CSR & Corporate Philanthropy

 

To stay in business we have to make a profit. To succeed in business, we have to share some of that profit for the public good” (Garvin in: Mescon & Tilson, 1987)

 

Incorporating CSR into the company’s business strategy is now becoming an essential element in gaining competitive advantage. Apart from focusing on environmental aspects of CSR, it is also good to consider philanthropic endeavours. Corporate Philanthropy is an extremely successful way for a company to communicate with all the necessary stakeholders to prove that it is a good corporate citizen. The proactive approach employed by corporate philanthropy can act as a touch point with stakeholders and reinforce a companies reputation, image and positioning.     

“Corporate Philanthropy can be an effective tool for companies that are trying to meet consumers’ rising expectations of the role businesses should play on  society” (McKinsey Report, 2008)

 

Companies are finding an increasing need to depend on value adding activities such as corporate philanthropy in order to distinguish themselves from their competitors and cultivate goodwill amongst their stakeholders. The money they plough into philanthropic activities should not be viewed as a sunk cost. Instead companies should view it as an investment for the good of the overall firm.

It is essential that companies realise that corporate philanthropy is not a zero sum game (Porter & Kramer, 2006). This concept dispels Friedman’s Agency Perspective which assumes that top managers pursue corporate philanthropy at the expense of the shareholders to satisfy personal needs and values or to enhance their reputation (Choi & Wang ,2007).

 

The Performance Enhancing perspective has actually been proven to be a more accurate representation of what actually occurs when a company pursues philanthropic activity. This perspective suggests that philanthropic activity reinforces company image, enhances morale and loyalty and acts as a form of advertising (Choi & Wang, 2007). This in turn adds to the company’s financial performance rather than taking away from it.

                                   

 “American Express has demonstrated that helping others also can be good business. Charitable donations need not siphon off precious profits: if targeted wisely as part of a marketing plan, contributions actually can increase bottom line figures.” (Mescon &Tilson, 1987)

 

The main advantages of corporate philanthropy emerging from the literature are: improvement of corporate image, attracting media attention and altering public attitudes, helping the company’s relationship with the government and impressing key decision makers, in addition, it can be written off against tax (Bennet, Porter & Kramer, Epstein, Menscon & Tilson, Blake).

Menscon and Tilson’s paper “Corporate Philanthropy: A strategic approach to the bottom line” and Lev, Petrovits and Radhakrishnan’s paper “Is doing good good for you?” both came to the simple and clear conclusion: corporate philanthropy can benefit the company as whole by ultimately improving the bottom line.  In addition to this finding, they noted that with changing consumer attitudes, corporate philanthropy is no longer a luxury, but a necessity if they want to remain competitive.

“It’s about business strategy, attracting the best employees, earning the license to operate, differentiating your brand in a competitive environment, deepening relationships with core stakeholders.  It’s no longer ‘nice to do’. It’s ‘have to do’.” (Cone in: Epstein, 2005).

 References:

Mescon, T. & Tilson, D. (1987) “Corporate Philanthropy: A Strategic Approach to the Bottom Line” California Management Review. Vol. XXlX, No.2. Pp49-61

 

Bonini, S. and Chenevert, S. (2007) The State of Corporate Philanthropy: A McKinsey Global Survey.

http://www.mckinseyquarterly.com/The_state_of_corporate_philanthropy_A_McKinsey_Global_Survey_2106_abstract

 

Porter, M. & Kramer, M. (2006) “Strategy and Society” Harvard Business Review.  December Issue. Pp 76-92

 

Choi, J. and Wang, H. (2007) The promise of managerial values approach to corporate philanthropy.  Journal of Business Ethics. Vol. 75. Issue 4. Pp 345-359

 

Epstein, K. (2005) “How today’s corporate donors want their gifts to help the bottom line” Stanford Social Innovation Review. Summer Issue. Pp 21-27.

 

Blake, J. (2006) Caring for the Bottom line.

http://www.btnewsonline.com/BTNewsOnline/Downloads/Caring_for_the_bottom_line.pdf

 

Lev, B. Petrovits, C. and Radhakrishnan, S. (2006) Is doing good good for you? Yes, Charitable Contributions Enhance Growth Revenue

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=920502

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Posted in corporate sustainability
7 comments on “CSR & Corporate Philanthropy
  1. cmgrenier says:

    That’s a good point. In fact in a conference on corporate sponsorship in Chicago last February we discussed the impact of the current economic downturn on sponsorship and philanthropic programs. Although there was a decrease in overall support for corporate sponsorship (such as sporting events, festival…) there was strong support about CSR and philanthropic endeavour that support good causes.
    In fact, Edelman firm presented the results of a global study of consumer attitudes that revealed that nearly seven in 10 (68%) consumers would remain loyal to a brand during a recession if it supports a good cause.
    http://www.edelman.com/news/storycrafter/EdelmanNews.aspx?hid=231

    Here is also another related link: http://www.ammado.com/company/108114/articles/9276

  2. colinhickey says:

    I agree with most of the points illustrated above and that philanthropic acts can better the recognition and loyalty of customers however, I irrevocably disagree with the statement that philanthropy is a “necessity to remain competitive”! I’d even go as far to say that it should not be classified as CSR, rather it is purely marketing, especially if the donation has no affiliation with the organisation. Corporate social responsibility refers to the responsibilities or duties of the organisation. It is definitely not the ‘duty’ of the organisation to give away its profits to gain notoriety if there are better and more useful marketing avenues which could be utilised to become competitive. Further, such philanthropic activities are short term at best for both organisations and benefactors, a company should look within its value chain to find areas that can create both value for them and society as a whole for the long term.
    For my take on CSR and how it should be practiced see my blog entitled: Creating a competitive advantage whilst using ( or through) sustainable development practices.

  3. colinhickey says:

    To Add:

    I am not by any means anti charity, however, the statement: “necessary to remain competitive” is just too wide sweeping for my liking. I have seen these philanthropic acts work to the advantage of organisations many times. For instance, Silver Pail Dairy, a local ice-cream manufacturer in Fermoy, County Cork, Ireland, recognised CSR as an opportunity and not just a responsibility, it created an alliance with bird watch Ireland to promote biodiversity. This has built brand image, brand loyalty and brand recognition. However, I do not believe that they are a necessity.

  4. […] Here is the original: CSR & Corporate Philanthropy « Sustainable Development … […]

  5. jeremy says:

    Ultimately, those who commit to CSR will not gain competitive advantage unless it is part of a corporate strategy where they *know* it is providing competitive advantage because they are *measuring* its impact.

  6. […] financial community, and the general public. Corporations want the public to believe that they are good citizens. The resources companies budget for charitable activities are considered a good and even necessary […]

  7. […] financial community, and the general public. Corporations want the public to believe that they are good citizens. The resources companies budget for charitable activities are considered a good and even necessary […]

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