The Keys to Rethinking Corporate Philanthropy

Increasingly, companies find that their giving and volunteering programs generate value beyond traditional corporate goals. They are also helping to address important social and environmental issues, enhancing their public image and reputation. Given these trends, we must rethink how we approach corporate philanthropy. Here are five key factors you should consider as you develop and implement your company’s philanthropic strategy.

Focus on context

Focusing on context can be a key step in rethinking corporate philanthropy. It allows corporations to enhance the value they create by aligning their giving with their strategic capabilities and strategies.

Competitive context is the set of factors that determine a company’s long-term economic prospects. These include the size, quality and nature of specialized inputs such as capital resources, physical infrastructure, information and scientific and technological institutions, trained employees and natural resources.

Companies that support causes that improve contextual conditions create a virtuous cycle. Increasingly disproportionately, their contributions add value to grantees by enhancing their competitive context.

Companies produce greater value when they address context by using the four pillars of social value—selecting the best grantees, signaling other funders, improving grantees’ performance and advancing knowledge.

As a result, they can achieve higher impact through more tightly aligned giving. This approach, which ring-fences a percentage of firm revenue or pretax profits for citizenship and philanthropic efforts, offers advantages such as streamlined messaging and more overt alignment with strategic performance. It also reduces the risk of declining giving levels when a market or company performs poorly.

Seek opportunities for collective action

Collective action is one of the most effective methods to amplify social impact, particularly in large-scale efforts where multiple actors contribute simultaneously. It helps mitigate the free rider problem by distributing costs broadly.

A collective impact approach is not a panacea for all complex problems; many factors go into a successful effort. An example is baking a cake – the right “recipe” can be found, but experience also matters.

However, the right collective impact approach requires a commitment from several stakeholders across sectors and disciplines. These groups may have varying expertise and experience, but they should all be committed to a common agenda for solving a specific social challenge at scale.

Corporate philanthropy can be leveraged to accomplish this by aligning giving with a company’s strategy or seeking opportunities for collective action within a cluster or with partners. The more tightly tied a company’s giving is to its business or strategy, the better it will perform in terms of social value, as it can leverage its specialized assets and expertise for maximum effect.

Align giving with strategy

Aligning giving with strategy can be a key to unlocking positive business outcomes and philanthropic impact. When corporate philanthropy is integrated with a company’s overall business goals, objectives, programs, and products/services, it becomes strategic philanthropy.

In a climate of profitability and accountability to the bottom line, companies are increasingly looking for ways to use their philanthropic activities to generate distinct business benefits. These include employee morale and engagement, increased sales, brand building, and global exposure.

In a world where many social contracts and societal systems have been broken, philanthropy is called to reinvent its mandates, practices, and partnerships. The social mobilization for anti-racist and social justice transformation has amplified this call.

Focus on impact

The key to rethinking corporate philanthropy is to focus on impact. Companies that do not tie their philanthropy to a broader strategy often fail to achieve significant social or economic impacts.

In contrast, corporations with a broader perspective often see value in their philanthropy reflected in increased revenue and positive societal impact. Moreover, they can tap into their employees’ specialized knowledge and capabilities to conduct serious research to identify potential grantees that are well-matched with their business.

This kind of company-specific approach to philanthropy is what the authors call strategic philanthropy. It is a combination of stakeholder needs and the corporation’s skills. The result is a philanthropic program that addresses social problems and uses the corporation’s resources to solve them. This is different from other types of corporate philanthropy, which the authors call constricted philanthropy. They cite IBM’s Reinventing Education initiative as a good example of this approach.