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E2 Contribution to the community

A) Goal of the indicator

Put in simple terms, the concept of community denotes all organizational forms of human coexistence, i.e., public community which extend beyond the family unit. At present, the state constitutes the primarily perceived form of community. As basic partial systems, municipalities can also be viewed as such, however. Communities form a space for political action.[1],[2]

If you take a closer look, you often find that communities constitute territorially demarcated regions (city districts, villages, regions) or homogenous wholes bound by pursuit of common interests and active membership (functional communities). The concept refers to very diverse dimensions of social life: personal relationships and their social networks, local circumstances such as infrastructures and embeddedness in a region, building development and property ownership, etc.

The community is at once the “nature of humankind as an ‘ensemble of societal circumstances,’ the multitude of mutual necessities of life and the manifestation of such necessities in ‘objective practice,’ – in city districts, associations and institutions.”[3]

 

Within the community, a “social space” of collective processes evolves in which individuals (as well as organizations) can shape their “life world” in accordance with their possibilities. Thus, every contribution to the community constitutes a shaping of individual living circumstances as well as the formation of social processes.

Every enterprise should take its societal responsibility and make an appropriate contribution within its sphere of influence to increase the potential of society (of the respective community) as a whole and the opportunities and potential for development on the part of individuals within the community. This can be achieved, for example, by strengthening societal cohesion, developing societal structures and taking measures to increase the opportunities of the disadvantaged and to balance out societal deficits by creating common goods.

Every human being and every organization profits from the community, for ex. through the services of municipal institutions and existing infrastructures. Taxes and social security contributions are paid to finance these services. In addition, lots of people and organizations make voluntary contributions, either in the form of financial donations, provision of non-monetary resources or work.

This contribution should be valued all the more highly, the more use individuals make of their existing productive factors [4] for strengthening the community rather than for generating private value. In addition to the contributions made by enterprises, the effect of such measures (the “societal footprint”) should be evaluated to a greater extent.

The goal is to achieve the most comprehensibly noticeable effects possible through use of such productive factors. Whereas the notion of performance refers to efforts which appear remarkable irrespective of whether they are successful or not, the concept of effect aims at actually noticeable changes which are reached through such efforts. It is considerably easier to quantify performance than it is to assess effects, however, and for this reason both are taken into account in the evaluation. Last but not least, the factor intensity evaluates the depth and sustainability of the engagement of the enterprise as well as the concrete kind of responsibility it takes.

B) Prompt questions

  • What form of societal commitment are we engaged in? How much money, how many resources / concrete efforts contribute to this? (compilation of a list of all activities with monetary dimensions)
  • Do we cooperate with non-profit organizations?
  • To what degree are these activities motivated by self-interest? Do we obtain added (consciously planned) benefit from our commitment? Which measures receive press coverage or are marketed in the media?
  • What are the effects of our actions? Which societal effects do we aim to achieve (individual, structural)? Do our activities bring about sustainable changes or do they primarily alleviate symptoms?
  • How well are these issues anchored in our company? Who takes charge of the overall coordination and which area of the company is it assigned to (marketing, executive department, board)? Who decides on funding? How much experience have we gathered in this area already? How stable is our commitment?
  • Does an overall strategy or vision for our voluntary commitment exist? What are our principals and particularities in this respect?

C) Evaluation table

 

Sub-Indicator

First Steps
(0-10%)

Advanced
(11-30%)

Experienced
(31-60%)

Exemplary
(61-100%)

Performance[5]

 

Relevance: high

0-0.5%

0.5-1.5%

1.5-2.5%

> 2.5%

Effects

 

Relevance: high

Isolated, noticeable effects, predominantly of a symptomatic nature

Intensified effects with no sustainability or initial measures with a broad impact

Intensified and sustainable effects in individual fields

Sustainable effects in several fields

Intensity

Relevance: low

Isolated measures, not institutionalized; little acceptance of responsibility

Individual measures taken on a regular basis, evolving strategy recognizable, responsibility recognizable

Comprehensive strategy, institutionalized implementation, far-reaching acceptance of responsibility

Practice accordingly for at least 3 years

 

[5] Monetary value of all measures (% of annual revenue or of paid and billable annual work time)

D) Special aspects regarding the evaluation

In cases of SMEs and large corporations, the monetary value of output (performance) should usually be taken into account. In cases of very small enterprises (sole proprietorships, two-person companiesU?), which essential entail personal performance, the proportion of overall work time contributed for such measures can be evaluated too. Should this result in loss of earnings, such performance could conceivably count more.

