The high rate of return on giving
Extreme weather, midwestern droughts, record commodity prices and global economic instability are only a few of the sustainability challenges facing business. As governments prove unable to respond, society looks to companies to take greater responsibility in implementing solutions. Havas Media Lab’s Global Report, which surveys 50,000 customers across 14 countries, found that nearly 85% of consumers worldwide expect companies to become actively involved in solving these issues (an increase of 15% from 2010). Only 28% of respondents felt that companies today are working as hard as they should to solve the big social and environmental challenges people care about. Trust in corporations is at an all-time low. Edelman’s Global Trust Barometer 2012 found that CEOs, as sources of information, are trusted only by 24% of the population.
In the last century, companies felt that the responsible way to contribute, and perhaps buy consumer goodwill was to create a corporate foundation and give money to community charities, libraries, art museums and symphonies. There’s nothing wrong with such giving, but it’s not going to save the world.
As companies seek authentic ways to engage in conversations with customers and stakeholders, a commitment to sustainable operations, and sustainability philanthropy in particular, can leverage these trends by (a) giving people a reason to like the company and (b) providing rich fodder for peer-to-peer spread of positive news. Given that social media, which now plays a major role in disseminating information about corporations, grew to 14 percent (up 75%), virtually catching up with information disseminated by corporations (16%), anything that gets your customers talking among themselves in positive terms about your company is a good thing.
Mission-driven companies have always understood that their consumers desire a more sustainable world. They share it and see it as the basis of their purpose and prosperity. Such companies as Method and New Belgium Brewing have always emphasized social and environmental change in their mission. Others like Interface and Unilever transformed themselves to become mission-driven companies. All have prospered. Indeed, now more than 41 studies show that the companies who are the leaders in environment, social and good governance policy are financially outperforming their less sustainable competitors.
Where, then, does this leave corporate philanthropy?
In recent years stakeholder opinions on the proper role of corporate philanthropy have shifted. The best companies are integrating strategic giving into corporate and CSR programs, refining philanthropy to increase its impact, not diminish its influence. Despite recessionary times, corporate charity is increasing, with the top companies increasing their giving four percent in 2011.
Leaders like Patagonia, with its One Percent for the Planet, showcase corporate philanthropy as a strategic business and societal imperative. Such pioneers have gained credibility and market share. For them philanthropy is not simply a "shared value" approach between businesses and stakeholders, but a genuine expression of caring and compassion, creating positive and sustainable change. Consumers and other stakeholders resonate with the authenticity, and reward the company with greater profits, but this is a happy result, not the driving cause.
Is there a business case?
Saving the world is an unaccustomed role for many companies, but in a sense it doesn’t matter. John Mackey said it back in 2005, Paul Polman, CEO of Unilever, stated it recently: Do the right thing, serve the customer and the other stakeholders of the company, and profits will follow.
A company can argue whether behaving in more responsible ways is the right thing to do, and whether that should be sufficient reason to engage in corporate social responsibility, but the truth is because it is also now clearly the more profitable route, there should be no debate in the first place. The studies cited above make the business case for sustainability, and the business case for corporate philanthropy, as a component of a company’s commitment to taking care of the world and its people follows naturally from that. There are five key areas in which strategic philanthropy adds value:
1) Increased brand value and recognition
Society’s expectations of business will continue to evolve; economic insecurity coupled with concern over the environment will only drive increased expectations for responsible corporate behavior. These will require companies to improve their communication, collaboration and transparency around their business activities, and strategic philanthropy can mitigate against the risk being seen as a lagging corporate citizen.
- In a recent survey, 75% of respondents felt a company’s philanthropic activities made a difference to them when deciding whether to do business with the company.
- In another survey 86% of consumers feel that given equal price and quality they are more likely to buy a product associated with a charitable cause.