Corporate activities are only possible in a healthy, sustainable society. As a member of society, a corporation bears broadly-defined responsibilities to build and give support to a better society. Under this philosophy, corporate philanthropic activities in Japan developed in earnest in the 1990s. Various companies drew up basic policies for corporate philanthropic activities, set up special departments, committees and other in-house mechanisms to handle corporate philanthropic activities and allocate management resources to address social issues.
In the early 1990s, basking in the afterglow of a bubble economy, philanthropic activities of Japanese companies were typically represented as large-scale, glamorous philanthropic events. With the collapse of the economic bubble, companies had to cut back on corporate philanthropic outlays but continued down-to-earth efforts to promote philanthropic activities in a more efficient manner.
Entering the 2000s, as the idea of corporate social responsibility (CSR) took hold among Japanese companies, there was a change in the position of corporate philanthropy in many companies with a growing tendency to promote philanthropic activities as part of a company's CSR.
At Nippon Keidanren, the Committee on Corporate Philanthropy gathered experts from various member companies and organized a study group to examine "the roles corporate philanthropy should play to help realize a sustainable society." The study group met more than 90 times over a period of five years. Taking into account the growth of global interest in CSR, the study group looked into the fields of corporate philanthropic activities which are considered important to the future and examined ways of how to promote these activities. The Committee has drawn up this interim report on the deliberations of the study group for use as reference by member companies as they seek their own answer to the afore-mentioned question. With this interim report as the basis, Nippon Keidanren plans to publish in the spring of 2008 a "Corporate Philanthropy Handbook," which will contain more detailed materials on corporate philanthropic activities, including leading examples of philanthropic activities of member companies.
While there is no single definition of "corporate philanthropy", this report, based on the common understanding of company experts in charge of corporate philanthropic activities, takes corporate philanthropy to mean "voluntary corporate activities to address social issues, investing company resources and expertise to help resolve these issues without seeking direct remuneration in return."
A corporation is a member of society, and society is the foundation for a corporation's existence. "Corporate philanthropy," therefore, means voluntarily taking up the problems faced by society and trying to resolve them by investing funds and other management resources. However, a society embraces countless problems and a single company cannot possibly take up all social problems. A corporation should choose the problems it wants to address in line with its management philosophy and corporate traditions, the nature of its business, the objectives it wants to achieve through corporate philanthropy, and other considerations.
It is difficult to anticipate and measure the direct impact of corporate philanthropy on a corporation's business, such as increased revenues or more favorable publicity. Corporate philanthropy, however, cannot be regarded as mere charity since it involves the investment of management resources. It is important to consider the long-term, indirect impact corporate philanthropic activities bring to a company through improved relationships with society, such as infusing a social spirit and vitality into the company, gaining greater affection from the society toward the company, making the company more sensitive toward social risks and ensuring the continuity of the company through a better society.
Furthermore, it is important to clearly present the company's basic policies on corporate philanthropy to shareholders, employees, clients, business partners, the local community and other stakeholders that have an interest on the company's philanthropic activities and stance, and report to them whether management has acted upon these policies.
Many companies have promoted corporate philanthropic activities in line with the above-mentioned basic ideas, treating the activities as "part and parcel of a company's social responsibility." Such trend is also evident in the surveys on corporate philanthropic activities conducted by Nippon Keidanren every year since 1991 among its member corporations and 1% Club corporate members. In the survey for fiscal 2005, 86.1% of the 447 responding companies took corporate philanthropic work as part of their social responsibility. Also, in the three years starting in 2003, the inaugural "CSR" year, more than half of the responding companies had stepped up corporate philanthropic work. In-house institutional building -- such as drawing up basic philanthropic policies, setting up corporate philanthropy offices and assigning staff to philanthropic work, or setting up company-wide corporate philanthropy organizations -- has likewise made major progress. Also, the idea of "corporate philanthropy as contribution to the local community" has taken hold among many companies (75.2% of responding companies in the survey for fiscal 2005), with companies launching corporate philanthropic activities with the understanding that they are members of society.