Example:

A sole proprietorship has an annual turnover of € 32,000. If the proprietor puts in 40 hours annually on a volunteer basis, this corresponds to approx. 2.5% of this person’s overall work time. In relation to the saleable proportion of his/her work time (usually 40% at best), the equivalent sum (€ 2,000 for 40 hours of work at an hourly rate of € 50), this already amounts to 6%. Normally the smaller value should be used for the evaluation but if the contribution to the community results in a lessening of income (for ex. because other orders cannot be accepted), a higher proportion can be calculated.

The larger the profits of a company are, the easier it is for them to donate a fraction of them for social causes. Donations are important for many activities (in the social realm in particular), but making them does not involve any special risk, nor does this entail taking any real social responsibility. Use of knowhow and personal working power is another thing. Very small enterprises often use a considerable proportion of their working power for benefitting the community rather than for generating profits. This means that professional performance is provided free of charge in a form which brings a maximum measure of utility, the consequence in most cases being that the enterprise itself is unable to take on other orders in full measure. In particular, such differences should be taken into account under the sub-indicator “Intensity.”

Differentiations from other indicators

Indicator E2 only evaluates performance for the community which is not directly related to the purpose of the enterprise. Thus, it is easy to differentiate this indicator from all others, whose focuses lie on the business activities of the company.

Socially motivated differential pricing, for example, primarily affects the sale of products and services and is thus not to be understood as a contribution to the community.

FAQs

How can the monetary value of a working hour be evaluated?

As a general rule, the realistic countervalue of the output should reflect itself in the calculation (what would this output cost on the market?) and not the countervalue of the loss in earnings which the person in question has (otherwise the working hours put in by the CEO of a multi-national group in a social framework would be extremely overvalued).

I provide comprehensive sponsoring; why is this not taken into account?

We wish to clearly distinguish contributions to the community from all kinds of sponsoring and marketing measures (in the realms of art/culture and sports), because the latter primarily serve the company’s self-interest and are usually covered by a marketing budget.

Activities aimed to support young artists or mass sports make a higher proportional contribution to the general good and should thus be given a higher evaluation, however.

In the case of SMEs and regional sponsoring in a clear social framework, exceptions can be made in terms of self-assessment and evaluation as well.

How is commitment in the framework of political movements to be assessed?

Here the focus should be put on the principle of effect. Does the activity have concrete, positive effects on society or do efforts concentrate on pushing a political idea? Even if the idea is motivated by the best intentions (for ex. commitment to the Economy for the Common Good movement), but no noticeable benefit results from this, commitment of this kind cannot (as yet) be taken into account.

We are a social business, so why should we make additional contributions to the community?

In regard to E2, the same holds for social businesses: only volunteer activities are counted which do not play a role for the company’s core business. Lack of profit orientation alone does not constitute a contribution to the community; the purposefulness and benefit of such achievements are evaluated under Indicator E1.

E) Definition + Background

In the ethico-economic debate, the concept “corporate citizenship” has established itself to denote active commitment which enterprises make to the community as citizens. Like normal citizens, organizations can make a volunteer (non-profit-oriented) contribution to the community.

The concept of the community is closely connected with that of “social capital,” which was investigated more closely right after the turn of the millennium by the World Bank and the OECD. The background of this investigation was the insight that the well-being and economic success of nations appears not to depend on classic economic parameters alone, but also on the individual education of a wide stratum of the population (“human capital”) as on the social cohesion of the community (the “social capital”). According to available insights, human and social capital can contribute decisively to a whole series of positive effects ranging from higher incomes and stronger social cohesion to a larger degree of life satisfaction.[6]

The World Bank grasps social capital as encompassing all institutions, relationships and norms which define the quality and quantity of social interaction. Such relationships and networks allow protagonists to make greater use of resources and reach common goals more easily. Social capital is the social cohesion of a community which has a decisive effect on sustainable economic and social development.[7] Therefore, any (government or private) investments made into these “capitals” can be viewed as a contribution to personal well-being and the economic survival of the members of a community.

