"Domestic Companies' Social Contribution Expenditure Increases by 14.8% Year-on-Year"

2020 Major Companies Social Value Report

[Asia Economy Reporter Dongwoo Lee] Despite a sharp decline in average profits last year, domestic companies increased their social contribution expenditures.

According to the "2020 Major Companies' Social Value Report" released on the 29th by the Federation of Korean Industries, which surveyed 220 companies among the top 500 companies by sales last year, including those that responded to the survey and published sustainability management reports, the total social contribution expenditure last year was 2.9927 trillion KRW, an increase of 14.8% compared to the previous year. The average expenditure per company also increased by 7.5% during the same period to 13.6 billion KRW.

In particular, 15.5% (34 companies) of the analyzed companies pursued social contribution activities despite recording pre-tax losses. The ratio of social contribution expenditure to pre-tax profit last year was 4.0%, the highest since 2009 (4.8%). The proportion of social contribution expenditure to company sales was also 0.2%, the highest since 2011 (0.26%).

The report suggested that the recent characteristics of corporate social contribution activities can be described as the "New 5W1H." It explained that the subject, timing, target, content, method, and purpose of corporate social contributions show trends different from traditional social contribution programs.

In fact, programs directly planned by employees increased, and programs were designed to increase employee participation by utilizing working hours or allowing participation anytime while spending leisure time at home with family. Beyond simple in-kind donations, intangible values such as know-how transfer were shared, and cases utilizing corporate infrastructure or online platforms also increased.

Interest in solving and developing social issues such as environmental and community development, rather than targeting specific groups, increased, expanding programs targeting these areas by 3.0 percentage points and 3.6 percentage points respectively compared to the previous year.

The area companies focus on most to realize social value throughout the entire corporate activity process (from production to sales), aside from social contribution activities, was "win-win growth with partner companies" (23.9%). This was followed by "realization of eco-friendly values in production activities" and "strengthening compliance management," each at 20.9%.

Among the surveyed companies (113 companies), 86.2% responded that they consider realizing social value through win-win growth with partner companies. Companies are exploring various methods to realize social value through win-win growth, such as securing transparency in fair trade, supporting the competitiveness of partner companies, providing liquidity support, activating communication, and joint social contribution activities.

Yoo Hwan-ik, Director of Corporate Policy at the Federation of Korean Industries, said, "Companies appear to be influenced more by their philosophy, vision, and social issues rather than short-term management performance when spending on social contribution costs," adding, "It is necessary to foster an atmosphere that encourages companies to create positive changes in various fields."