Philanthropy & Co.: the benevolent bottom line

Altruism meets self-interest
But if altruism and self-interest have sometimes converged in striking ways, aligning giving with getting now seems absolutely imperative—even if arts, education or social services become casualties. “For instance, I have no problem with the overwhelming majority of Pfizer’s investment in philanthropy in health care,” says Bauer. “If that means the Met or the Philadelphia Orchestra may not get as big a check, so be it. They’ll find it somewhere else.” He suggests organizations lacking corporate contributions look more to individual supporters. After all, in 2004, three-fourths of the $250 billion in total charitable giving originated with individuals. For corporations, meanwhile, giving to causes that help the bottom line is no longer optional. Says Bauer: “It was a nice thing to do before. Now it’s a need-to-do thing.”

Consider the pace of change. Between 2004 and 2006, “traditional” charitable philanthropy declined from 46 percent to 40 percent, and sponsorship — “commercial” giving — dropped from 16 percent to 12--while “strategic” giving jumped from 38 percent to 48 percent according to the Wall Street–based Committee to Encourage Corporate Philanthropy, whose 100 members— chief executives and corporate chairmen — account for nearly 50 percent of all corporate giving. Among large companies, the balance may have tilted against purely charitable giving, where firms expect no business benefit in return. Of 40 top CEOs surveyed by CECP in 2008, nearly three-quarters — 72 percent — said that the business benefits of their philanthropy was at least as important as any social benefit derived from it.

Engineering companies and military contractors are aligning themselves with causes that promote math and science education, in order to find better engineers. Oil and gas companies are contributing to the quest for sustainable energy sources. Microsoft delivers computers to schools, contributing not just to education but a future client base. Since early 2006 , CECP has been documenting the way that “most companies are targeting business needs” — by identifying causes or groups that are popular with existing or new customers, open new markets, align with their own core competencies, boost recruiting or retention of employees, or enhance competitive positioning in an industry. Indeed, a 2008 McKinsey and Co. survey of corporate executives found that nearly 90 percent believed that corporate philanthropy should achieve both business and social goals.

Mismanagement at the Red Cross, other nonprofit scandals and the diversion of philanthropic dollars to disasters such as the Asian tsunami and Hurricane Katrina have only intensified the scrutiny of charitable spending — and increased the challenge faced by many nonprofits to prove their effectiveness and demonstrate benefits to donors. Starting with the 2001 terrorist attacks, willingness to respond to disasters swelled — but, noted a 2006 CECP report, so did “increased internal interest in how the company conducts its philanthropy.”

Senior managers suddenly recognized just how much money and donations were flowing from giving departments, and many opted to take a fresh look at their strategy. Already, corporations had been grappling with heightened competition, an economic downturn, belt-tightening and the consequences of globalization. Nowadays, companies are more often citizens of the world than mere players in the local Chamber of Commerce.

Brand know-how
Disasters also have provided lessons in leveraging a corporation’s core competencies, reinforcing the message that a brand not only gets involved but knows how to get something done. It doesn’t just write a check or open a booth at a walkathon. Coca Cola, for instance, showed victims of Katrina and the general public that it could bottle and deliver fresh water as quickly as soda. Abbott Labs garnered attention by putting diabetes labs in the Astrodome. And Wal-Mart’s disaster warehousing reinforced its image.

The corporatization of philanthropy benefits nonprofits such as City Harvest, the do-good behemoth that now distributes 20 million pounds of food each year to 600 soup kitchens, senior centers and other places in the five boroughs. Its fleet of trucks is almost always in motion. By 2008, City Harvest’s revenue from sponsorships and cause-related marketing had swelled to $1.1 million, from $400,000 in 2003.

A modern nonprofit’s partnership with a business often helps both partners, occasionally in surprising ways. City Harvest figures it gets more donations by having its logo in each Pret A Manger eatery and getting a cut of every “Holiday Sandwich” sold. After entering New York City in 2003 with a strange name, preservative-free prawns and baguette sandwiches, Pret A Manger has since established itself at 14 New York locations. Key to this success was leveraging City Harvest’s brand to acquire local familiarity and a following — a twist on the more common use of a company’s brand to enhance a nonprofit’s prospects.

Early on, both organizations saw the relationship as symbiotic. In 2006, then-City Harvest senior manager for sponsorship Julie Epstein characterized the Pret A Manger relationship as having a dual benefit. “Their business is food, as is ours,” said Epstein. “It helps them — and us. It’s a perfect fit. They were new in the market. We had an established brand. We gave them credibility.”

Likewise, when luxury hotel group Mandarin Oriental opened in Manhattan in December 2003 with a lavish gala attended by royal earls, Nicole Kidman, Mayor Michael Bloomberg and some of the city’s wealthiest denizens, Mandarin made City Harvest a beneficiary, as a way to introduce itself to the high-end New York crowd that tends to donate to City Harvest.

But even City Harvest recognizes the potential of losing longstanding donors, such as Credit Suisse, and has come up with creative responses, such as heightening volunteer opportunities for Credit Suisse employees. “If we weren’t able to do that,” acknowledged Epstein, “we simply might not be able to receive their funding anymore.”

MORE FROM GIVING

Giving Section Front

Nonprofits walk fine line on political activity U.N.: Much of Myanmar cyclone aid lost Good Samaritans rush in to save man's cash Dave Annable goes to bat for A.L.S. victims On birthday, Mandela urges rich to help poor For Wynton Marsalis, ‘The cause is people’ Giving Section Front   Add Giving headlines to your news reader: