Society’s expectations of good corporate citizenship have changed. As the wealth and power of businesses grow, so have society’s expectations of corporate responsibility. With the weakening of national governments and the strengthening of businesses, people now expect corporations to provide leadership and take more responsibility in solving pressing social and environmental challenges.
Almost half of societies polled in 28 countries expect businesses to support charities. Executives acknowledge the business significance of corporate philanthropy, but the perceived low return on investment (ROI) restricts their charitable spending. An effective corporate philanthropic strategy can boost your business’s competitive advantage and create greater social impact.
Below, we’ll discuss why current charitable practices are ineffective and offer a new approach to corporate philanthropy to create greater value for both businesses and societies.
Why Traditional Corporate Philanthropy Is Ineffective
Current corporate philanthropic practices are unsustainable and often ineffective in achieving their objectives because they don’t create business value.
Most businesses employ traditional philanthropic practices ⏤ such as cash grants and donations ⏤ to boost their image and support worthy causes. These traditional charitable activities, however, are only sustainable for short-term campaigns and fail to achieve any long-term social impact. As a result, most corporate contribution programs do not realize their full potential, creating very little value for the business.
Low-Value Business Activity
Corporate executives struggle to justify charitable spending to investors and stockholders in terms of business benefits. Consequently, corporate philanthropy has declined from 2.3 percent of pre-tax profit in 1986 to less than one percent today, as businesses sideline charitable expenditures in favor of activities that generate a higher return on their investment.
How can businesses harness the benefits of corporate philanthropy while creating meaningful social impact? A more focused and strategic corporate philanthropic program can maximize the value of charitable contributions for both businesses and beneficiaries.
What is Strategic Corporate Philanthropy?
Strategic corporate philanthropy is when a company’s charitable activities benefit both the business and society. When philanthropy satisfies both shareholders and beneficiaries, businesses can develop more sustainable charitable programs and make long-term commitments to the effort. Strategic corporate philanthropies are more successful in achieving their goals, creating the social impact businesses need to boost their competitiveness.
A common misconception in corporate philanthropy is that charitable efforts should not be used for economic gain. However, this obsolete way of thinking is contributing to the ineffectiveness of current charitable programs. Research conducted by MIT’s Sloan School of Management found that creating true value for both businesses and beneficiaries is the only strategy to develop sustainable corporate philanthropy programs that make a lasting societal impact.
A Win-Win Situation
Many of the world’s leading companies are adopting a more strategic approach to their charitable efforts to create a greater social and economic impact. A good example of this is Trans Global Auto Logistics’ (TGAL) sponsorship of a world-record attempt to row across the Pacific Ocean. TGAL is sponsoring and facilitating the logistics of the event which will help St. Elizabeth’s Centre for people with profound disabilities. The proceeds from the world-record row will be used to build a new specialist healthcare facility.
TGAL’s charitable effort will not only make a long-lasting societal impact but also showcase its unique assets and expertise in ocean transport. With its international presence and specialty boat shipping services, few of TGAL’s business rivals can match the company’s capabilities. Sponsoring this event on May 25, 2021, will promote TGAL’s ocean freight services and improve the lives of people with special needs, creating a win-win opportunity for the business and beneficiaries.
Benefits of Strategic Corporate Philanthropy
An effective philanthropic strategy that aligns social and economic goals will not only create sustainable societal benefits but can help businesses improve reputation, enhance talent acquisition and retention, increase customer loyalty, boost growth, and generate a higher return on their social investment.
American clothing giant Levi Strauss’s Worker Rights program is a great example of strategic philanthropy’s benefits for both business and society. The Levi Strauss Foundation has invested $8 million to improve the health and education of more than one million factory workers in 16 countries. In addition to its long-lasting societal impact, Levi’s estimates that it has generated an ROI of $4 for every $1 invested in the program in the form of reduced worker absenteeism and turnover rates.
How To Develop An Effective Corporate Philanthropy Program
A strategic corporate philanthropic program can be the most cost-effective way to boost your business’s competitiveness in the marketplace. Many of the world’s top corporations have altered their philanthropic approach from one of charity to mutually beneficial projects. Some well known strategic corporate philanthropic programs that benefit both the business and society include:
- Cisco’s Networking Academy
- Campbell Soup’s support for the American Heart Association’s Go Red for Women movement
- Unilever Dove’s Self-Esteem Project
An effective corporate charity program should integrate an internal and external perspective to maximize the value of philanthropy for the business and society. Use these three tips to develop a strategic philanthropic program for your business:
Perceive Corporate Philanthropy As An Investment In Society
Many companies dole out cash impulsively to charities without measuring the act’s impact on society and their business. This approach marginalizes the value of charitable work and is the main reason why corporate philanthropy is in decline. Changing your philanthropic work’s narrative to one of investing in society will allow you to develop a long-term and more sustainable plan for tackling social issues, creating greater value for people and your business.
Ensure Philanthropic Activity Is Connected To Your Business
You’re an ardent supporter of marriage equality. Great! But how will donating company funds to LGBT non-profit organizations benefit your project management software business? It is unethical to spend shareholders’ funds on causes that executives and employees believe in. Business revenue must be used to maximize the value of shareholders’ assets.
When selecting a philanthropic project to undertake, make sure it aligns with your business activities and objectives. Campbell Soup’s support for the American Heart Association helps them sell more of their heart-healthy products. Dove’s Campaign for Real Beauty and support for organizations that work on women’s issues has returned $3 for every $1 spent on the project in the form of increased sales in personal care products. Aligning corporate interests with social issues can produce real value for both businesses and societies.
Professionalize Your Philanthropic Program
Due to its perception as a low-value activity, corporate philanthropic projects are often treated as peripheral work by businesses. With social consciousness becoming a focal point for many consumers, businesses must develop strategic and professional philanthropic programs to boost their competitiveness.
Corporate philanthropy should be executed with the same level of professionalism as other high ROI business functions if you want to reap its full benefits. Does your company have the right competencies to run a successful philanthropic program? Are your corporate philanthropy employees in need of some professional development training to boost their skills? Improving the professionalism of contribution programs will create greater value for beneficiaries and improve business performance.
Improve Business Competitiveness With Corporate Philanthropy
As societies become more socially, environmentally, and economically responsible, corporate philanthropy will become an increasingly influential factor in determining business success. Most corporate charitable activities, however, are ineffective at achieving long-lasting societal impact and often breed public cynicism rather than goodwill.
A strategic corporate philanthropic program eliminates the ineffectiveness of traditional charitable activities as it creates value for both businesses and societies. Corporate philanthropy is effective and sustainable only when it can help converge business and society’s interests. Develop a professional and strategic philanthropic program that satisfies both investor and consumer demands in order to improve your business’s competitive advantage.
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