The precedent-setting commitment of Warren Buffet and Bill Gates to charitable work is bringing corporate philanthropy to the forefront. After many years of corporate scandals and Sarbanes-Oxley news, the tipping point has arrived. Corporate philanthropy is good—both for business and the nonprofits that benefit from it. And the better news is... you don't have to be in big business to do it.
Corporate philanthropy may be called by a variety of names, including corporate social responsibility, corporate citizenship, or corporate giving. In larger companies, it can fall under the banner of the community relations, community affairs, or even public relations departments. Over the past several years, however, companies that have realized the potential that corporate philanthropy has to offer their brands have re-allocated responsibility to the marketing and branding departments.
According to Philip Kotler and Nancy Lee, authors of, Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause, corporate social responsibility is "a commitment to improve community well-being through discretionary business practices and contributions of corporate resources."
Corporate philanthropy (CP) has also taken on many forms in recent years.
For many companies, grants or in-kind donations are still the preferred distribution methods, allowing companies to spread their CP budget among many community organizations and causes. In-kind donations give companies an opportunity to provide their expertise, services, or products to a charitable organization. Examples: an accounting firm that conducts an organization's annual audit pro bono, an advertising agency that provides pro bono creative, or a bottled water distributor that donates its products to a fundraising run.
This popular method gives companies exposure in a variety of events and fundraisers, for a host of causes. For the array of charity balls, galas, and fundraising runs and walks, it's a way nonprofits can generate revenue while attracting participation from corporations and businesses.
United Way is a prime example of this giving method. Its annual campaigns across North America include successful employee-giving programs that companies support internally, serving as campaign fundraisers and cheerleaders. Money raised comes from payroll deductions or through employee-organized fundraising events (such as bowl-a-thons, golf tournaments, pizza lunches, etc.), or both. Some companies will even match their employee gift totals each year.
More recently, many companies that practice corporate philanthropy are encouraging their employees to volunteer for local organizations. Some will give employees time off for volunteer work, while others expect it outside of business hours. Sometimes, companies choose one or more specific organizations to support collectively, while others allow employees to select the charities.
Cause-Related Marketing (CRM)
One of the more successful and older methods of corporate philanthropy is practiced through CRM programs. In their book Brand Spirit: How Cause Related Marketing Builds Brands, Hamish Pringle and Marjorie Thompson define CRM as, "a strategic positioning and marketing tool which links a company or brand to a relevant social cause or issue, for mutual benefit."
An example is the "Save Lids to Save Lives" promotion that Yoplait ran from March 15 through May 15 of this year. Yoplait promised to donate 10 cents to the Susan G. Komen Breast Cancer Foundation for every special pink lid that is saved and mailed in through July 31, 2006. Yoplait committed to donate up to $1.5 million with a guaranteed minimum donation of $500,000.
Another CRM example is Cold Stone Creamery's support for the Make-A-Wish Foundation of America. Seeking to increase customer awareness of the brand and drive traffic to its stores, it instituted "The World's Largest Ice Cream Cake Social" in 2002. The April 2005 promotion generated the highest monthly sales in Cold Stone Creamery history and produced more than double the Web traffic of any other month of the year. The company made the largest donation in its history to the organization—over $750,000. Because of the promotion's success, Cold Stone Creamery has implemented a plan involving the foundation in new store grand opening events nationwide.
From a marketing perspective, CRM is an ideal form of corporate philanthropy. Pringle and Thompson go on to add that it's "an effective way of enhancing corporate image, differentiating products, and increasing both sales and loyalty."
Rewards for the Good Guys
No matter which corporate philanthropy methodology companies use, the outcomes can be very beneficial for business. The 2004 Cone Corporate Citizenship Study results show that Americans have grown to expect companies to play a more active role in addressing society's needs. In fact, 86% of respondents claimed they would likely switch from one brand to another of the same in price and quality, if the other brand is associated with a cause.
This loyalty also extends beyond consumerism. A company's commitment to a social issue is an important factor for 81% of people when they decide where to work. This ties into employee recruitment and retention rates for many companies, especially as more people look for meaning in their lives and ways they can "make a difference" in their communities.
This type of consumer response is reinforced with results from the GolinHarris 2005 Corporate Citizenship Index. Some 40% of respondents in the survey of 3,500 Americans say good corporate citizenship makes them more willing to do business with a company. The survey also found that corporate citizenship can influence consumer opinion and behavior, and essentially turn consumers into brand champions. Respondents indicated that good corporate citizenship by a company or brand would inspire them to (in rank order):
- Be willing to try the company's products for the first time
- Welcome the company into their community
- Recommend the company's products and services to friends and family
- Improve overall trust for the company, its people, and products
- Improve overall opinion of the company's reputation
Punishing the Bad Guys
While the research shows how companies can improve consumers' trust when they support social issues, it also shows how consumers will punish companies that behave illegally or unethically: 81% of respondents claim they would speak out to family and friends against a company's negative practices, 73% say they would boycott that company's products or services, and 80% claim they would consider selling their investment in that company's stock or refuse to invest in its stock.
