A Period Of Extraordinary Change And Response
We are in a period of extraordinary change, accelerated by COVID-19. The pandemic is resetting much of our global society, including the way businesses operate across the world. We have also witnessed a recalibration of our awareness of environmental and human interdependence, and of our own vulnerability. Recognition of these trends at both a logical and an emotional level is driving much of the transformative response from individuals, trusts and corporates to the challenges thrown up by COVID-19.
Is The Pandemic Changing The Relationship Between The Corporate World And Society?
There is a general recognition that the pandemic has strengthened the argument for corporates to engage with issues of concern to society, whether they be social or environmental concerns. Seven in ten US corporate funders surveyed by the Charities Aid Foundation of America had increased their charitable contributions in 2020. We have also seen revolutionary approaches to giving from major foundations who are issuing social bonds for the first time to fast-track their response to the crisis. As reported in the Financial Times, the US$13bn Ford Foundation, founded by carmakers Edsel and Henry Ford in 1936, has appointed Morgan Stanley and Wells Fargo to raise US$1bn in 30 and 50-year social bonds. A McKinsey report notes that it is “not only the scale of capital being committed by major philanthropists (at least US$10.3 billion globally in May 2020, according to Candid, which is tracking major grants) but also how it is being given: at record speed, with fewer conditions, and in greater collaboration with others.”
The immediate response to COVID-19 has seen some businesses more active in the charitable space – in the UK for example, we have witnessed the hospitality industry responding to Marcus Rashford’s campaign with free meals for school children during the autumn half term period. Even this week a new initiative has been launched in the UK by HRH Prince Charles to sign corporates up to support his “Terra Carta” – a charter to promote sustainability which has been launched to a receptive audience whose positive response has been sharpened by the deepening sense of obligation brought on by the pandemic. There are similar responses elsewhere around the world.
Many companies already engaging their businesses through Corporate Social Responsibility (“CSR”) programmes have in recent years extended these activities through making their impact measurable through Environmental, Social, and Corporate Governance (“ESG”) strategies, which further integrates socially responsible and sustainable practices into the fabric of the organisation.
However, it is easier for corporates to engage in environmentally responsible activity as this is directly under their control, and the methodology to define targets and measure performance is already well developed, with a large measure of global consensus. However, the systemic problems of society, many of which revolve around the different currencies of inequality – money, health, voice and security – are more complex and difficult to solve, and have few broadly accepted targets and performance measurements.
So we believe that approaching social problems through a philanthropic lens can be a useful way for corporates to ensure their intentions and resources are well directed, allowing them to explore how they might do things in a new way, and at a scale they haven’t before, and in a way that responds directly to the increased pressures on society brought about by the pandemic.
Thinking Philanthropically About Corporate Social Engagement
“Corporates are increasingly seeing that they need to act in solidarity with society as a single ecosystem,” explains Iain Rawlinson. “In the same way that protecting the environment has become better understood as a cause with which corporates have an indissoluble relationship addressed through sustainability commitments, many corporates are also now seeing their own future as indissoluble from the social ecosystems in which they operate. The interdependence that the pandemic has shown to be a core part of the human condition, needs now to form a core part of organisational purpose, and it is in businesses’ interests to invest long-term in things which are part of this integral connectivity. Businesses can only thrive in a healthy environment, in a connected and resilient society, and with governance functioning well – which are the foundations of the movement towards ESG.”
With ongoing restrictions on businesses and people, and with many corporates facing a bleak outlook for the next year, it may seem an unlikely moment for corporates to turn their energy towards philanthropy. Indeed, with many corporates needing simply to focus on survival, there is not universal scope to take action, as in some cases businesses’ own sustainability needs to be prioritised – and in some cases urgently.
But for those corporates which have the capacity, as Larry Fink, CEO of BlackRock observes, “to prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” So this is the moment for corporates to consider their purpose – and we believe it is constructive for corporates to re-examine and deepen their engagement with the health of the society on which they depend with a philanthropic mindset.
