How Corporate Giving Strategies Influence Donor Behaviour
Corporate giving is a term that often intersects two points of tension, and more recently, these tensions are on the rise. As a result, many corporations are thinking (and acting) more strategically.
On the one hand, the global disturbances caused by COVID-19 have put the bottom lines of many corporations under the microscope and heightened pressures from investors and shareholders. On the other hand, global outcry in response to social justice issues has caused customers to demand more from corporations. Companies who choose to do nothing risk losing loyal customers.
These tensions call into question a longstanding debate about whether corporations should engage in philanthropy at all. Decades ago, economist, Milton Friedman, challenged popular notions of corporate social responsibility in a 1970 New York Times Magazine article when he said, “social responsibility of business is to increase its profits”. Friedman’s unlaying point was that if the corporation contributes philanthropically, it prevents the individual stockholder from deciding how funds are spent, instead, they should be made by individual stockholders or by individual employees—and not by the corporation.
Corporate philanthropy today is, by many accounts, a competitive advantage. Top talent is drawn to employers with a social purpose and customers often chose to buy from companies who they believe contribute to causes and beliefs that align with their own.
How corporations manage the competing tensions between their bottom line and supporting social good can impact how donors and customers alike align their own philanthropic strategies (and shopping habits).
Common options for corporate giving
There is more than one way a corporation can support a charitable cause and some approaches are more effective philanthropically while others are more suited toward marketing and improving brand image. Here are a few common strategies donors might want to be aware of before aligning their own philanthropy.
Direct Corporate Giving
Companies can donate directly to a charity that is recognized by the Canadian Revenue Agency (CRA). They can also make donations in-kind such as donated goods, services, staff expertise, or any other contribution that isn't cash. This type of contribution helps to fulfill their philanthropic values, fuel the non-profit’s mission, and engage their employees. Sponsorship agreements allow the company to connect its brand to the charitable partner and its programs, which can imply a brand supports or shares the same values as their charitable partner.
Cause marketing campaigns typically include an advertising campaign that promotes the sale of its goods or services will result in a donation to a charitable cause. This type of giving can be conducted to benefit an unrelated charity or a company’s own corporate foundation. Partnering with a reputable charity allows the company to benefit from a charity’s positive reputation.
Establishing a Corporate Foundation
A corporate foundation is a non-profit organization recognized by the CRA. Separate from the company itself, a corporate foundation is similar in many ways to a private foundation as the majority of the funds are coming from one source.
A corporate foundation can be a vehicle to build up a charitable reserve in years of higher profits, allowing for a steady flow of charitable grants to organizations in leaner years. And, as with a private foundation, a corporate foundation carries all of the legal and fiduciary responsibilities, which can be costly and time-consuming.
Collaborations with Non-profits
Companies may choose to collaborate with existing non-profits for the purpose of social good without forming their own non-profit entity. This collaborative strategy is increasingly evident in companies’ corporate social responsibility (CSR) reports, which often highlight partnerships with non-profits as a core strategy for fulfilling their CSR objectives.
Given that non-profits often have expertise and front-line implementation capabilities, this strategy makes sense. These types of collaborations are particularly successful because they leverage each partner’s core strengths in order to achieve their shared charitable and social impact objectives.
How donors can give strategically
Whether deciding to give to a workplace initiative, support a cause backed by a preferred corporation, or choosing to make a gift through other means such as a Donor Advised Fund, donors should start by speaking to their advisor to get all the facts.
Understanding a corporation’s philanthropic goals and how they plan to achieve them is an essential step for a donor to reach their own giving objectives.