What makes a corporate giving program an effective vehicle to support societal causes and support business success? A review of the evidence uncovers seven elements that help maximize the power of a company’s, or its foundation’s, monetary giving:
Materiality consists of identifying the most productive societal causes for the company’s community involvement to support. Best-in-class community involvement programs focus on causes that are pertinent to the business. For example, a surf shop might focus on beach cleanups and a restaurant on sustainable local agriculture. Harvard Business School research finds that while firms that focus their community involvement on material causes experience a nine percent increase in stock performance relative to those that don’t invest meaningfully in community involvement; firms that focus on immaterial causes experience only a three percent increase (Khan, M., Serafeim, G., & Yoon, A. “Corporate sustainability: First evidence on materiality.” The Accounting Review. 2015). For more materiality, see OneOC’s Materiality Matrix.
- Shared-value partnerships
When the philanthropy benefits the business as well as the partner nonprofits, it is more sustainable and scalable and, thus, can do more social good. An alliance with a nonprofit might help a business reach new markets or develop employee leadership skills, for example.
- CSR alignment
The company’s monetary giving should support the other corporate social responsibility programs, and vice versa. For example, monetary contributions might be directed towards the nonprofits that host day-of-service group events for employees or where employees conduct board service.
- Impact investing
Impact investing generates social or environmental impact alongside of, or in lieu of, a financial return by filtering or otherwise selecting companies/projects where the investments are directed. If the company foundation has an endowment, impact investing can help preserve the environment, support human rights or otherwise support the philanthropy program’s social impact goals.
Figure 1: The building blocks of high-impact corporate philanthropy
Like any program, corporate philanthropy needs to be managed effectively and have efficient operations.
The most successful corporate philanthropy programs measure their social and business impact, learn from the findings and take actions to improve.
For a company to receive public recognition for its philanthropy, which is a good way to augment the business and societal impact of such efforts, typically requires above-average contributions. Scale, of course, also determines the amount of good the philanthropy does. Data from the CECP and the Conference Board find that US companies donate approximately one-tenth of a percent of revenues and one percent of pre-tax profit. Leading companies donate five percent or more of pre-tax profit.
It should be noted that even companies with world-class philanthropy programs have weaknesses in some of the building blocks and might skip some. The point is not to perfectly and fully implement the seven building blocks, but to use them to make informed decisions on how best to improve your corporate philanthropy.
To use the building blocks as a template for assessing your corporate philanthropy download the Corporate Philanthropy Assessment Matrix (members only).