Corporate philanthropy has gotten a bad rap. Various stakeholders accuse companies of donating money to causes simply to make themselves look good. Shareholders question the need for such donations during times of economic downturn or particular financial trouble. Nonprofits complain that companies give money haphazardly to causes that aren’t connected to their businesses. The days of simply writing a check to United Way are gone.

There is a solution. As the corporate citizenship movement gains momentum in the business world, philanthropy has become more strategically aligned with business and social goals. A few cutting-edge companies have begun to align their giving efforts with business objectives. But what makes philanthropy strategic?

Recently The Center hosted a TeleConvening that examined strategic philanthropy, its impact on business and its future as a component of corporate citizenship. Steve Rochlin, director of research and policy development with The Center, presented on the topic and 80 Center members joined the discussion and shared their experiences as corporate philanthropy practitioners. Here are some tips from the TeleConvening.

What is strategic philanthropy?

Strategic philanthropy is a “win/win” endeavor that has both business and societal value. However, 51% of companies still identify charity as the number one motivator for their philanthropic efforts, according to preliminary Center research done in conjunction with the Center to Encourage Corporate Philanthropy. Thirty seven percent identified strategy as the major motivation. 

Philanthropy will only be strategic when it delivers on all of the things businesses expect from it.

The six goals of strategic philanthropy are to:

• Make a difference
• Make a business case
• Communicate
• Express values
• Support employees
• Support executives

How does philanthropy fit into corporate citizenship?

Corporate citizenship can help synthesize these goals.  The growing role of companies in the global landscape means that more and more people consider business as both the problem and the solution to many of the world’s problems from transparency, diversity and economic development, to human rights, sustainable development, the environment and ethics. Corporate citizenship refers to how a company works to deliver the promise of its core values in a way that:

• Minimizes harm
• Maximizes benefit
• Builds accountability and responsiveness to stakeholders
• Integrates throughout the business

It is important to remember that philanthropy is not the whole of corporate citizenship, but it can help deliver on the promise of core values by minimizing harm, maximizing benefit and building accountability.

The new strategic philanthropy functions as a pool of research and development to enable businesses to continuously improve and innovate performance as a corporate citizen. 

Some companies have already embraced this idea of strategic philanthropy. For example, Levi Strauss’ work on supply chain issues makes great use of the company’s resources and has led to great business, as well as social opportunity. Similarly, Nike’s work on child labor issues has also opened doors for the company as well as for emerging markets.

For this TeleConvening, The Center invited Michelle Grogg, the Director of Corporate Citizenship at Cargill and Mary Franco, the Vice President of Corporate Citizenship from GE, to share their companies’ experiences with making their philanthropy more strategic.

Strategy at Work: Companies Taking the Strategic Plunge

Cargill is an international provider of food, agricultural and risk management products and services. Several issues drive the company’s citizenship efforts, including labor issues, fair trade, globalization, health and nutrition, transport, food safety and animal rights. Recently, the company has shifted its corporate citizenship vision to be more strategically aligned with its core business.

Cargill understands that the global corporate citizenship movement marginalizes philanthropy. However, linking giving to overall citizenship strategy enlivens the core purpose of philanthropy and makes the function have a more meaningful and intuitive place in the company.  Accordingly, its focus areas became more aligned with core business objectives and resources. New focus areas for corporate giving are:

• Accessible, safe and nutritious food supply
• Innovation in education
• Stewardship of natural resources

Through linking giving to overall citizenship strategy, Cargill enlivens the core purpose of philanthropy and makes the function have a more meaningful and intuitive place in the company. For example, the company’s $1 million donation to the United Nations World Food Program to provide education and nutrition programs in Central America and Africa utilizes employees’ capacity for logistics and dissemination. The program provides opportunities for employees to help implement strategic distribution methods for the UN program.

GE, too, as a global diversified technology and services company, is undergoing its own transformation toward strategic philanthropy, which will direct corporate resources (time, talent, cash and product).  The importance of company values is at the heart of a new corporate citizenship strategy. To stimulate change of corporate culture around its values, GE’s corporate citizenship team hosts "workout sessions," presenting citizenship as relevant to all GE employees. In these sessions, issues are identified and potential programs envisioned to create social impact at a local level. The goals of the workout sessions include:

• Driving awareness of GE’s citizenship at the country level
• Identifying key issues
• Brainstorming with internal and external stakeholders on GE’s impact with societal problems

The workout process has lead to several key breakthroughs in the way of strategic philanthropic investments. In Mexico, for example, GE needed to grow points of market entry to customers. Through workout sessions, the level of poverty was identified as the major societal challenge that GE could influence. In response, GE partnered with a customer in target communities, and donated resources to build community centers. The company estimates that these efforts have yielded $10 million in new GE business.

GE’s moneybasics.com, a part of its responsible lending project, also resulted from a workout session. As the company grows the financial sector of its business, it sought to focus some philanthropic energy on financial literacy programs. MoneyBasics, currently piloted in the UK, is a partnership between two national UK charities and GE Consumer Finance. Working together, they are helping people of all ages understand money and finance and increasing access to financial literacy information. The company has seen the responsible lending program influence internal practices as well. Through the benchmarking that is necessary for the project, the company has begun to eliminate facets of the business that may be of questionable integrity or do not consider the customer’s point of view. For example, the company currently is addressing concerns around exclusively offering GE products and services in their financial literacy efforts.

