by which to build a tailored business case for single or multiple sustainability initiatives implemented within various timeframes”, is extensively annotated and should be consulted directly for practical guidance on developing and implementing sustainability initiatives.[8]  The elements of Willard’s method for developing the business case for a sustainability project or initiative are based on his assumption that there are only three reasons that companies undertake major projects and that these justifications for investment must be borne in mind when making the case for implementation to decision makers:

• “Do the Right Thing”: This justification means activating the company’s purpose and values, being ethical, and making sure that projects and initiatives are aligned with the company’s strategic direction and mission. Willard explained that something is “right” when it improves the wellbeing of stakeholders and that since society and the environment are stakeholders there is a strong justification for sustainability projects and initiatives that improve their wellbeing by reducing harmful impacts and increasing positive impacts.  In addition, a sustainability project or initiative may be the “right thing” for the decision maker’s own personal values, wellbeing and aspirations.
• “Capture Opportunities”: This crucial justification speaks the need to the chief executive and financial officers to accommodate the needs of the company’s investor stakeholders by not approving any sustainability project or initiative that cannot be cost justified over a specified planning period, be it short- or long-term.  When presenting a business case consideration must be given to the specific financial metrics that are motivating the decision makers and these may vary and can include return on investment, reductions in expenses, top-line revenue growth and/or the impact of the project or initiative on the company’s investment market value and share price. 
• “Mitigate Risks”: Willard explained this justification as being the flip side of “Capture Opportunities” and pointed out that prudent stewardship of the company’s assets and principles of good governance demanded implementation of robust enterprise risk management processes. Part of those processes is examining each new project or initiative from a risk management perspective and that requires that business cases must quantify risks that could arise if the project or initiative was not undertaken and the risks that could arise if the project or initiative fails.

While each of the justifications should be addressed in every business case the appropriate weighting will depend on the particular circumstances and the personal concerns and approaches of the decision makers involved.  In many cases capturing opportunities and/or mitigating risks will remain the predominant factors for decision makers, even as the company is looking to integrate sustainability into its operations; however, the need to “do the right thing” is becoming increasing important as non-investor stakeholders, such as employees and customers, apply pressure on executives to take societal and environmental wellbeing into account.  Moreover, when a company decides to “do the right thing” by improving working conditions for its employees it will hopefully see that the company’s capacity to capture opportunities will be enhanced due to the involvement of a happier and better trained workforce.

Willard argued that each business case for a sustainability project or initiative should include several common elements, each of which is related to one of the justifications described above:

• When a project or initiative is recommended as being in furtherance of the desire to “do the right thing” it must be aligned with the company’s purpose, values, mission, vision, principles, beliefs and long-term strategic goals.
• When a project or initiative is recommended as a means for capturing opportunities it should include a cost-benefit analysis and return on investment assessment that supports one or more particular categories of opportunities such as revenue growth from improved company reputation with customers, innovative sustainable products, services and financing and strong brand and social license to operate; operational expense savings and improved efficiencies or human resource expense savings (e.g., lower hiring and attrition costs and increased productivity). Additional opportunities may be available with respect to asset and/or market value improvement.
• When a project or initiative is recommended as a means for mitigating risks the business case should address mitigation of risks of inaction (i.e., if the initiative is not undertaken by the company and its competitors do) and mitigation of risks of taking action (i.e., if there might be cost overruns, delays, or collateral damage). For example, a project or initiative may be appropriate to mitigate the risk of lost revenue from poor company reputation with customers; the risk of lost revenue from outdated products and services; or the risk of higher energy, carbon, materials, water, waste, maintenance, travel and/or transportation expenses.

The business case should also address potential benefits to the company with respect to “reputation” and “innovation”; however, it should be acknowledged that impact and value to these areas from a particular project or initiative will be difficult to quantify in the same manner as revenues and expenses.  In spite of the measurement challenges, successful projects and initiatives can improved reputation with customers, which may drive revenue growth; improve reputation with employees that drives engagement and productivity that eventually leads to human resources expenses savings; and improve reputation with investors that causes the company’s market value to increase.  In addition, projects and initiatives that produce new revenues and cost savings are generally new and innovative and will lead to advances in many operational areas including policies, products, processes and practices.

This article is part of the Sustainable Entrepreneurship Project’s extensive materials on Community Engagement and Investment and an excerpt from Community Engagement and Investment: A Guide for Sustainable Entrepreneurs by Alan S. Gutterman, which is available for purchase at various online booksellers.  Readers may also enjoy the author’s Responsible Business: A Guide to Corporate Social Responsibility for Sustainable Entrepreneurs.

[1] International Organization for Standardization, ISO 26000: Guidance on Social Responsibility (Geneva, 2010).

[2] The STAR Community Rating System, which was launched in 2008, is one of the emerging frameworks and certification programs created for local governmental and community leaders to assist them in assessing the level of sustainability in their communities.  The STAR framework that is based on a holistic set of Guiding Principles with respect to local sustainability that include thinking—and acting—systematically; instilling resiliency; fostering innovation; redefining progress to include not just GDP but also improvements in the health and wellbeing of the community’s people, environment and economy; living within means; cultivating collaboration; ensuring equity; embracing diversity; inspiring leadership and continuously improving.

[3] http://www.un.org/sustainabledevelopment/sustainable-development-goals/ 

[4] Reporting on Community Impacts: A survey conducted by the Global Reporting Initiative, the University of Hong Kong and CSR Asia (Amsterdam: Stichting Global Reporting Initiative, 2008).

[5] B. Willard, “Introduction” in Sustainability ROI Workbook: Building Compelling Business Cases for Sustainability Initiatives (May 2017 Edition) (the Workbook, which is regularly updated, is available for download, along with other information on corporate sustainability projects, at http://sustainabilityadvantage.com/). 

[6] Id.  Citing and describing J. Davis-Pecdoud, P. Stone and C. Tovey, “Achieving Breakthrough Results in Sustainability”, Bain & Company (January 2017).

[7] Id. 

[8] Id.