Philanthropy gets serious for some companies

With the holidays gearing up, companies will soon start preaching about "the season of giving," in hopes that their products will be the ones customers put under the tree at Christmas. But some companies have made the giving spirit a part of their year-round operations and have turned the idea on its head — making good deeds and charity a part of their business plans, and donating revenue to non-profits that matter to their CEOs, employees and customers.

Last year, philanthropic giving in the United States grew 6 percent to $260.28 billion, according to data by the Chicago-based Giving USA Foundation. While corporate giving made up only 5.3 percent of that total in 2005, it represented a 22.5 percent increase from the previous year — in large part due to the outpouring following the South Asia tsunami and Hurricane Katrina.

Most of these gifts go to charities and foundations — the usual routes for philanthropic contributions. But a growing number of companies have taken their philanthropy a step further, not in how much they give, but in how they do it. Instead of just making donations, they’re making philanthropy a core part of the company's mission. With each item they sell, a portion of the revenue automatically goes to the company’s chosen cause, often a specific non-profit that has become a de facto partner.

According to Dwight Burlingame, associate executive director at Indiana University’s Center on Philanthropy — which wrote the Giving USA study — the old style of corporate giving is now almost matched by this new brand of corporate philanthropy, which he estimates at a near-equal 5.2 percent of total philanthropic contributions.

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"Most corporate giving today is focused on, 'How can I do good at the same time I do well for the company?'" Burlingame says.

For companies following the new charitable path, that means finding causes that relates directly to their products and helps tie customers' philanthropic values to the companies'. It also lets consumers combine their shopping with their philanthropy — important, since not everybody has the time to spend hours searching out a charity that fits their passions, or wants to receive reams of junk mail asking for contributions.

Outdoor gear manufacturer Patagonia helped pioneer the trend, and now gives away 1 percent of sales to environmental causes. Ethos Water, purchased by Starbucks  in 2005, gives away 5 cents of each bottled-water sale to clean drinking water programs in developing nations such as Bangladesh and Honduras. Even Internet companies are getting into the act. GoodSearch.com, an Internet search engine, gives 50 percent of its advertising revenue to a huge slate of charities chosen by its users.

It’s important to note that these companies are giving away a percentage of revenue, not profit. That means they’re putting their balance sheet more at risk than an organization where giving is dependent on making money for its owners first. “I think customers are pretty savvy, and they smell a fraud a mile away,” says Kim Jordan, whose New Belgium Brewing Company gives away $1 of every barrel of beer sold to local causes like care for kids with learning and developmental disabilities. “If [corporate philanthropy] turns out to be a hollow promise, there’s huge backlash. And that kind of thing gets found out eventually.”

With more companies than ever jumping onto the branded philanthropy bandwagon — you can buy a pink food mixer made by KitchenAid to support breast-cancer awareness for $299.95 — customers are likely to pay closer attention than ever to the sales pitch. To make sure they’re not just buying into a marketing gimmick, consumers need to check the fine print.

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