Insight #1: The Why and What of Strategic Philanthropy

Companies should understand why they give and what would make that giving strategic. GE’s strategic process offers a good example of this understanding. Values have played an important part in GE’s process toward strategic philanthropy. The company strives to put values at the center of its corporate citizenship wheel, surrounded by community engagement, environmental health and safety, social public policy position, compliance and governance, product and supply chain standards, and valuing and growing employees. Mary Franco, vice president of corporate citizenship at GE, says that the company strives toward an “unyielding integrity.” As a global company, understanding the values of the countries in which it operates is also important. According to Franco, “The first question is ‘Are we in sync with the country’s values?’” 

Cargill’s operations touch many communities and stakeholders in a variety of ways. Michelle Grogg, director of corporate citizenship at the company, believes that the large scope of the company’s business was an important factor in forcing it to be more strategic in its citizenship efforts, “Because of the diversity of our business, many corporate citizenship issues impact us. So we thought it was necessary and important to get our heads around them.”

* During the TeleConvening, participants responded to real-time surveys via the Internet and had a chance to weigh on the subject. These corporate voices are captured throughout this report.

Understanding the issues that affect business is an important step, even for companies that do not feel ready to become totally strategy-based in their giving. For example, Doug Sabo, director  government and community relations at McAfee, Inc. explains “all of this talk about strategic philanthropy links to how we are thinking, if not yet to what we are doing.”

Insight #2: Partner for Success and Understanding

Cargill attributes part of its success with its strategic philanthropy to partnerships. During its strategic shifting process, the company realized it needed some filters to create more strategic partnerships. The company looks for partners that will help it to:

• Make a distinctive contribution
• Engage its employees
• Solve problems rather than treat systems
• Meet its unique business interests
• Provide opportunities to collaborate with customers and stakeholders

Cargill partnered with CARE International in contributing $1 million to support education and maternal/child nutrition programs in Latin America and Indonesia. The NGO’s screening process helped Cargill think more strategically about its funding beyond this singular donation. According to Grogg, “CARE insisted on a rigorous review process that was different from other NGOs when we approached them. It helped us with our transparency efforts and to evaluate the goals of the contribution.”  CARE required Cargill to think about its operations, business values and citizenship efforts because of its rigorous selection process. The company was much more honest about its operations as a result. The company also had to think about why it wanted to part of the program, forcing a reevaluation of strategic goals. 

Insight # 3: Ongoing Engagement

Joan McDade from Wells Fargo expressed concern about the disconnect between strategically aligning philanthropic contributions and employee engagement programs, “Maybe employee engagement isn’t always strategic, but it is clearly important… You want to keep employees engaged [after re-alignment] and I think it is important to make sure they don’t loose that connection.”

Addressing this concern, Mary Franco of GE adds, “We try to engage our employees in our strategic initiatives. We get involved in things that not only help with external issues, but also with internal problems. It’s not always aligned, but we feel it is important to keep [employees] connected. We try to focus on the employees to make them proud… We’ve also just increased our matching gift programs because it is one of those things people feel connected to.”

Insight # 4: Pressure Points

While the shift toward strategic philanthropy is the next logical step in corporate giving, many stakeholders are still looking for the business case that shows that giving to the community is viable and beneficial. Most companies are receiving pressure to make the case from their senior executives. However, a few participants identified some less-traditional stakeholders as a source of pressure. These included the government, employees, customers, and the communities in which they do business.

Insight # 5: Size Doesn’t Matter

As a medium–sized company, McAfee questioned how companies with limited staff and budgets can be more strategic with their giving. Both Mary Franco of GE and Michelle Grogg of Cargill believe that philanthropy at small businesses can be compared with philanthropy at their large but very decentralized companies. Franco says, “Our smaller units do get guidance from corporate, but we understand the issues are very different and allow them some room. Its all global with a local flavor.” Grogg offers another solution, “One of the things we do [in our smaller units] is bring in community leaders to talk about specific issues.” This allows the smaller units to learn from the community and let this information guide their philanthropy rather than headquarters.

Steve Rochlin from the Center believes that small and medium-sized enterprises (SMEs) have an advantage in some ways, “Sometimes smaller companies think they need big budgets and staff, but if you really look at some of the best examples [of strategic givers] like Ben and Jerry’s, Seventh Generation and Timberland, they are the small ones. In smaller companies, there is a flexibility that allows them to be creative."
 
Lessons Learned

The strategic philanthropy movement needs to be part of a larger movement toward global corporate citizenship. However, as companies begin to think about larger issues of citizenship, the importance of philanthropy can often be overlooked. Companies should consider the impact that re-alignment around issues of corporate citizenship will have on their giving practices. Being more strategic with corporate giving dollars allows greater impact and more sustainable programs. By being strategic. “doing the right thing” fits more naturally with doing business. Incorporating philanthropy into strategic corporate citizenship is the right thing for business, society, the environment, customers, employees, shareholders and other citizenship stakeholders.

Editor's Note: If you are interested in learning more about strategic philanthropy, consider attending The Center's course on the subject. Learn more...

About TeleConvenings
This article is drawn from the content of a recent Center TeleConvening, a free member-only web conference on a current topic. Center TeleConvenings provide an opportunity to engage with peers and experts in a structured setting without the expense and time of travel. Detailed reports, audio recordings and slide presentations from all TeleConvenings are always available on this web site. Learn more...