According to the BusinessDirectory.com, Corporate Social Responsibility is defined as . . . a company’s sense of responsibility towards the community and environment – both ecological and social – in which it operates.
Companies express this citizenship –
- through their waste and pollution reduction processes
- by contributing educational and social programmes, and
- by earning adequate returns on the employed resources.
Corporate social responsibility, also known as corporate social investment or corporate citizenship, alongside good governance and socio-economic development has virtually become ‘licence to trade’ in South Africa.
This being the case, the business community has finally embraced the concept, accepting that they can no longer work in isolation from the community and that good governance means social involvement beyond the walls of their offices. They accept that commitment to corporate social investment inevitably involves incurring costs and rarely provides financial benefit to the company. However, they acknowledge the incredibly positive and sustainable impact, both environmentally and socially, these initiatives have on the future prosperity of our country.
A large percentage of companies today align their company’s business strategy and their vision and mission statements with their corporate social responsibility programmes. For example, a company based in KwaZulu Natal may commit to improving the quality of life of the people residing in the communities within which they operate (KZN) and where the majority of their staff live by better enabling them to provide for their own needs and empowering them to better themselves and their communities in the future. Other companies might align themselves with programmes that correlate with their own particular area of expertise e.g. a stationery manufacturer who supports education and training, a food manufacturer who opts for feeding schemes or a drug manufacture who promotes HIV, TB or other health programmes.
Having extolled the virtues of CSR it is important to point out that there is a difference between corporate social investment and social economic development – it’s all to do with the sustainability of the initiative. Corporate social investment programmes can be sustainable or non-sustainable e.g. a feeding scheme. Whilst this in no way diminishes the need for such a programme – feeding schemes are vitally important – the contribution does not qualify as socio-economic development.
What is Socio-Economic Development (SED)
Socio-Economic Development is any programme that creates sustainable access to the economy for its beneficiaries. This means that contributions should be providing sustainable benefit. In a nutshell SED projects teach people to fish rather than giving them a fish.
Socio-Economic Development is one of the noble and good ways to earn BEE credits. The key principle of socio-economic development is for enterprises to contribute to initiatives which will result in the beneficiaries -
- developing skills that enhance their capabilities
- accrueing sufficient experience to access the workplace.
Not only do these attributes make the beneficiary more valuable to the economy, it also enhances their chances of a better life.
Socio-economic development is one of the seven elements of the BEE scorecard which focuses on the extent to which an organisation carries out initiatives intended to uplift South African society. A contribution for example of 1% of annual after tax profit is worth 25 points for a qualifying small enterprise and 5 points for a company.
Some projects are registered as public beneficiary organisations and qualify under the tax exemption provisions of the Income Tax Act. Contributors can therefore include all contributions as an operational expense and benefit from the applicable tax deduction. In this instance not only does the investing company benefit from image enhancement resulting from the exposure received by association, it also earns valuable BEE credits.
Broad-Based Black Economic Empowerment
BBBEE is a policy laid down by Government to create opportunities for greater participation in the economy by Black people, as a strategy to overcome the low levels of black involvement in the SA economy. At the same time it aims to facilitate the growth of Black entrepreneurs and business.
The status of a business is measured accordance with its BEE credits on the BBBEE Scorecard System which ascertains the extent to which a business is BEE compliant. It is compulsory for South African business to conform to the rules laid out in this policy.
Further information on the BBBEE Code of Good Practice its Scorecard System and other relevant details are available on the Department of Trade and Industry’s website www.thedti.gov.za.