Common properties put at the free disposal of all members of the community (free of private use or property rights) must also be viewed as a component of that community, however. One special form of this are public goods for which no rivalry in regard to use exists, i.e., goods which can be used by several members of the community simultaneously without any mutual impediment. This includes so-called “knowledge commons,” which encompass the entire freely accessible knowledge of a society as well as common and freely usable resources which are made accessible by a collective utilization agreement (“commons”) such as Open Software.

Contributions to the community can be made in various forms. In assessing corporate citizenship engagement, Judith Polerauer distinguishes the following areas:[8]

Forms of engagement

  • Instruments: donations, leaves of absence, other
  • Cooperation
  • Features: continuity and institutionalization

In-company implementation

  • Organizational anchoring and responsibility
  • Planning and implementation
  • Cash-value benefits

Subject area

  • Areas of engagement
  • Selection processes
  • Influence factors

In addition to actual performance (forms of engagement), anchoring of measures in the organization and the process of selecting areas of engagement should be taken into account to arrive at a comprehensive evaluation.

Output can be, for ex.

  • financial means
  • Monetary donations, for ex. to organizations which employees engage in
  • Exemption of employees during working hours
  • Sponsoring (albeit only under certain circumstances; see below)
  • Interest-free or low-interest loans
  • Advancement awards
  • Participation in community foundations, special assistance funds, donation parliaments, non-profit organizations
  • Provision of other material resources
  • Cost-free or inexpensive services, products and logistics
  • Cost-free or inexpensive provision of products and resources
  • Use of space, properties and office facilities
  • Provision of immaterial resources
  • Time, knowhow, expertise
  • Support of employees’ engagement during their free time
  • Activities engaged in by teams or the entire workforce
  • Dispatchment of executive personnel to boards of non-profit organizations and friends’ associations, etc.
  • Consultancy / training / qualification of social organizations, for ex. in the areas of PR, IT, controlling, strategic planning, financing
  • Provision of contacts and networks, for ex. suppliers, customers, service clubs, experts
  • Lobbying work for community organizations or community-related issues
  • Fund-raising for organizations

 

Contributions are evaluated in relation to the monetary value of all measures (% of annual turnover or proportion of the company’s own immaterial assets).

Classic contributions to the community customarily consist in paying taxes.[9] Since tax payments are usually made in accordance with legal regulations, this contribution is not taken into consideration here, however. Other contributions to the community which do NOT count in this respect either are sponsoring activities which are primarily engaged in for marketing and/or PR purposes (for ex. professional sports or large events). It is sometimes hard to make distinctions here but the situation becomes clearer upon examination of the intended and the actually achieved effects.

Effects (for the community) are, for ex.:

 

-        improvement of individual well-being, health and employability (see UN Human Development Goals, for ex.);

-        reduction of social costs which result from economic activities, for ex. (such as costs incurred by rehabilitation measures, elimination of ecological damage);

-        increase in performance of societal institutions or in accessibility of collective goods (such as space, capital and knowledge for the general public).

In addition, the spectrum of effects which the measures in question have (individual effects or wide-scale ones, structural change or treatment of symptoms) and the temporal effect (short- and/or long-term) is evaluated. Specific measures taken in problem areas not often attended to are to be given a higher evaluation than unspecific donations.

In addition to the effects for the general public, there are usually some positive effects for the enterprise itself. Dresewski describes the following benefits which Corporate Citizenship has for the company in the sense of a positive increase or development: [10]

Personnel development

  • Employee satisfaction and loyalty
  • Employee recruitment
  • Qualifications
    • Social and managerial competence
    • Communication and ability to work in a team
    • Goal orientation, self-initiative, creativity
    • Work-life balance

Marketing and distribution

  • Product innovations
  • Access to new markets
  • Customer loyalty
  • Access to important new customers
  • Sales promotion through social engagement

Entrepreneurial communication

  • Degree of familiarity
  • Reputation
  • Differentiation on the market
  • Brand development

Location and regional development

  • Intact environment
  • Living conditions of employees
  • Soft location factors
  • Contacts to immediate environment

 

Ideally, a balanced relationship between effects for the community and effects for the organization itself evolves. But if self-interest dominates the actions of the enterprise, deductions will be made on the evaluation. If receipt of donations leads to dependency of the recipient on one single financier, this will be evaluated critically as well.

