This is part one of a two-part article on corporate philanthropy. In this article we discuss the evolution of corporate philanthropy. Part 2 will be published in the subsequent non-profit newsletter and will provide a framework for structuring corporate philanthropy.
Today, there is greater recognition than ever before that giving back to society is not only good for the recipients but it is good for the company.
According to the Foundation Center, there are more than 2,600 corporate foundations in the United States with total corporate giving amounting to $5.5 billion annually (2013).* In addition, there are many more companies that have direct charitable giving programs, and other social impact initiatives, such as pro bono and volunteering, that occur outside of the formal structure of a foundation. Today, there is greater recognition than ever before that giving back to society is not only good for the recipients but it is good for the company — in terms of brand building, talent retention and improving key evaluation metrics such as corporate social responsibility (“CSR”) and environmental, social and governance (“ESG”).
Over the past decade, we have seen a significant shift in corporate giving — as corporate profits have risen, so have charitable giving rates. The latest Giving USA1 report suggests that giving by U.S. corporations rose by 8 percent in 2017 alone. In fact, there is a general understanding that businesses, particularly larger companies that operate in multiple jurisdictions and are part of and/or exert influence over global/regional supply chains, have a responsibility to operate in socially responsible ways. We have seen increased focus on two broad metrics: CSR and ESG. CSR initiatives are generally acknowledged to play a role in employee engagement, and ESG metrics are increasingly acknowledged as investment and financial performance factors. Sometimes one may eclipse the other in how CSR and ESG interchangeably may refer to the same types of socially responsible business best practices, programs, initiatives and metrics that are being adopted by companies.
A review of reports produced by the Committee Encouraging Corporate Philanthropy (CECP) from the past 10 years reveals a number of clear trends that have emerged in corporate philanthropy. These include:
- Cash giving, but not necessarily via corporate foundations;
- Giving plus, where cash is contributed along with pro bono work or in-kind donations of products or services;
- International giving – as companies become increasingly more global, so do giving efforts;
- Alignment with core business objectives and core competencies;
- Focused giving – fewer, larger gifts in service of specific issue areas or causes for deeper impact;
- Informed giving – voice of the customer and community is sought out and goals are more stakeholder driven;
- Collaborative – more intra-industry, more cross-sector partnerships (e.g., nonprofit and nongovernmental organizations, academia, public sector, other companies); and
- Measurement and reporting – return on investment to the company and the community, articulating demonstrable business value plus social outcomes.
Given the dynamic context in which corporate giving programs operate and the variety of both internal and external factors to which they need to be responsive, it’s not a surprise to see these trends. Some of the challenges most impacting society and businesses today stem from competitive disruption, a changing workforce/automation, impacts of climate change, a growing wealth gap, and natural resource scarcity, to name just a few.
Meanwhile public expectations for businesses to be responsive to social issues are increasing. Stakeholders want to know how revenue is being earned, what a company’s position on social issues is and what their ultimate impact is on the community and the world at large. Performance is no longer being measured solely in terms of quarterly financial results, but in these broader terms of CSR and ESG metrics as noted above. A recent survey from Globescan shows that there is still a gap between the public’s expectations for companies with regard CSR and the actual performance of such.3
Aon’s recent Global Risk Management survey4 further underscores concerns around stakeholder perception; it indicates that two of the top ten risks are damage to brand and failure to attract top talent. Brand equity, mostly composed of customer loyalty, prestige and positive brand recognition, is considered part of a company’s intangible assets and it directly impacts a company’s bottom line.
There are a number of dynamics driving concerns about attracting talent such as demographic and economic factors, but workplace features is one of the main drivers. Aligned CSR and corporate philanthropy programs can help mitigate the risks around brand and talent. According to the Cone Communications 2017 CSR Study, “CSR continues to be a differentiator in the minds of consumers… Communicating strong CSR practices consistently reaps reputational and bottom-line benefits year-over-year.”
It isn’t surprising that the macro socioeconomic forces driving public discourse are also playing out at the micro level among corporations to engage in issues beyond the pure financial.
Aon’s 2016 Workforce Mindset Study found that a company’s environment and social responsibility and a positive reputation with customers rank in the top five in importance of what employees want from their employer. Among top 10 differentiators, the survey found, “Is a Strong Fit with my values” ranked No. 5. Differentiators are important factors for employers to consider as they can distinguish and set themselves apart among stakeholders, not the least of which are customers and employees.
It isn’t surprising that the macro socioeconomic forces driving public discourse are also playing out at the micro level among corporations to engage in issues beyond the pure financial. As corporate philanthropy continues to evolve, good corporate citizens are becoming more proactive to provide transparency, focus, and demonstrable impact in society. Good CSR practices can directly affect how a corporation is perceived by all of its stakeholders –not only by its employees, but also by its investors, consumers and the general public. Corporate philanthropy, when done well, is key in amplifying the strength and differentiation of a company’s CSR.
*Source: thebalancesmb.com, November 6, 2016
1) Giving USA 2018 https://givingusa.org
2) Committee Encouraging Corporate Philanthropy ("CECP") Giving in Numbers Reports, 2009 and 2018 editions https://cecp.co/home/resources/giving-in-numbers
3) www.globescan.com (CSR Expectations and Performance 2015)
4) Aon Global Risk Management Survey, surveys roughly 1600 c-suite executives globall7 (2017)