Expenditures for corporate philanthropic activities have also increased steadily in recent years. In the survey for fiscal 2006, expenditures for corporate philanthropic activities totaled 454 million yen per company, an increase of 100 million yen from the previous year. This is the second largest amount after the 525 million yen recorded in fiscal 1991 at the time of the bubble economy. Even though ordinary profits per company reached record levels, the ratio of corporate philanthropy expenditures to ordinary profits rose 2.18% from the previous year. These results are numerical evidence of the determination of Japanese companies to vigorously promote corporate philanthropic activities as part of their CSR.
In undertaking corporate philanthropic work as part CSR, it is necessary to consider the background of heightened global interest in CSR and the emerging needs of society and reflect these considerations in their corporate philanthropic activities.
Behind the growth of global interest in CSR lies a host of social issues that have become increasingly diverse and complex along with dramatic developments in the global economy and an expanding world population. Global warming, energy problems, instable supply of water and food resources, poverty -- all these issues can be obstacles to corporate activities. There is, thus, growing expectation from society that globally active companies play some role, whether directly or indirectly, to help resolve these problems.
When we turn our attention to Japan, we see that social problems that may cast a huge shadow on the future are becoming increasingly prominent. How can we address problems involving schoolchildren such as bullying, suicide, violence and truancy? In an earthquake-prone country, how can we step up efforts to prevent calamities or strengthen the capability of rebuilding once disaster strikes? These and other social problems abound. The state, municipal authorities and NPOs have been making vigorous efforts to address these issues. As members of the local community, companies are also facing challenges of how they should confront these social problems and what roles they should play.
As expectations on corporate activities have become higher among company stakeholders, they have become increasingly severe in the way they look at companies. The criteria to evaluate a company have become more diverse, and the power of NGOs, consumer groups and labor organizations to get their message out is carefully watched by corporations, governments as well as international agencies. As there are cases where the very existence of companies has been threatened by scandals, many corporations have largely come to accept the notion that they should engage in business activities while at the same time taking the social good into consideration.
It is vital that corporations become aware of these social trends, let the public know about their business strategy, the nature of their business and the thinking of management, and sincerely listen to the voice of society.
Corporate philanthropy is one component of CSR, designed to strengthen a company's relationship with society. However, the essence of corporate philanthropic activities as CSR varies in each business sector and from corporation to corporation and changes in accordance with locality and time. The following is a description of how such heightened interest in CSR influences corporate philanthropic activities:
In the Keidanren survey on corporate philanthropic activities in fiscal 2004, a high proportion of Keidanren member corporations (297 companies, or 65.4% of companies that responded to the survey) said heightened interest in CSR had an impact on their corporate philanthropic activities. These companies were then asked to list up to three priority areas of CSR that were reflected in their philanthropic activities. The most cited priority (by 219 companies, or 78.5% of the companies which said there has been an impact) was "improving corporate value and corporate brand." The second most cited priority (by 149 companies, or 50.2%) was "improving accountability to stakeholders," and the third (by 112 companies, or 37.7%) was "improving the effectiveness of philanthropic activities or its impact on society."
In particular, as corporate philanthropic activities involve the spending of corporate resources in the society, disclosure of information has advanced rapidly. While in the survey for fiscal 1993 only 29.7% of the companies said they have "widely disclosed information to the public," 69.6% of the companies have done so in the latest survey. Many companies post information on the Internet, and include corporate philanthropic activities in their "CSR" reports and other publications. Some companies even give stakeholders opportunities to present their views.
Meanwhile, concern has also been raised that corporate philanthropic activities now tend to shift to areas that can be easily explained to stakeholders, leaving out issues that should otherwise be addressed.
In view of advancing globalization of corporate activities and the background of CSR, there is an issue of how to promote corporate philanthropic activities by a company group as a whole.
When Keidanren member corporations were asked in one survey on corporate philanthropic activities on their global arrangement of corporate philanthropic activities, nearly half the responding companies said "group companies (subject to consolidated accounting) conduct their activities independently in various countries/regions." On the other hand, some companies say they have drawn up a common philanthropic agenda and common philanthropic programs for use around the world and launched global philanthropic activities under the leadership of the group head office.