Orientation of contributions in terms of the monetary value of measures taken is founded on several sources (quoted after Judith Polterauer[11]):

In 2002, Bernhard Seitz investigated the largest employers and calculated a COCS (cost of community services) rate of 0.4 per mill. of turnover.

Frank Maaß and Reinhard Clemens ascertained “that small and medium-sized enterprises (up to 99 employees) contributed considerably more in proportion to turnover than large and very large enterprises did (more than 100 or 500 employees respectively)”.

This is confirmed by a Forsa study[12] which compiled a detailed list:

Turnover of enterprise

Proportion of financial / cash-value contribution in relation to annual turnover on average

Less than 250,000 Euros

3.1%

250,000 – 500,000 Euros

1.9%

500,000 – 1 mill. Euros

0.9%

1 mill. to 5 mill. Euros

0.5%

5 mill. to 50 mill. Euros

0.4%

50 mil. Euros and more

0.1%

 

Dresewski arrives at different figures, according to which enterprises with more than 500 employees contribute approx. 0.05% of their turnover for social engagement, while small and medium-sized companies with up to 100 employees contribute approx. 0.2% for civic engagement.[13]

Apparently, it is important to distinguish whether we are dealing with an American or a European enterprise. American organizations tend to have a more pronounced culture of giving because the state takes less responsibility for such concerns. But this is only a very general presumption which cannot (yet) be substantiated by concrete statistics.

Current figures regarding cash-value contributions are oriented to the Forsa study. During the first years of Balance Sheet assessment, feedback from pioneers in this category will be considered here.

Evaluating the effects of measures seems to be even more difficult. The approach for evaluating social capital devised by the World Bank provides initial orientation. Regarding six categories of assessment, concrete questions were formulated which provide a gauge for societal engagement of individuals.[14] The higher the social capital of a company is, the more pronounced its social engagement should be:

  • Groups and networks: participation of individuals in various types of social organizations and informal networks. The degree of individual contributions in relation to the benefits received and the diversity of engagement as well as changes in engagement over time were taken into account;
  • Trust and solidarity: this entails trust towards neighbours, key public services providers and unknown parties as well as development of this perception over time;
  • Joint activities and cooperation: participation in mutual projects and joint crisis management. Society’s reaction to denial of cooperation was taken into consideration as well;
  • Information and communication: the ways in which poorer households gain access to information, for ex. on markets and public services; degree of access to communication resources and infrastructures;
  • Social cohesion and non-exclusion: this entails consideration of social differences, the nature of such differences and the ways in which they are dealt with;
  • Empowerment of individuals to engage in political activity: possibilities for exerting control over institutions and processes which have direct influences on one’s own individual well-being

 

The sub-indicator “Intensity” evaluates

-        the balance between a company’s actual possibilities (which in general increase with size) and contributions actually made;

-        the “consistency” between targeted effects and the overall strategy on the one hand, and the economic activities of the enterprise on the other (for ex. regionally specific measures taken at all company sites)

-        adoption of concrete responsibility and sustainability of engagement (for ex. long-term operation of a training centre for unemployed youths is given a higher assessment than a one-time donation to a financial foundation)

The BITC (enterprise network in England) is currently developing two measuring tools, the Community Mark and the Community Footprint. Both are still in the developmental stage and they have not reached the German-speaking world yet, but they could prove to provide interesting measuring methods (cf. the ecological footprint).[15]

F) Means for facilitating implementation

Dresewski sees three approaches for implementation:[16]

1)    Try out new forms of social engagement

2)    Develop cooperation projects with a long-term orientation

3)    Develop a Corporate Citizenship strategy

The Corporate Citizenship-Mix[17] can provide further orientation for implementation. It describes nine instruments which enterprises of all sizes can employ and – similar to the marketing mix – a kind of tool box which provides enterprises with a selection of tools suitable for implementing their Corporate Citizenship strategy. The size of the enterprise and the extent of the resources which could be employed play no role here. In principle, medium-sized enterprises can use all nine instruments.

