The study, Unlocking the value of social investment, reviewed corporate reports issued between 2012 and 2013 by the 10 largest global companies in each of 10 industry sectors. These companies and their associated corporate foundations invested on average, the equivalent of 2.5 percent of their pre-tax profits in programs to tackle social and environmental challenges such as access to education, healthcare and disaster relief.
Yet the report found:
- Only 20 percent of these companies reported any quantified metrics for the impact of the programs they fund
- Just 32 percent reported a detailed investment strategy
- Only 29 percent discussed outcomes or impacts in even general terms
- None quantify long-term impacts
- Pharmaceuticals companies make the largest proportionate investment in social programs – nearly 12 percent of pre-tax profit
Chi Woo, KPMG Australia Partner said: “Companies are investing huge amounts into social programs, despite the wider corporate focus on cost, post-Global Financial Crisis. To put it in context, the US$12.2bn invested by these 100 companies alone is equal to the entire annual foreign aid development budget of France2. But despite the extent of the investment, this study indicates a surprisingly ad hoc approach to reporting the outcomes and levels of success of the projects. Companies report on the money spent but there is little explanation as to the payback either for shareholders or even the direct beneficiaries.”
Chi Woo added: “A clear strategy for social investment is crucial for success yet currently there appears to be a ‘scatter-gun’ approach, with companies typically investing in five different areas rather than focusing on priority areas where the business can make the most difference. This does not help target the investment efficiently or maximise the benefits from the money spent. Measuring the impact on the ground can be challenging but it is key to learning how the effect of these programs can be improved”.
The report argues that best practice community investments are those that create shared value for both the beneficiary and the business, rather than pure philanthropy, as those projects with clear business drivers are more likely to be sustained by shareholders in the long run. In some jurisdictions, such as India, companies are required to invest in Corporate Social Responsibility programs as part of their ‘license to operate’.
Chi Woo said: “There is some debate over whether such mandatory investment should be considered true social investment, but I believe there is just as much need for companies to properly assess the outcomes and strategy behind these projects as for other CSR expenditure. The end goal of improving communities and the environment is the same, and companies should be allowed to recognise the benefits from that investment. The most important thing is to enhance the overall standards of reporting and measurement of social investments.”
Unlocking the value of social investment is intended to help corporate responsibility managers and others involved in designing and delivering social investments to overcome some of the challenges to measuring and reporting on social programs. It contains practical advice, case studies and a framework for better measurement and reporting of social investments and programs.
Based on 69 of the 100 companies researched that reported their total social investment. These companies report the total value of social investment, such as cash donations, the value of employee volunteering time and donated products and charity sponsorship. This figure should not be taken as absolute as companies use disparate methods to value in-kind contributions.
According to OECD data development aid [XLS 118KB] from France in 2012 totalled US$ 12 billion.