Sustainability and integrated

Cost management driving CSR activity in South Africa

Research from the 2011 Grant Thornton International Business Report (IBR) reveals that the biggest driver for South African businesses to implement more ethical business practices is cost management. A total of 62% of SA business owners report that this is a key driver for Corporate Social Responsibility (CSR) in their organisations. Only 37% of companies are motivated by a desire to ‘save the planet’, a figure which is down 19% from 2008 figures.

The Grant Thornton 2011 International Business Report (IBR) survey, which is now undertaken on a quarterly basis, focuses on mid-cap listed and medium- to large privately held business owners’ perceptions of various issues. The CSR report reviews key drivers of CSR, various initiatives which are launched and how these programmes should be reported.

“South African companies’ CSR activity appears to be more commercially motivated, than altruistic,” says James Brice, head of Sustainability Services at Grant Thornton Johannesburg.

This perception appears to be on a par with international perceptions with just 36% of businesses globally agreeing that ‘saving the planet’ drives businesses to implement more ethical business practices. BRIC countries are the most environmentally conscious with 60% of business owners in BRIC nations responding that ‘saving the planet’ drives their businesses to implement ethical practices.

“This is an appropriate trend,” says Brice. “For environmental or social initiatives to be sustainable, they need to contribute to the bottom-line. This is also being encouraged through King III and the JSE’s drive towards integrated reporting. Companies are being challenged to move away from philanthropy and towards bringing environmental, social and governance issues closer to their core business activities. Stakeholders and shareholders are becoming more aligned in that they are looking for value-add propositions, not just window-dressing.”

The survey revealed that staff retention and brand building were also motivators in implementing CSR programmes in South Africa, with both elements getting 55% of positive responses from business owners.

South Africa however was the highest country surveyed, at 93%, who had donated to a community or charity cause over the last year, while the global average sits at 64%. South Africa also scores highly on the promotion of diversity and equality at work, with 87% of companies agreeing with this statement, compared to 64% globally.

“Good corporate citizenship is of utmost importance for South African businesses and in terms of the Black Empowerment Act, this indirectly provides additional drive for business owners to commit to diversity issues,” says Brice.

When asked what sustainability initiatives South African companies have implemented in the past year, business owners reported they have improved energy efficiency since 2008 with responses up 5% to 69%. This is 9% higher than the global average and is most probably driven by the nation’s problems with electricity provision in the country since 2008.

South Africans’ perceptions on the importance of reporting CSR and governance issues is different to that of their global counterparts with 43% confirming that their organisations already actively report on CSR activity. A huge 72% of businesses surveyed agree that businesses should combine governance reporting into their financial reporting, to provide one integrated report. Globally only 25% of businesses report on CSR activity and just 44% think it should be incorporated into financial reporting.

“This difference of opinion in views on CSR reporting appears to be influenced by King III and the nation’s drive towards an integrated reporting framework, which guides businesses in South Africa on good corporate governance,” states Brice.

South Africa appears to be on the right track in terms of promoting CSR activity, with alignment between non-financial and financial performance becoming an important differentiator in sustained value addition.