Impacting investing: trends, issues and capabilities
Corporate Philanthropy: It Is No Longer About Charity (Nor Should It Be)
by Alice Korngold
Multinational corporations have the global footprint, financial and human resources, and profit incentive to solve the world’s most challenging problems, including poverty, climate change, education, healthcare, and human rights.
In the past, some companies provided charitable contributions to NGOs/nonprofits, primarily in communities where their employees lived and worked. But philanthropy was tenuous because it was not closely enough tied with the company’s primary purpose, and shareholders sometimes questioned its validity. More recently, however, some companies have begun to realize that there are opportunities in bringing their expertise, technology, and worldwide workforce to bear in fixing social problems. Addressing these problems may be advantageous to the company—by reducing costs, such as energy-efficiency; mitigating risks—such as protecting natural resources that are vital to their supply chains; or presenting opportunities to develop and market goods and services—such as building smart cities to improve citizen services.
In “A Better World, Inc.: How Companies Profit by Solving Global Problems…Where Governments Cannot,” I contend that companies are uniquely equipped to address the world’s most daunting challenges, and that some corporations are already beginning to do so. While NGOs/nonprofits have worthy missions, they do not have the resources and scalability sufficient to make transformational progress. And governments have not been able to make binding and actionable agreements to deal with these problems.
It might give one pause to think of companies as the source for finding solutions to social, economic, and environmental issues. After all, elements of the business sector have sometimes been—and even continue to be—responsible for creating human rights abuses, environmental degradation, and economic injustices that continue to plague the world today. I do not suggest that we entirely abdicate global problem-solving to businesses. Nonprofits and governments have vital roles to play.
Companies recognize the benefits of global problem-solving
In conducting research for my book, I found many companies that recognize that addressing global challenges can also be good for business. For example, Johnson Controls is increasing energy-efficiency and reducing greenhouse gas emissions by retrofitting old buildings in cities worldwide, such as the Empire State Building and the Inorbit Mall in Mumbia. Vodafone, with Safaricom, launched M-PESA in Kenya to provide mobile services to the unbanked poor to become more financially self-sufficient. GSK, in partnership with Vodafone, seeks to increase the uptake of DPT vaccines in Mozambique, and then expand the program in additional countries; this could save tens of thousands of children’s lives. And Unilever is not only reducing greenhouse gas emissions in its manufacturing and supply chain, but the company also seeks to be innovative in providing consumers with tools to change their reduce their use of water and energy.
The companies that I write about continue to provide philanthropic funding, but they leverage their dollars and their technology to support their employees who are working on solutions. HP, for example, has partnered with 60 NGOs and academic institutions globally to find new and effective ways to educate young people. The company contributes funding and technology to their nonprofit partners, while also engaging their employees. HP hopes to benefit by educating the next generation of employees and consumers, collaborating with partners who are also potential customers, showcasing their problem solving prowess, and sometimes developing innovative new products along the way.
The opportunity for NGOs/nonprofits
The corporations that are most successful in their problem solving efforts partner with nonprofits that bring complementary expertise as well as stakeholder relationships in communities of interest. By leveraging the interests of companies, NGOs/nonprofits have an opportunity to gain access to corporate resources. For example, Dow partners with Acumen on an investment portfolio of small and growing businesses in East and West Africa; these are companies that provide low-income people with water, sanitation, agriculture, and energy services. Dow provides problem solving expertise and general capacity building consulting, such as marketing, IT services, finance, product design, product development, business strategy, supply chain, measurement impact, and market expansion.
The value to Dow is that although the company has had a presence in Africa for 50 years, it sought to expand to East and West Africa. Dow believed that through its work with Acumen and its portfolio companies, it would be able to gain access into new markets, develop insights and relationships with people in the regulatory agencies, and convey to local businesses and civic leaders that the company was there to engage and bring solutions. Additionally, Dow saw this initiative as a way to understand the local economy in advance of its building manufacturing plants that will have a life of 50-100 years, investing billions of dollars, and making operational decisions. With the partnership with Acumen, Dow can do good, while advancing itself as well.
Better than philanthropy
Global problem solving is the next logical step along the continuum that began nearly 30 years ago when some businesses began to think about philanthropy and volunteering more strategically. Once they realized that they could align their contributions with causes that would enhance their business interests, it was a few steps forward and up the corporate ladder for visionary CEOs to see that more was possible. This is good for the world. Good for two reasons. First, because corporate community involvement is no longer tenuous; now there’s a business case for companies to solve poverty and climate change—it’s good for business. Second, because corporate engagement is powerful; a great deal of good can be done.