Most Big Companies Have No Idea If The Billions They Throw At Social Programs Work

A man brushes his teeth in the street at the Dharavi slum in Mumbai, India. Uriel Sinai/Getty Images

Together, 100 of the world’s largest companies reported social investments valued at $12.2 billion last year, according to new research by KPMG International.

And yet few of those companies are reporting the impact these investments are actually having on the people they are trying to help.

The study, Unlocking the value of social investment, reviewed corporate reports between 2012 and 2013 by the 10 largest global companies in each of 10 industry sectors across 11 countries including Australia.

These companies and their associated corporate foundations invested on average the equivalent of 2.5% of their pre-tax profits in programs to tackle social and environmental challenges such as access to education, healthcare and disaster relief.

However, the research found:

  • Only 20% of the companies reported quantified metrics for the impact of the programs they fund
  • Just 32% reported a detailed investment strategy
  • Only 29% discussed outcomes or impacts in even general terms
  • None quantify long-term impacts
  • Pharmaceuticals companies make the largest proportionate investment in social programs, nearly 12% of pre-tax profit

Social programs come under many names: community investment; social investment; charitable giving/philanthropy; corporate citizenship; social action/commitment; community engagement/involvement; corporate social responsibility.

And KPMG Australia Partner Chi Woo says says companies are investing huge amounts into social programs despite the wider corporate focus on cost in a post-GFC world.

The $12.2 billion invested by these 100 companies alone is equal to the entire annual foreign aid development budget of France.

“A clear strategy for social investment is crucial for success yet currently there appears to be a scatter-gun approach, with companies typically investing in five different areas rather than focusing on priority areas where the business can make the most difference,” Chi Woo says.

The report argues that best practice community investments are those which create shared value for both the beneficiary and the business, rather than pure philanthropy.

Projects with clear business drivers are more likely to be sustained by shareholders in the long run.

In some jurisdictions, such as India, companies are required to invest in Corporate Social Responsibility programs as part of their license to operate.

This chart shows how companies invest in social programs:

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