Tooting Your Horn
What's interesting about corporate philanthropy is that many companies have been shy about boasting; yet, according to the Cone study, an overwhelming majority of Americans (86%) want companies to talk about their efforts, and only four in 10 say companies are doing that well.
"These facts side-by-side are a mandate," says Carol Cone, CEO of Cone, the Boston-based marketing firm that conducted the study. "For senior executives, they are a mandate for action on social issues. For marketing executives, they are a license to communicate the company's commitment and efforts."
What's even more notable is that respondents want to hear about these corporate philanthropic efforts from third parties such as family and friends, government agencies, news outlets, the Internet, and charities. When hearing directly from companies, Americans show preferences for easily digestible sources such as advertising, product packaging, and brochures or newsletters.
With all the money, goods, and services being exchanged in the symbiotic relationships that corporate philanthropy entails, it's interesting to note that many companies do not have a strategy in place for their philanthropic efforts.
According to PricewaterhouseCoopers' "Trendsetter Barometer," even though 73% of fast-growth private companies are presently involved a great deal or to some extent in charitable giving activities and 40% of their CEOs describe these activities as a priority of their business, only 5% say their business principals seek professional advice on addressing their philanthropic objectives, and only 15% have a formal plan for their charitable giving activities.
Kotler and Lee provide a more strategic solution to this philanthropic wandering. They advise businesses to select a few strategic areas of focus that fit with their corporate values and support their business goals. Companies should choose issues that relate to their core products and markets, they say, and can meet their marketing objectives, such as increasing market share or penetration or building brand identity, for example. And, with the emphasis we've seen in the past few years on marketing metrics, they also advise regular evaluation of philanthropic initiatives.
In addition, Kotler and Lee recommend that companies involve more than one department in the decision-making process on which charities to support, and should consider the issues that touch their customers, communities, and employees. Their approach would help build consensus and ensure that philanthropic efforts are genuine. Even though businesses are benefiting from these initiatives, the public may see through efforts that are one-sided or strictly for corporate gain.
In a marketing flyer created by the Council on Foundations (COF), businesses are advised not to think of "the new philanthropy" as a donation but as a strategic business investment:
"Yesterday's corporate 'checkbook charity'—companies simply giving money away to good causes—has been superseded by today's strategic philanthropy, which ties donations of time, money, and gifts-in-kind to defined business goals and desired benefits. Companies that have created corporate foundations or corporate giving programs have discovered that partnerships between private enterprise and public interest can produce profitable outcomes for all."
This emphasis on the business of corporate philanthropy has both positive and negative fallout for the nonprofit sector. On the plus side, corporate giving in 2005 grew by an unprecedented 22.5% (18.5% adjusted for inflation) to reach an estimated $13.77 billion.
But, on the down side, smaller and lesser-known nonprofits, whose missions may not be as sexy, stand to lose as better branded and larger charities receive the lion's share of increased strategic corporate philanthropy.
Any Size Will Do
You don't have to be a behemoth corporation to engage in corporate philanthropy. These same principles can work at the local level, helping small and mid-sized businesses build their brands and market their products and services, while, as good corporate citizens, simultaneously raise awareness for local causes.
"Businesses of all sizes have reaped the market share, human resource and public relations advantages that philanthropy offers through programs that align community responsibility with business need," adds the COF. "Addressing the problems of the people in your community can—and does—stimulate business development."
|Corporate Philanthropy Benefits for Business*
|Corporate Philanthropy Benefits for Nonprofits
|Increased brand awareness and recognition
|Increased brand awareness and recognition
|Enhancement of overall corporate image and reputation
|Enhancement of organizational image and reputation; increased publicity potential
|Positive consumer purchasing and investment decisions
|Increased revenue and unrestricted funds
|Fewer, higher-level, longer-term partners; stakeholder loyalty
|Recognition as a responsible neighbor of choice
|Increased ability to do more and "live the mission"
|Community goodwill and support
|Improved sense of partnership with corporations in solving community's problems
|Competitive advantage in recruiting and retaining employees
|Competitive advantage in recruiting and retaining employees, volunteers, and donors
|A more productive and healthier workforce
|Increased employee commitment and enthusiasm when seen as a "winner"
|Lower training and other employee-related costs
|Reduced operating costs
|Improved inter- and intra-company collaboration, communication, and sense of purpose
|Increased collaboration and communication between private and nonprofit sectors
*source: Council on Foundations
It all began in the 1980s with an American Express campaign to raise funds for the Statue of Liberty restoration. Not only did the company raise $1.7 million for the cause, but card use jumped 28% and the number of new users grew 17%. The symbiotic corporate philanthropy relationship was born.
Today, the business sector has expanded on the many charitable opportunities that abound. With a strategic approach to match philanthropy with business goals, and an eye for the vulnerable and needy in our communities, businesses can continue to collaborate with nonprofits, growing these partnerships in unprecedented ways. We're still in the infancy stages of corporate philanthropy. Over time, and with more involvement from businesses of all sizes, much can be achieved together.
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