The economic downturn hasn't dampened companies' commitments to corporate social responsibility (CSR or CR) programs. Despite a decrease in economic and business optimism, executives expect that more resources will be allocated to corporate responsibility initiatives because they believe that the programs improve profitability, according to a recent Grant Thornton survey of manufacturing executives. Survey respondents say that corporate responsibility is important to achieving strategic goals in terms of new products, services, and processes; customer retention and loyalty; applying and leveraging technology; cost containment and reduction initiatives; and performance management initiatives.

"Today, corporate responsibility programs are a large part of what customers demand," says Jim Maurer, Grant Thornton's national managing partner for their consumer and industrial products practice. "Corporate responsibility programs have moved out of the realm of public relations to become real tools for improving the bottom line. Companies are realizing that strong investment in corporate responsibility programs is both a civic obligation and a successful business strategy."

Corporate philanthropy -- donating money and employee time to support specific causes -- is a keystone of corporate responsibility that, if executed strategically and supported by best practices, can benefit shareholders, employees, and society while at the same time building corporate reputation and sustainability.

"The reality is that capitalism has to be seen in the broader social context and not defined just by economic capital but also by human and social capital," writes Marc Benioff, chairman and CEO, Salesforce.com (The Business of Changing the World, McGraw-Hill, 2007). "Of course, as a responsible company, we must try to maximize shareholder value -- we must, however, approach it with a long-term view in mind. Part of the long-term maximization of shareholder value is having and running a profitable business; the other part consists of investing for the future."

However, for corporate philanthropy to be effective, companies must walk a fine line between exploiting the public relations benefit and doing good work. "One of the burning debates of corporate philanthropy has always been how much to exploit the public relations benefit of doing good," writes Benioff. "Some companies prefer to do what they call 'pure philanthropy,' which they define as philanthropy that doesn't have a marketing component built in. Others go to the other extreme with cause-related marketing, backing high-profile popular events such as the Olympics. And there are gradations in between."

Benioff advises companies that strive to exemplify best practices in corporate responsibility to pick a problem they can take ownership of and solve. Fireman's Fund, a property and casualty insurer and division of Munich-based Allianz SE, won an American Business Award, The Stevie, for best corporate social responsibility program in North America. Its Heritage Program, a multitiered effort designed to support firefighters in making communities safer by giving grants to fire departments for new equipment and creating outreach initiatives to raise attention to the needs of the fire service, supports the company's founding mission.

"We wanted, of course, to support communities and make them safer, but we also wanted to build our brand, to drive business within the company, and to help to attract and retain the best employees," says Danielle Cagan, director of corporate responsibility. "We've set up our corporate philanthropy program here as a differentiator that sets us apart from our competitors."

The 4-year-old program has given out more than $18 million in grants. "The way it works is that our agents are able to direct grants based on their business performance, so as they grow, we give back in those communities and then we provide marketing support for each of these grants, helping them to build their profile in their local communities," says Cagan. "The other primary way in which our grants are awarded is through our employees. Any employee can nominate a fire department for a grant; they compete with each other and with employees in different parts of the company for funding. The size of the funding pool is based on company performance."

Fireman's Fund has extensive metrics in place to monitor the program. "We look at the retention rates of employees who are engaged with the program vs. those of people who are not engaged, and we see a strong positive impact," says Cagan. "From an agent perspective, we see a strong correlation toward better performance with those independent agents who are engaged. We're also looking at how we can engage our end customer -- the policy holders."

The program has been so successful that the company is expanding it to a sister organization, Allianz Life. "The Heritage program brings continued value to our company -- not only quantitatively, but from a morale-boosting perspective as well," says Jill Paterson, executive vice president and chief financial officer. "Our independent agents who are actively engaged in the program tend to have better business results with us. Employees who attend donation events and are involved in the program have a lower turnover rate than those who don't participate."

MEASURING CR EFFECTIVENESS

Measuring the results of corporate responsibility programs in a way that's meaningful and practical is, perhaps, the biggest challenge that companies face in building a strong giving program. According to the World Economic Forum, there is only one system that measures the impact of corporate philanthropy on the corporation itself, a joint project of Walker Information and the Council on Foundations that evolved into the Corporate Philanthropy Index (CPI), which shows the relationship between the perceptions of stakeholders and their acceptance of corporate philanthropy. The tool is available to all companies, but it can be expensive and time-consuming to use.

Large, public companies that spend the most money on CR usually take metrics more seriously than smaller organizations, sometimes turning to academia and independent consultants to devise a measurement strategy.

Companies with extensive internal technical capabilities design their own software systems, using scorecards and dashboards that make results transparent throughout the organization. Some of these companies make their philanthropy models available to other organizations.

Salesforce.com pioneered a model for structuring giving programs that's spreading to other businesses. CEO Benioff established the "l/l/l model," in which 1 percent of company equity, 1 percent of profits, and 1 percent of employee time are invested in philanthropic endeavors. "When we started our foundation, we put 1 percent of our equity into nonprofits, and when we went public in 2004, the value went from zero to about $15 million on the first day," says Suzanne DiBianca, chief service officer and executive director. "We don't go back to the company every year and ask for a certain amount of profit -- we're able to get by on that initial equity donation. It's a great model for small companies or pre-IPO companies."

In fact, the company worked with Google before their IPO. Google put 1 percent of equity in a foundation, which soared to $1 billion one day after Google went public.

DiBianca says that the foundation sets a business plan every year. "We manage and monitor those goals on a system that we built on Salesforce.com and use dashboards to track volunteer hours by region, by executive, and by activity so that at any moment in time we can see where we stand compared to our goals."
The company allows free use of its software services for various nongovernmental organizations (NGOs). "We have 4,000 nonprofits using donated or discounted Salesforce.com products to manage their data needs -- everything from fund-raising to volunteer management, case management, and more," says DiBianca. Most of those organizations use the company's platform to measure program metrics and report data to funders.

Benioff was awarded the CEO of the Year award for middle-market companies this year by CRO Magazine. Salesforce.com received an award from Paul Newman's Center to Encourage Corporate Philanthropy.

ENVIRONMENTAL CAUSES RESONATE

Many companies have turned their CR efforts to environmental issues, particularly if they're big energy users or manufacture products that have a significant impact on the environment.

Scottsdale, Ariz.-based The Dial Corporation, a subsidiary of Germany's Henkel KGaA, a privately owned global leader in home and personal care and adhesives technologies, is at the forefront of sustainable product development.

"In February, of this year, Henkel announced a 3-year commitment to partner with Arizona State University's Global Institute of Sustainability to establish a new multidisciplinary platform to measure the total environmental impact at every stage of a product's life, from its inception to consumer use," says Rudy Vetter, vice president of business development and sustainability. "Henkel developed a tool 16 years ago that's used by other companies in the industry to understand the environmental footprint of a product. Because our products peak up during the consumer use phase, because they're used usually with hot water, we focus heavily on sustainable product development, such as a self-foaming soap that reduces the need for water."

Employee commitment to product sustainability goals at Henkel was a priority. "We created a program called e-commitment, targeted to internal sustainability intelligence," says Vetter. "I was convinced that our employees would step up immediately if they got guidance, a tool box to provide the right framework, and they did. It provides information so that they can be teachers in the community about what greenhouse gases are, what carbon footprint means, and then we turn it into action, showing them what they can do to make a difference."

Henkel supports a number of programs at all local units -- probably over 200 charity projects around the United States, according to Vetter. "Corporate citizenship activities extend beyond direct business interests," he says. The program makes contributions to communities and social institutions on several levels, including employee volunteerism to address local challenges, as well as contributes to worldwide projects for achieving global development objectives such as the Millennium Development Goals of the United Nations.

Henkel has won a number of awards for corporate responsibility and sustainability, including this year's Environmental Social Governance (ESG) Award by an association of German financial analysts for outstanding achievements toward sustainable developments. It was ranked number two in last year's Good Company Ranking of the 120 largest European companies and is listed in CR indexes including the Dow Jones Sustainability Index and the FTSE4 Good Ethical Index.

But even at companies at the top of responsibility and sustainability rankings, corporate responsibility programs are a work in progress; best practices must continually evolve as business challenges arise.

Intel, which ranked number one in CRO Magazine's 100 Best Corporate Citizens for 2008, is a model for integrating corporate citizenship into business strategy while dealing with crisis situations. Its corporate responsibility programs evolved as the company faced negative publicity over failing to disclose flaws in products, pollution at an Intel facility, antitrust lawsuits, and anti-competitive investigations, some of which are ongoing. But the company learned some valuable lessons from the harsh criticism that it has received and racked up major accomplishments in every aspect of CR along the way -- most importantly in environmental affairs.

Intel and Google co-founded the Climate Savers Computing Initiative to drive the adoption of more energy-efficient computing by both individuals and organizations in order to address the issue of climate change. Intel President and CEO Paul Otellini joined the Copenhagen Climate Council, which aims to advance a new global climate treaty slated to go into effect in 2012, and the company is sponsoring a study to identify ways in which technology can help the European Union to meet its goals to improve energy efficiency and reduce global-warming emissions.

According to Suzanne Fallender, corporate responsibility communications manager, the company's 90-page sustainability report is dominated by environmental issues. "The biggest impact of our corporate responsibility program is in the environmental area," she says. "In fact, our employee bonus is now tied to environmental measures. We're analyzing different metrics to link employee compensation to environmental goals, and we're also looking for ways to measure reputation externally on environmental issues and how we're driving energy efficiency in different areas."

Finance plays an important role in establishing these metrics. "We engage with finance to help us to understand the ROI on specific projects. We work with the chief administrative officer, who's the former CFO, to talk about the intersection of finance and risk and corporate responsibility. But we're seeing CSR responsibilities come more and more into functional positions," says Fallender.

Because of Intel's size, its industry, and the very nature of computer chips, which remain largely invisible to consumers, its corporate responsibility challenges are especially complex. Communicating its accomplishments beyond its industry peers to score reputational gains -- a hard-to-quantify but important element of ROI -- is an uphill battle. But its commitment to transparency and sustainability -- for example, in publishing environmental data quarterly -- shows an effort to walk the talk.

Intel, like other businesses that strive to implement best practices in social responsibility, knows that stakeholders are watching closely.