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Corporate Citizenship Gap Widens Between Large, Small Companies

By Steve Bates  10/9/2009
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Large U.S.-based companies are increasing investments and involvement in corporate citizenship activities much more than are small companies, according to a new report.

The report, Weathering the Storm: State of Corporate Citizenship 2009, released by the Boston College Center for Corporate Citizenship, suggests that small companies were so severely impacted by the recession that many non-essential functions, such as corporate giving and improving low-income communities, were scaled back or suspended at these firms.

At the same time, small firms were far less likely than large ones to lay off employees during the recession. And small companies have put more emphasis on work/life balance and “talking about [corporate] citizenship with employees” than large ones in recent years, the report notes.

“One way to describe the pattern in big companies is through the strategic logic of ‘shrink-and-grow,’ ” the report states. “Big firms shrank their work force this past year, as they’ve been doing for the past three decades when profit pressures arise. But at the same time, they grew more green products and programs and upgraded the management of citizenship within the firm.”

The report defines corporate citizenship as “the way a company takes responsibility and is accountable for managing its social and environmental impacts on society—from the design of its products and services to the management of its operations to the way it works beyond the fence line to address social and environmental challenges.”

Nearly two-thirds (63 percent) percent of leaders at large companies said that improving conditions in their community was important to them in 2009, but only 44 percent of leaders at small companies agreed. Similar numbers were reported for protecting the environment. Only one-third of small company leaders said supporting employee volunteerism was important to them.

The report speculates that the recession had a “material and psychological impact on citizenship that led some small firms ‘back to the basics’ when it came to their philanthropy, community support and the priority given to corporate citizenship.” Large firms cut back on philanthropy as well, but they “continued to put a priority on citizenship, promote employee volunteerism and, where there was a history of doing so, attend to needs of low-income communities.”

Despite the contrast between large and small companies, report researchers found some good news:

*Many U.S. corporations have continued their commitment to corporate citizenship despite the poor economy. Fifty-four percent say corporate citizenship is even more important during a recession.

*Business leaders are recognizing that they must increase their role in shaping public policy. Issues of concern to U.S. companies include health care, product safety, education and climate change.

*Sustainability is now seen a major business driver, with 52 percent of companies (and 65 percent of large companies) designing and offering sustainable products or services.

Findings in the report were based on a national sample of leaders at small, medium and large companies who completed a survey in June 2009. The impact of the recession was a recurrent theme.

“The hopeful message in our data is that, despite the extreme turbulence, most businesses are committed to being good corporate citizens,” said Barbara Dyer, president and CEO of the Hitachi Foundation, a sponsor of the research, in the foreward to the report. “Increasingly, companies are aiming to integrate corporate citizenship with their business strategy. And these executives identified a number of new business opportunities they are pursuing that are fundamental to good corporate citizenship,” continued Dyer.

Engaging with elected and appointed government officials on crucial matters such as health care is high on the agenda. Of the senior executives surveyed for the report, 65 percent say business should be more involved in finding health care solutions. At mid-sized companies—100 to 999 employees—72 percent say business should be more involved.

However, the authors state, American companies do not want to be told how to be good corporate citizens. Business leaders see improving their reputation and identifying business opportunities as being particularly valuable aspects of corporate citizenship efforts, but there was a decline in the percentage of senior executives who believe that the public has a right to expect good corporate citizenship, from 65 percent in 2007 to 57 percent in 2009. At the same time, many U.S. executives feel that their organizations do not get enough recognition for the voluntary steps they have taken to be good corporate citizens.

Not surprisingly, many companies are increasing communication efforts around their corporate citizenship efforts—internally and externally. More than half of large U.S. corporations report that their board of directors approves corporate citizenship programs.

The report found that more companies are aligning their actions and investments with good corporate citizenships principles. Treating employees well is a key element of this effort. Other initiatives include boosting skill development, education and career prospects for employees paid less than $40,000 per year.

“Business leaders recognize that being a good corporate citizen adds real value to their firm,” said Dyer.

The future of corporate citizenship in the United States is bright, the report concluded. Investments, particularly those that demonstrate “green” initiatives, are increasing rapidly. However, companies can make their biggest impact through influencing laws and regulations, the authors observe.

“The challenge for business leaders is to engage constructively with the new administration in Washington, and leaders from civil society,” the report stated. They must “create a framework for corporate responsibility that brings together ethical leadership, self regulation and regulation to create a viable platform for corporate responsibility and accountability in a global economy.”

Steve Bates is SHRM’s manager of online editorial content.

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