Here's What You Need to Know About Corporate Philanthropy Right Now

Once upon a time, corporate philanthropy was a pretty simple enterprise. Companies would sprinkle around grants for various good works, mainly in the communities where they operated, with a preference for traditional charities that helped the underserved, the arts or education.

Plenty of companies still give this way and the corporate provinces of the philanthrosphere can be lackluster. Too often, even sizable corporate foundations are run by insider executives who’ve come over from the business side with little knowledge of the social sector.

Increasingly, though, a new kind of philanthropy is moving front and center in the corporate world: Proactive giving that’s closely aligned with the mission and assets of companies, and quite strategic. In some cases, corporate funders are even moving ahead of private foundations because they take a more holistic view of how change happens and fuse traditional grantmaking with market-based approaches in ways that traditional foundations either can’t or won’t do.

At the same time, though, signs abound that corporate philanthropy is becoming more tightly yoked to the quest to boost profits. The giving of companies is becoming both more strategic and more self-interested. Is that a problem? I’ll come back to this question in a moment, but first, let’s look at a new report that offers a good account of the sea change now underway in corporate philanthropy.

The report is by Corporate Citizenship, a consulting firm, and it highlights a number of trends worldwide that we’ve been seeing ourselves at Inside Philanthropy while reporting on corporate giving.

The first is the growing number of companies giving in ways that tap their own expertise and dovetail with business strategies. Nearly three-quarters of corporate foundations surveyed across 20 countries said that their giving strategy is linked to the parent company’s business focus, a big jump up from 58 percent in 2013.

We see this all the time with U.S. corporate giving, especially around education and skills. For example, tech companies, car makers and energy firms have all been pouring 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, have been investing millions in grantmaking to boost basic jobs skills and career readiness. Banks have also swung behind asset building and financial inclusion in a major way, looking to pull more unbanked people into the mainstream of financial life (and buy their products). Health providers and insurance companies are more keenly focused on boosting public health—a nice thing to do and that also lowers their costs.

All this giving provides tangible benefits to corporations, but it’s also quite strategic and effective. For example, companies like Intel, Microsoft or Toyota are better positioned than private foundations to know what kinds of STEM education programs are likely to produce young workers with the right skills for tomorrow’s economy. JP Morgan Chase, which employs thousands of people in major cities, has a keen fix on what such workers need to know for success in a modern workplace. It is also well positioned for the development of new financial services that can help the poor integrate into the mainstream banking world, a thread of philanthropic work that we’ve tracked closely in recent years. The tax-deductible grantmaking of these companies is boosting their bottom lines while also addressing some major problems that other actors in society haven’t been so good at solving.  

And speaking of other actors, another finding of this new report is that corporate foundations are doing a better job lately of engaging with an array of stakeholders in the nonprofit and for-profit world. Again, this is something we see all the time in our reporting. For example, corporate STEM giving is often done with educational partners and government agencies as part of a larger regional workforce strategy. And an array of banks and nonprofit actors are now collaborating very closely on financial inclusion efforts aimed at moving low-income Americans away from predatory lenders and building savings. In addressing disasters and the refugees crisis, we’ve seen companies like UPS and Western Union work in close concert with top NGOs to tap their unique corporate assets for moving supplies or money.

A few other findings of this report are worth mentioning. First, it found that corporate funders were becoming more focused on fewer issue areas, which tends to be a precondition for driving impact, as any private foundation knows. Second, it found that these funders had become keen to measure their impact, another prerequisite for success. Half of the corporate funders surveyed said they measure their impact already, and three-quarters said they would like to. Third, the report found that game-changing foundations within the corporate world were “embracing social investment models that generate both financial return and social impact.” In other words, the impact investing approach is spreading here, too, but on far more fertile ground since private sector leaders naturally think in terms of addressing issues with market-based solutions. Again, the activity with new financial products designed for lower-income consumers is a great example. Other examples can be found around education technology.

What does all this mean for nonprofits seeking grants? It means that if you’re a traditional charity trying to hit up hometown companies for grants, you might well climb a tougher hill  than in the past. On the other hand, if you’re a nonprofit with a strategy for making change that syncs up with the assets and goals of major companies, you might find a lot more funding partners in the corporate world than might once have been the case. Social enterprises may find new friends as well in this sector. 

To be sure, the new corporate philanthropy can be disgracefully self-interested and instrumental, and we report on such cases often, alas. By and large, though, corporate funders are heading in a positive direction these days.