In the latest survey, when asked to what extent they are aware of the corporate philanthropic activities of the entire company group, 242 companies, or 55.6% of 435 responding companies, said they are either looking into the situation or preparing to initiate such studies. Meanwhile, the tasks cited include not only the setting up of a corporate structure for the promotion of corporate philanthropic work in the entire company group and collecting and sharing information but also laying out a basic philosophy and principles of corporate philanthropy for the entire company group and spelling out a clear definition and the range of corporate philanthropy.
As the practice of consolidated accounting spreads, it becomes increasingly important for companies to get hold of information on corporate philanthropic activities in the entire company group, share and send out the information. The challenge is to find a way to address the social problems in the community where a group company operates while maintaining the consistency and a sense of unity in the entire company group.
In corporate philanthropic activities, it has been the practice for companies to be concerned about the creation of "corporate values" and "social values." Creating "corporate values" means infusing a sense of social spirit and vitality into the company, as it gets functionally involved with society through corporate philanthropic activities. This will eventually foster a corporate tradition that values a diverse value system and a creative corporate culture. Based on such understanding, officials in charge in various companies have frequently collaborated with NPOs, where the value system and the code of behavior differ from the corporate world, and provided assistance to company employees to get actively and voluntarily involved with NPOs. With respect to "social values," the various companies have been promoting their activities with the hope that their work will help resolve social problems and build a better society.
In the future, companies will be required to promote activities that will simultaneously reinforce both corporate and social values. In other words, it is increasingly necessary for companies, acting in line with their management philosophy, select the priority issues in their field of activities and in their location of operation to promote innovative corporate philanthropic activities in the fields where their expertise, technology, equipment, know-how and knowledge work. In doing so, the key to success is cooperation with NPOs, since they have expert knowledge of social problems. The reason is that the perspectives, the thinking process, the sense of reality and the field of expertise of NPOs are different from those of the corporate world. When companies and NPOs, organizations of very distinct natures, pool their resources and specialties together and work as equal partners, it will help resolve problems faster and more efficiently.
One example of success of this kind of cooperation between companies and NPOs concerns the assistance of disaster-stricken communities. The two sides set up a "Council of Support for Projects of Volunteer Activities in Disaster Relief" for relief work inside Japan and "Japan Platform" for relief work overseas. These two projects have helped raise the effectiveness of planning and execution of relief programs in line of the local needs and improved the transparency of their activities.
Sharing the achievements and concerns of various companies in line with the results of the latest survey, the Committee on Corporate Philanthropy has sorted out the issues involved in promoting corporate philanthropy from two perspectives: social issues (items 1 to 5) and organizational issues in promoting corporate philanthropic work (items A to E). As the areas of focus and the issues involved naturally differ from company to company, the examples listed are not exhaustive; they are intended to suggest a direction for the future.
Educate the next generation: Many companies have already launched philanthropic activities related to children's education. However, problems involving schoolchildren such as bullying, suicide, violence and truancy may cast a deep shadow over the Japanese society in the future. It is necessary, therefore, to explore the contributions a company can make to help resolve these problems and bring up a new generation of young people, examining the options on the basis of the company's own work in the past. The government, school authorities and NPOs should also work together to create an environment to foster diversified, multi-tiered educational activities.
Build a socially inclusive society: As the Japanese population is graying with less children, the concept of social inclusion is catching attention. The idea is to liberate people afflicted by loneliness and feeling ignored and to embrace them as member of society. It is necessary to give support to the elderly people, people with disabilities, the homeless, victims of domestic violence, foreign residents and refugees in Japan and other categories of people who may feel ignored in the society so that they can become an active member of society. The key is to sharpen the sensitivity of the company and company employees toward human rights and find a way to maximize the new values and vitality brought by the coexistence of distinct entities and diverse cultures.