Corporate Philanthropy Is Wider Than ESG Compliance, But Provides Answers To It
A corporate philanthropic approach goes far beyond mere ESG compliance, and neither is it a reworked version of old-style CSR. It is a new approach, intended to address the deep social inequalities which were present before, but have been widened by, the pandemic.
Thinking in a “philanthropic” way has a number of advantages:
- The philanthropic sector has an established track record of innovative and effective interventions in the systemic problems of society, which can provide useful parallels for the corporate sector when decisions are being made about social engagement strategy and what resources may be provided by the corporate – money, time, information, skills and people – and how the activity should be planned, governed, measured and reported.
- Thinking “philanthropically” enables a more strategic and long-term engagement with underlying societal problems than thinking “charitably” (which tends to be the act of giving for immediate relief) – and so enables businesses to play a more strategic role in contributing to the welfare of society.
- It allows the corporate, through its Board, the freedom to express itself according to its conscience and its values, and takes the discussion beyond a focus merely on “compliance”, and for example, ESG, where a business could be tempted towards acting only with a view to achieving high scores.
At a time when Boards and Senior Leadership Teams have difficulty carving out additional space in what are recognised as already crowded agendas, corporate philanthropy provides a possible approach to guide their approach to engagement with society – and this can be balanced by a deepening awareness that there are tangible advantages of taking action.
Corporate Philanthropy Has Business And Competitive Value
Iain Rawlinson explains, “A well-defined engagement by companies with corporate philanthropy as a route to engaging with society is an exciting opportunity for organisations to add to how they define themselves, including their purpose, values and emotional engagement with people. By engaging philanthropically with stakeholders and communities, corporates also support their own business interests which then extend beyond commercial results to include social outcomes. This then becomes a valuable component of a business’s strategic and competitive position – strengthening its investment case, and also helping to attract the next generation of talent which has a heightened and critical interest.”
“The potential for philanthropy to become part of the DNA of the business is significant – where the applicable currencies are much wider than financial contribution – it’s about shaping a strategic approach to the deployment of money, time, information, skills and people to achieve outcomes – which are the core competencies of the corporate world. Why should these not be applied to building capacity, shaping the context and building solutions around social issues? In this way building economic value truly serves society, rather than the other way round, which tends to be the present outcome.”
Understood in these terms, corporate philanthropy broadens the scope for active participation in, and creates diverse opportunities for, meaningful engagement with society.
A Key Moment In Promoting A Sustainable Society
“This is the moment for Boards to develop corporate philanthropy into a core element of business strategy,” adds Ben Morton Wright. “Why now? With the pandemic dramatically widening existing inequalities, the huge funding gap to meet the United Nations’ Sustainable Development Goals – 17 interlinked goals to achieve a better and more sustainable future for all by 2030 – has just got even bigger, whilst the overall resource available has decreased. A transformative approach to philanthropy across corporates, individuals and governments is needed to deliver the SDGs.”
“We have all been deeply affected by this pandemic – individuals, organisations, charities and governments – and our recovery from this crisis depends on us acting together in solidarity. Corporate philanthropy offers the opportunity for a broader and more meaningful value for a wider group of stakeholders, whilst still meeting the needs of shareholders. The pandemic has catalysed a paradigm shift for corporate engagement with society – and corporates now need to commit even further and more deeply to engage with stakeholders and communities across a wide range of societal issues.”
We believe there is a bond to be made between the corporate’s ability to organise and deliver on target outcomes, and the historic expertise and track record of the philanthropic sector in engaging with systemic social problems. Corporate philanthropy in this sense is not a contradiction that might be supposed. The pandemic has become a catalyst to break open a deeper examination of this potential alliance, for the benefit of society as a whole.
If you would like to learn more about Corporate Philanthropy and how the team at Global Philanthropic can help you build a corporate philanthropy strategy which aligns with your business goals, contact us at [email protected].
We will be discussing Corporate Philanthropy at Talking Philanthropy: Asia-Pacific – Supporting a Philanthropic Ecosystem, on May 14th 2021. Learn more at globalphilanthropic.com/talking-philanthropy and join the discussion.