CSR campaigns are often viewed as a way to connect with consumers, but they're increasingly being used in messaging geared toward investors.
On July 29, after a relatively quick, five-month search, Yes To, makers of Yes To Carrots and other lines of natural personal-care products, announced that it closed a $14-million round of funding with San Francisco Equity Partners and Simon Equity Partners.
According to the press release, sales of Yes To Carrots more than doubled since its products came stateside last year. (Yes To launched in Israel in 2005.) But aside from the financial growth the company has experienced, and beyond the economic potential of a company entering the multibillion-dollar beauty industry, Yes To attributes its ability to attract investment partners to its nonprofit organization, The Seed Fund.
“We've had the ability to join up with partners that are not only socially aware, but [also], when we told them about the Yes To Carrots Seed Fund, [they] said that without The Seed Fund, the investment would not have been as exciting as it was,” says Ido Leffler, the company's CEO (pictured).
Organizations across the spectrum are engaging in CSR initiatives like never before. These efforts are resonating with consumers, who are also embracing sustainability and philanthropy in their personal choices and, increasingly, with investors, who are traditionally thought to concern themselves wholly with bottom-line numbers. Nowadays, triple bottom-line figures, which also take social and environmental performance into account, have become a conversation that company leaders and IR pros need to have.
“The Seed Fund is one of the primary things we talk about as a company,” Leffler says. The nonprofit provides seeds, equipment, and instructions to communities to grow and sell organic produce.
The company also participates in other programs around the world, and plans to invest a lot of energy in 2009 on projects that empower women. Its commitment to helping others has attracted like-minded investors. During the search for funding, the company was able to be picky in order to find the perfect investment partners, Leffler says.
“Some investors that we've decided weren't right for the company would still like to be part of The Seed Fund,” he notes. “That in itself is a testament to them as investors.”
CSR'S growing influence
In conversations with potential and actual investors, Leffler emphasizes the need for clear objectives and steadfast adherence to a company's CSR plans. Moreover, he adds, companies need to keep their CSR efforts visible.
“Not only [is it] important to consumers to know what you do, it's important to investors,” he says. “So let the investors know what you've done in the past and what you're doing in the future... They'll live it, and they'll fall in love with it as ours have.”
Not only is CSR a philanthropic matter, but it's also a risk management issue.
“Companies have to accept the fact that these issues are becoming larger pieces of the overall information mosaic that investors use to evaluate companies, especially from a risk management perspective,” says Hulus Alpay, SVP and head of the IR practice at Makovsky & Co.
Issues like poor working conditions at overseas operations can elicit customer anger and affect profits. So, it makes sense for IROs to have an understanding of their company's liabilities and stance on the issues, as well as their industry's position on certain issues.
“[IROs] should do their homework,” Alpay says. “They should be working with management teams to have a consistent message that [revolves] around liabilities in their space, plans to address [them], and to provide updates.”
Some industries have more experience talking concisely on these issues than others.
“The degree to which reporting and establishing CSR metrics is relevant to an industry sector is correlated to the perception of how those issues affect shareholders and other key stakeholders,” says Peter Hirsch, partner and corporate affairs discipline leader at Porter Novelli. “Anywhere you have an industry heavily dependent upon regulatory good will, they're more likely to pay attention to CSR issues.”
Hirsch cites the energy, chemical, and plastics industries as those that are well-versed in the ways CSR and IR overlap. And while these conversations are not new to many outside of these industries, communications professionals say the growth of CSR, socially responsible investing (SRI), and other activists have brought the issue to the fore of financial communications. According to 2007 data from the Social Investment Forum, “$2.71 trillion out of $25.1 trillion in the US investment marketplace” comes from SRIs with organizations like investment fund Calvert (also a member of the Forum) driving discussion.
“Almost all companies that have sophisticated [CSR] efforts... recognize that one of the key sets of stakeholders are socially responsible investment funds, and that universe is growing,” says Eric Biel, MD for corporate responsibility at Burson-Marsteller.
Biel adds that messaging to these groups, other stakeholders, and those traditionally thought of as “NGOs” needs to be consistent, which means eliminating the silos of communication and erasing the old perceptions of what a company's role in society is.
“Whether you're a natural company or a regular company,” Leffler says, “not to give back to the community is just not very good corporate practice.”
Socially responsible investment funds
A 30-year-old investment fund that offers an array of products, including socially responsible mutual funds determined by seven criteria of financial analysis, such as government and ethics.
Domini Social Investments Specializes exclusively in SRI.
The Domini Social Equity Fund was launched in 1991 to track companies ranked for their social responsibility and appearing on the Domini 400 Social Index, which was introduced the year prior.
Jewish Funds for Justice
The national public foundation's Tzedec investment portfolio gathers low- and no-interest loans from Jewish philanthropic investors and reinvests them in community development financial institutions to revitalize low- and moderate-income neighborhoods.