  1. Corporate Giving is the umbrella term for ethically motivated selfless loan, donation or endowment of money or non-monetary resources and cost-free loan or donation of company services, products and logistics.
  2. Social Sponsoring entails transferring a customary marketing measure – as a transaction based on reciprocity – to the social realm, which allows the company to open up new communication channels and offers the non-profit organization new methods of financing.
  3. Cause Related Marketing is a marketing instrument which entails selling a product/service and donating part of the revenue to a social cause or an organization.
  4. Corporate Foundations refer to the establishment of a foundation by a company, this being a type of engagement which finds increasingly common use among medium-sized enterprises.
  5. Corporate Volunteering entails civic engagement by companies through investment of time, knowhow and expertise on the part of their employees and support of volunteer engagement of employees during working hours and in their free time.
  6. Social Commissioning has to do with targeted business partnerships with non-profit organizations, for ex. employment of physically disabled or socially underprivileged persons as (equally competent and competitive) service providers and sub-contractors with the intention of supporting the organization by commissioning its services.
  7. Community Joint-Venture denotes a joint venture of a non-profit organization and an enterprise to which both partners contribute resources and knowhow and which neither one could conduct alone.
  8. Social Lobbying designates use of the contacts and influence of a company for the objectives of a non-profit organization or the goals of special groups in the community.
  9. Venture Philanthropy refers to entrepreneurially active venture capitalists who invest money and knowhow into non-profit organizations for a limited amount of time and a certain specified project.

Typical examples of “First Steps” are foregoing of Christmas gifts and cards for the benefit of making donations to social initiatives, promotion of social employee projects, support of apprentices entering the job market through mentoring, food donations made by supermarkets or allowing social initiatives free access to one’s own customer network.

G) Good Practices

We currently have almost no knowledge of good practices, in particular of actions implemented by relatively large companies which act as models by making an appropriately large contribution and participating in comprehensive institutionalization in the community. Individual cases do exist where community engagement far exceeds economic performance, however, and these tend to involve very small companies (especially sole proprietorships).

One example is Patagonia, a US-American outdoor equipment provider which has donated 1% of its annual turnover to the initiative “1% for the planet” (www.onepercentfortheplanet.org) every year since 1985. This initiative rallies together enterprises which consider their responsibility for the natural environment to be an integral component of their business activities.[18]

And yet, Patagonia only got average ratings when it came to evaluation of social standards in the supply chain and production area. This only shows that enterprises can be exemplary in individual areas while only reaching “experienced” or “advanced” status in others.[19]

Good Practices regarding cooperation between profit-oriented enterprises and non-profit organizations in Austria are presented at the Austrian Social Business Day once annually. See for ex.: http://www.socialbusinessday.org/blog/blog-asbd2012/66-goodpractice.html and other related information on the homepages of the respective enterprises and of involved non-profit organizations.

An example of successful Corporate Citizenship is Betapharm. See http://www.brandeins.de/magazin/vom-modebegriff-zum-wirtschaftsfaktor/profit-mit-non-profit.html and the “Leitfaden für gelungenes CSR”: http://www.betapharm.de/unternehmen/unser-engagement/pionierarbeit-csr.html.

