Once upon a time and not too long ago, corporate philanthropy followed a pretty simple approach. Companies would make contributions for various good works with a preference for traditional charities that often helped the underserved, the arts, or education.
The corporate foundation, which is a separate legal entity from the sponsoring company, often became the vehicle companies would use to meet their charitable giving goals. In the not so distant past, corporate foundations did little more than support the company’s employee matching gift program and hand out small donations far and wide in communities where the company operates and where employees reside.
Increasingly, a new kind of philanthropy is moving to the front and center in the corporate world. Company sponsored foundations, like other private foundations, are becoming more proactive. In the case of corporate foundations, they are becoming strategically aligned with the mission and business interests of the company.
We’ve seen a significant shift in the number of companies that are tying their foundation’s giving to specific causes and interests. Corporate Citizenship, a global CSR consulting firm, reports that nearly three-quarters of corporate foundations surveyed across 20 countries said their giving strategy is linked to the parent company’s business focus. The number of companies becoming more strategic and linking charitable activity to their business focus areas is up in recent years, and we expect this trend to continue.
For example, let’s look at where tech companies, car makers, and energy firms spend their philanthropic dollars. Most of these companies pour grants into STEM education as they look to the future supply of skilled workers for their sectors. Big banks, which rely heavily on entry-level workers coming from diverse urban populations, invest millions in grantmaking to boost basic job skills and career readiness.
We see two other significant changes in the world of corporate foundations. The first is the desire to make an impact and demonstrate that they are making a difference. The previously cited Corporate Citizenship study found that half of the corporate funders surveyed said they currently measure their impact, and three-quarters said they would like to.
The second change is that corporate foundations engage with other key stakeholders in the nonprofit and educational sectors to create partnerships to collaboratively address issues. They aren’t attempting to solve the big challenges alone. For example, when a company identifies STEM as a focus area, they will often partner with educational groups, nonprofits, and governmental entities to collaborate on a strategy to make a significant difference and to ‘significantly move the needle’ on a complex issue.
The Walmart Foundation is a great example of what we’re discussing and what is happening in the world of corporate foundations. The Walmart Foundation was originally designed to sprinkle donations in every large and small community where they have stores. The company has a long list of organizations receiving grants from its foundation. For example, at a store opening, the Walmart Foundation would give a $500 grant to the local United Way. Millions of dollars were distributed in this way through small donations to local nonprofit organizations often with no expectation of how the funds would be spent. It was done as a goodwill gesture on the part of Walmart when moving into a new community.
While the company still makes these type of grants, foundation giving has become more strategic and aligned. Since 2014, giving at the Walmart Foundation has undergone a paradigm shift with a long term push to revamp a tarnished image and increase bottom line results by focusing on core social issues that tie directly to the company’s business. They publicly talk about the new strategy and how it ties back to the company.
As a foundation, they are focusing on several key issues including employment, women’s empowerment, hunger, and veterans. Foundation giving is closely tied to business interests and needs such as promoting better labor practices, helping front line employees get ahead, and providing better job opportunities.
While hunger and veterans’ issues aren’t unique to Walmart, these are issues in which the company can make a significant difference by leveraging its advantage as a top grocery supplier with a presence in communities all across the U.S. The company is donating 611 million pounds of food and $61 million to organizations fighting hunger.
Some may argue that these investments and contributions aren’t truly philanthropic in nature and smack of self-interest. However, it is important to recognize that the company is making a difference, and strategic philanthropy is now the norm.
Whether it be Walmart, a large bank, a tech company, a car manufacturer, or any number of companies who invest, collaborate, and measure their impact, a focused strategic approach to corporate social responsibility is good. When companies engage in strategic philanthropy, they can make a difference and have a positive impact both in the community and for the company. It’s a win-win situation.
Is it bad for companies to address issues important to them if at the same time those same issues are impacting communities all across the world? It is a good question and one certainly to ponder. We think it’s a good business practice and one that will continue for years to come.