Strengthen human security: At the background of a heightened global interest in CSR lies a growing prominence of social problems that could affect the very existence of humankind. To address problems of human security involved in issues such as human rights, human life and environment is also vital for sustained economic development. This issue is also catching attention as an agenda not only for domestic corporate philanthropic work but for global philanthropic activities as well. This requires that companies seek new corporate philanthropic programs as well as cooperate with NGOs and United Nations agencies.
Foster the spirit of social entrepreneurship: The primary purpose of social entrepreneurship is to seek solutions to social problems with market forces as the tool of business. It is a field of undertaking that matches the innovation of the social structure and value systems targeted by corporations in their corporate philanthropic work. Efforts to launch undertakings that would lead to innovative solutions of social problems are also gathering momentum inside companies. The question is how to foster such entrepreneurship inside and outside the company, provide assistance to such understandings and work together with the people involved in such efforts.
Strengthen the infrastructure of the citizens' sector: Citizen organizations such as NPOs and NGOs are important partners of corporations in corporate philanthropic activities and there is strong expectation that these organizations will become key bearers of social change. As their management infrastructure is still weak, it is necessary to help bolster their management resources and help train their personnel. As accountability sought by stakeholders in a company also includes operations and management of resource-recipient organizations, both sides must enhance the society's trust placed on them. Whether as a business sector or as an individual corporation, it is necessary to help strengthen the infrastructure of the citizens' sector.
Relationship with corporate business/CSR: Companies are expected to effectively use the technology, equipment, know-how, information and human resources they have built up and launch innovative and strategic philanthropic activities to help address social problems at home and abroad. This requires that companies gather the necessary information and get the right approach in matching a company's intentions with the social needs and social problems.
Relationship with publicity: As advances are made in information disclosure on corporate philanthropic activities, an increasing number of companies handle corporate philanthropy in commercials and advertisements. There are also merchandise and service products that can be used by companies for donation from their revenues to activities to help resolve social problems. However, these things may not always be appreciated by local citizens. It is necessary to launch publicity work and conduct marketing in a way that leaves a positive impact on the citizens' livelihood and activities, such as launching educational campaigns in collaboration with NPOs that focus on social problems.
Support social engagement by employees: Since the 1990s, a major trend of corporate philanthropy is to give support to social engagement by employees. More recently, there is also expectation that, as employees turn their eyes to problems outside the company, it would be possible to enhance their sensitivity as "CSR" bearers and sharpen their awareness to social problems. Also, as retirement is increasing among employees of the baby-boomer generation, companies can help retired employees build a rich second life through corporate philanthropic activities.
Evaluation of corporate philanthropic work: In corporate philanthropic activities, the essential thing is to provide corporate resources such as merchandise, equipment and machinery, know-how and personnel resources to the society. Consequently, philanthropic activities must enjoy the support and empathy from a wide spectrum of stakeholders. To achieve this objective, it is necessary to set up clear targets in spending a company's resources, conduct an assessment of the activities launched, and explain these activities in simple language to stakeholders inside and outside the company. Meanwhile, quantitative assessments are difficult, and the way to conduct proper assessment remains an issue to be resolved.
The launching of global corporate philanthropic activities: As management of an entire company group and brand management have been tightened, a question has emerged on how to promote group-wide corporate philanthropic activities across the world. In the survey on corporate philanthropic activities in fiscal 2004, while nearly half of the responding companies said "group companies (subject to consolidated accounting) conduct their activities independently in various countries/regions," there was also a strong desire to create a common global agenda and common programs. The challenge is how to address social problems in each community while maintaining consistency and a sense of unity in the company group as a whole.
This report was compiled as an interim report on the deliberations conducted by company experts of the Committee on Corporate Philanthropy over the past five years. The issues taken up in this report and the direction of future activities described can be said to reflect the current common understanding of these specialists, who exchanged information on the work and achievements of their companies in the corporate philanthropic field and held extensive discussions with representatives of NPOs and experts. By publishing this report, we hope it will help Japanese companies recognize corporate philanthropic work as a component of their CSR in their overall business activities and help them accomplish greater social achievements in cooperation with their stakeholders.