SOCIAL RESPONSIBILITY .... Why philanthropy
is R&D for business
Targeted
giving can help companies lay the groundwork for future commercial success.
We often measure the impact of corporate philanthropy by counting the number
of individuals who are helped by a particular program. In my experience,
however, philanthropy can also help companies reduce business risk, open up new
markets, engage employees, build the brand, reduce costs, advance technology,
and deliver competitive returns.
Corporate philanthropy is usually
defined in contrast to various “shared” or “blended” value approaches to
corporate social responsibility (CSR), in which companies seek to do well by
doing good. However, I define corporate philanthropy as a discovery phase in
investment in a social issue. I encourage companies to view philanthropic
investments as incubators for promising ideas and a mechanism for understanding
both community and corporate needs. Much like R&D, philanthropy allows
companies to make thoughtful investments in sectors where the return profile is
typically more speculative.
Philanthropy as growth strategy
During my decade as CEO of the
Campbell Soup Company, we created the aspirational mission of “building the
world’s most extraordinary food company by nourishing people’s lives
everywhere, every day.” Along the way, we launched several ambitious
philanthropic initiatives. In 2010, we committed to cutting our environmental
footprint in half by 2020. We announced a special partnership with the American
Heart Association to address consumer concerns over heart health, particularly
as it related to diet. In partnership with the Campbell Soup Foundation, we
built a long-term program to directly address childhood obesity and hunger in
communities where the company operated major facilities. I observed that the
more we leveraged our business resources to deliver social value to the
communities around us, the more engaged our employees became and the better we
performed in the marketplace.
Campbell’s Soup is hardly an
isolated case. In 2003, Vodafone saw an opportunity to bring mobile-banking
services to rural Africa through its Kenyan affiliate Safaricom. While the idea
ultimately became a profitable business for Vodafone, there wasn’t sufficient
corporate confidence to fund it fully at first. Instead, Safaricom’s new
mobile-banking service was seeded by a philanthropic matching grant from the
United Kingdom’s Department for International Development. Philanthropic
dollars helped incubate the initiative, providing the empirical evidence that
Vodafone needed before it took a bigger financial risk.
Philanthropy can also help companies
on the employee-development front. For example, IBM’s Smarter Cities Challenge
is a competitive grant program that sends teams of IBM employees into cities
all over the world to address community issues. The teams offer integrated
consulting services, tapping IBM’s core-business expertise and knowledge to
collect and analyze critical data, provide solutions, and improve complex
systems such as health care and public safety. Many IBM employees report that
the Smarter Cities Challenge was one of the most rewarding experiences of their
careers. In short, it’s a priceless program for professional development and
employee engagement that IBM could not have purchased through the market.
Giving by numbers
Today, I chair CECP, an organization
that draws together and empowers senior executives of the world’s leading
companies to achieve progress on societal challenges while driving business
performance. CECP corporations collectively generate about half of annual US
GDP. In our most recent survey of member and other Fortune 500 companies, we
found that 59 percent increased their philanthropy between 2007 and 2012. We
also found that in-kind contributions have grown sharply in recent years. As a
percentage of total corporate giving, noncash contributions grew in aggregate
from 57 percent in 2007 to 69 percent in 2012. Finally, education has become
the leading recipient of programmatic giving. The typical company in our survey
allocated 29 percent of its giving budget to K–12 schools and higher-education
institutions.
In total, CECP member companies gave
more than $14 billion to charitable causes last year. I don’t think it’s an
accident that corporate giving levels are up. Smart companies understand that
philanthropy is part of a broader economic-recovery strategy, both for them and
for the communities in which they invest. A senior executive from one of the
nation’s largest banks relayed to me that investing in community programs was
one of the key reasons why his company made it out of the recession. They
helped their communities at their lowest point, and the communities helped them
right back.
The new normal
Of course, philanthropy is not the
only strategy for companies to play meaningful corporate-citizenship roles.
Business leaders should use every tool in their CSR portfolio to help create
economic value that can help address relevant societal issues. From my vantage
point, this is clearly the new normal; the new lens through which all corporate
activity will be viewed.
As strongly as I advocate the more
complete adoption of this approach by the business community, I also challenge
companies to take a second look at the opportunity to more fully leverage
philanthropic initiatives that can pave the way for future market-based
innovations. It’s a great way to learn about communities and their needs, and
test new business strategies. The key is bringing good business insight and
discipline to the process.
Doug Conant is the chairman of CECP. He is also the CEO and founder of
ConantLeadership and the nonexecutive chairman of Avon Products. Mr. Conant
formerly served as president and CEO of the Campbell Soup Company.
http://www.mckinsey.com/insights/corporate_social_responsibility/why_philanthropy_is_r_and_d_for_business?cid=other-eml-nsl-mip-mck-oth-1310
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