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  • Writer's pictureAri Betof

Another Way to Do Good: When CSR Becomes CSI

No, it’s not the kind of CSI that involves forensic TV drama. Many of today’s leading corporations are beginning to see the value of channeling their charitable giving into programs of corporate social impact (CSI), rather than the traditional corporate social responsibility model (CSR).

Businesses improving the world

According to a 2018 Cone/Porter Novelli Purpose Study, 78 percent of respondents from the general public stated that companies should be in business to do more than just make money; they should contribute to causes that make people’s lives better as well. With one estimate showing private sector spending ahead of government spending seven times over (and 20 times greater than spending in the nonprofit sphere), corporations have the potential to produce large-scale, long-lasting positive impacts on the world.

The concepts of corporate social responsibility and corporate social impact are ways by which a corporation can hold itself accountable for making the world a better place. Usually, these programs also help increase engagement and support from a full spectrum of stakeholders, including shareholders and the general public. They strengthen a company’s brand even as they make positive contributions to the common good.

But here’s the difference between CSR and CSI:

The CSR model – giving as an adjunct to profit-making

In the CSR model, a company commits to managing its operations in such a way that it benefits the community—for example, in the form of minimizing environmental impact, building or supporting educational scholarship programs, or offering free job-training opportunities to underserved students. The company’s primary focus remains on boosting its profits.

Traditionally, companies have developed their philanthropy in line with the CSR model. They may choose to donate some of their extra cash or resources to causes that benefit their local, national, or international communities. In this model, the giving is typically seen as an option, and it is not necessarily closely integrated into the overall corporate structure. In this model, social impact is an important, but ultimately secondary consideration in the company’s strategies, operations, and bottom line. Companies that do choose to give thus typically receive considerable praise and good will for their generosity.

Companies on the Fortune 500 expend about $15 billion in CSR funding annually. Most of that—70 percent—is in the form of contributions of their own products. The 15 percent or so that is dedicated to cash gifts to nonprofits may be subject to the profit and loss cycle.

The CSI model – when giving is purpose-built

The definition of corporate social impact is less clear-cut. But, in general, companies focused on social impact intentionally set themselves up to solve a problem or meet a need in society, whether locally or globally. It is their primary goal, along with producing profits. A social impact company can be operated either as a standalone organization, or as a subsidiary or spinoff of a larger corporation. The raison d'être of a CSI-driven organization involves catalyzing and sustaining positive change.

The term “corporate social impact,” which is also called “corporate social investment,” also refers to those corporate-sponsored foundations, social welfare accelerator programs, and impact-funding programs that differ from the traditional grantmaking charitable foundation. They operate in a half-way point between the traditional nonprofit sector and the for-profit corporate world. In effect, they are the overlap in the Venn diagram between philanthropy and business. The type of work CSIs do isn’t new, but there has been greater interest in this model of philanthropy recently.

CSIs are able to draw on their hybrid identity to bring social impact stakeholders from outside companies, as well as those representing other nonprofits and even government agencies, on board a collaborative project. Because their dual primary purpose is to produce results in terms of community wellbeing and profit, they often serve to supply the long-range vision capital necessary to the funding of incubators and previously untested innovations. Some European CSIs are more and more adopting the methodologies associated with venture financing, using business strategies alongside their related corporations in order to amplify the social results of their investment.

CEOs who have emerged as strong supporters of CSI efforts within their CSR programs include Larry Fink of asset management behemoth BlackRock. Among other CSI programs, the corporation started its Emergency Savings Initiative in 2019, designed to create innovative and achievable savings strategies for medium- and low-income households. This project collaborates with nonprofit groups dedicated to promoting consumer finance information, and is funded at $50 million.

An investment into CSI holds another advantage: While a CSR budget can be relatively small and difficult to augment, CSI efforts are purpose-built to both turn a profit and be scalable and sustainable over the long term.

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