Corporate Philanthropy | Part 1 of 2
Corporate Philanthropy
Corporate Philanthropy – A New Context (Part 1 of 2)
Below is part 1 of a 2 part series on corporate philanthropy. To read part 2 please click here.
Is Corporate Philanthropy an oxymoron or can for-profit companies step-up and altruistically love mankind?
Before answering that question, let’s first face the music of rational chagrin shared between professionals in both not-for-profits and for-profits regarding philanthropy. Recently, both groups have been struggling under a two-handed assault from practitioner and policy critics alike. Even Michael Porter, one of the most influential writers and thinkers of our times, believes philanthropy is woefully ineffective in living up to its own hype, regardless the flavor. Unfortunately, the viewable facts to date do little to support the anecdotal claims of greatness in philanthropy, no matter who is shelling out the shekels.
As the intent of corporations is to generate greater private wealth for shareholders, similarly the intent of not-for-profits and philanthropy is to generate greater social wealth for society. We can thus view some comparable facts in light of this context:
- Philanthropy, in the US alone, employs ~15M people generating ~$1T in annual gross revenues; whereas,
- US corporations employ ~150M people generating ~$15T annually.
An interesting inference can be seen on the face of these big numbers: domestic corporations actually employ 10 times more people yet also generate 15 times more productivity than not-for-profits. If we expand our definition of Philanthropy only slightly, from one of not-for-profit, tax-free activities to one of actual social wealth creation and verifiable results we can begin to see how corporations are doing better at Philanthropy in a variety of areas, even without the soft-hearted intent of a social worker.
The answer to our initial question is thus an emerging YES. Our new vision is one of Corporate Philanthropy in significant upgrade. Each year more and more corporations are redefining the way they do business by producing social impacts that used to be viewed as the sole domain of not-for-profits. In this process they have integrated corporate philanthropy into their for-profit effectiveness to achieve direct, verifiable social and financial gains. Frankly these greater, measurable results are a much more valuable definition of Corporate Philanthropy than the old-fashioned touting of the amount of tax-free donations raised and then given away.
These social results also imply a tidal shift by the largest, global companies: they have moved beyond transaction-point incentives and organizational behaviors towards capturing greater value from their entire supply and consumer chain. This value creation includes reduced life-cycle costs and impacts of products (from initial development to reclamation and reuse) both within and well beyond their local communities. Another visible indicator of corporate philanthropy in upgrade is the wide variety of emergent corporate and professional disciplines supporting this tidal shift, including Mission Related Investing (the for-profit money management of tax-free corpus), Sustainable/Ethical Investing and Corporate Social Responsibility.
Each area is a broad umbrella unto themselves, yet they share a defining similarity of movement away from fig-leaf Philanthropy as a marketing function towards a holistic value-creating convergence of for-profit considerations that has become central to CFO, CEO and Boards regarding the strategic allocation of capital. And even better, the markets are now showing that new corporate philanthropy performances such as these are worth more than their peers, as priced from their shareholders point of view.
In the next part of this series we will outline the shifting focus of for-profit initiatives that are redefining Corporate Philanthropy as a blended venture of profit-seeking and social good in more detail. Please stay tuned.
R. Mark Hanna is founder of Social Wealth Partners, a private philanthropy advisory firm, and president of Social Wealth Investment Management, a for-profit, social wealth generating investment fund.
Read Part 2 of this article by clicking here.
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