H) Bibliography/Links/Experts

  • BITC – Business in the Community – UK network: http://www.bitc.org.uk/
  • Dresewski, Felix/ Kromminga, Peter/ von Mutius, Bernhard: [Citizenship, 2004-1] Corporate Citizenship oder: Mit sozialer Verantwortung gewinnen. Ein Leitfaden für die praktische Arbeit, in Wieland, Josef: Handbuch Werte Management, Erfolgsstrategien einer modernen Corporate Governance, Muhrmann, 2004, pp. 489-525
  • Dresewski, Felix: [Citizenship, 2004-2] Corporate Citizenship. Ein Leitfaden für das soziale Engagement mittelständischer Unternehmen. Berlin 2004
  • Dresniewski, Felix/ Lang, Reinhard: Corporate Citizenship: [Citizenship, 2005] Über den Nutzen von Sozialen Kooperationen für Unternehmen, gemeinnützige Organisationen und das Gemeinwesen, in: Sabine Reimer, Sabine/Strachwitz, Rupert (eds.): Corporate Citizenship. Diskussionsbeiträge. Arbeitshefte des Maecenata Instituts für Philanthropie und Zivilgesellschaft. Heft 16. Maecenata Verlag. Berlin 2005
  • Pommerening, Thilo: Die gesellschaftliche Verantwortung von Unternehmen – Vergleich CSR und Corporate Citizenship, Download at: http://upjo.s9.systematrix.de/fileadmin/user_upload/MAIN-dateien/Infopool/Forschung/pommerening_thilo.pdf
  •  Maak, Thomas/ Ulrich, Peter: [Unternehmensführung, 2007] Integre Unternehmensführung. Ethisches Orientierungswissen für die Wirtschaftspraxis, Stuttgart: Schäffer-Poeschel, 2007
  • Polterauer, Judith: [Unternehmensengagement, 2010] Unternehmensengagement als ‘Corporate Citizen’. Zum Stand der empirischen Corporate Citizenship-Forschung in Deutschland, in: Backhaus-Maul, Holger et.al.: Corporate Cititzenship in Deutschland. Gesellschaftliches Engagement von Unternehmen, 2nd, revised and expanded edition, Wiesbaden: VS Verlag für Sozialwissenschaften, 2010, pp. 203-240
  • Boulet Jaak J. / Krauss Jürgen E./ Oelschlägel Dieter: Gemeinwesenarbeit als Arbeitsprinzip. Eine Grundlegung. Bielefeld, 1980
  • Project “1% for the Planet”: www.onepercentfortheplanet.org 
  • UPJ – German Corporate-Citizenship network: http://www.upj.de/
  • OECD [2004]: Vom Wohlergehen der Nationen, free download at http://www.oecdbookshop.org/oecd/display.asp?sf1=identifiers&st1=962001015E1
  • World Bank [2002]: Understanding and measuring social capital, free download at http://go.worldbank.org/957SH3NOC0
  • UN Human Development Goals: http://www.un.org/millenniumgoals/bkgd.shtml

 


[1] Source: Wikipedia

[2] In some discourses not only the state, but also the market or civil society are regarded as communities.

[3] Boulet, Jaak J./ Krauss, Jürgen E./ Oelschlägel, Dieter: Gemeinwesenarbeit als Arbeitsprinzip. Eine Grundlegung. Bielefeld, 1980, pg. 156

[4] At present, these commonly refer to land, capital, work and knowledge.

[5] Cash-value extent of all measures (% of annual turnover or % of paid or calculated annual work time)

[6] OECD [2004]

[7] World Bank [2002]

[8] Polterauer, Judith: Unternehmensengagement, 2010, pp. 212/13.

[9] In Switzerland, the notion of community seems to be refer almost exclusively to the tax system.

[10] Dresewski [Citizenship 2004-1], pp.499-508 (with concrete practical examples).

[11] Quoted in part directly and indirectly from: Polterauer 2010, pp. 222/23.

[12] Forsa: “Corporate Social Responsibility” in Deutschland, 2005, download for ex. at: http://www.aktive-buergerschaft.de/fp_files/StudienBerichte/bg_forsa_csr_in_deutschland_2005.pdf

[13]  Dresewski [Citizenship 2004-1], pg.492; the study on large corporations is from the year 1988, however; social and civic engagement probably differ in scope.

[14] World Bank: Measuring Social Capital (2004)

[15]  For more information go to: http://www.bitc.org.uk/community/communitymark/about_the_communitymark/about_the.html undhttp://www.bitc.org.uk/community/community_footprint/index.html

[16]  Cf. Dresewski [Citizenship 2004-1], pp. 509-514 (detailed description).

[17] Source: Dresewski [Citizenship 2004-2], pg. 21f.

[18] Cf. Maak, Thomas / Ulrich, Peter: Unternehmensführung, 2007, pg. 299.

[19] Cf. an article in the Schweizer Tagesanzeiger from14/11/2010: Hippe Label – unfaire Produktion: http://www.tagesanzeiger.ch/wirtschaft/unternehmen-und-konjunktur/Hippe-Label--unfaire-Produktion/story/23511741  (8th August 2011)