Integrating Strategic Philanthropy with your Corporate Citizenship

Earlier this month I presentat at the Phasis Symposium on CSR.  What follows are the slides and presentation notes.

This post highlights key learnings that I have had when helping small and medium-sized business leaders establish their corporate citizenship programs. 

Over the past decade community investment has seen a significant shift from simply cheque-book philanthropy to a more fulsome, integrated approach in driving social change and increasing corporate engagement. 

Traditionally, corporate giving was seen in one of two ways: either it was a sponsorship or it was a donation of resources (time, talent and/or treasures).  From a community investment model we moved into a CSR, or corporate social responsibility approach, where the operations of the company started to take into account, not just the shareholders and the financials but also people, place and planet.  The triple bottom line reporting evaluated everything from supply chain sourcing to employment standards.  This model became so entrenched in corporate operations that regulations for corporate fiscal responsibility between community partners and corporate funders were adopted in order to protect shareholders and recognize the inter-connectedness of the social decision making with the financial returns of the company.  The most popular of such legislations was the Sarbanes Oxley legislation in the US that was designed to improve investor confidence after major corporate failures like Enron and Worldcom.  Also included in this legislation was protection for community partners with companies because shareholder value has a perceived and real correlation to community engagement. This legislation had a ripple effect on the Canadian charities that received funding from US based companies, mostly around multi-year funding and reporting. 

As the Millennials take hold in the workforce, we are in a revolution again, this time into Corporate Citizenship where it isn’t just about the triple bottom line, but it is about how the company is positioned locally, nationally and internationally.  The role that companies play in community economic development extends beyond their work force and the products and services that they offer into the market.  So much so that new corporate structures are being introduced and protected by legislation – Social Businesses in BC, B-Corps in the US.  These types of businesses are also garnering increased private investments as State governments create investment incentives into these types of businesses.  Millennials are not looking for work-life balance, they are looking for “whole-life integration,” to quote Connie Fontaine, Director of Marketing & Communications of Ford Motor Co.

The role of the company in the new economy filters all the way across into our social, educational, recreational and environmental systems.  Company’s involvement in community extends beyond sponsorships and corporate donations, beyond supply chain management and HR practises.  The role of the company is an intrinsic component to complex problem solving and solution generation in partnership with organizations that are mandated to solve these problems.

Dexterity Ventures Inc. sprang out of Dexterity Consulting, a non-profit management consulting practise that I launched in 2003.  In 2008 Dexterity Consulting became Canada’s first philanthropic brokerage firm working with SME’s, individuals and families setting up strategic giving plans and sitting alongside wealth and legal advisors as a support in the philanthropic conversations.  In 2010, I spun off some of the research that I had accumulated on Canadian charities and donor profiles into an online donor-charity matching platform called Place2Give.  That same year I set a goal to positively influence $1Billion in charitable transactions by 2015.

This year DVI made its first social impact investment into a social tech company called GenerUS that is building out a platform linking businesses to charities through a couponing system similar to Groupon or Dealfind called Coupons4Giving.  Through our partnerships we have also supported the launch and growth of other social enterprises like Sponsor Energy, EpicYYC and the Charity App Challenge.

Each year my company works closely with 6-8 small or medium sized companies and families facilitating a minimum of a few hundred-thousand per client upwards of several million to charities in North America.  This year we will be conducting a social impact audit on the role that my company and the technology we have developed is influencing the charitable sector in an effort to measure back against the $1Billion target that I set 4 years ago.

This past issue of the Stanford Social Innovation Review has a series of articles on corporate philanthropy.  SSIR is probably one of the best magazines on the topic of social innovation and impact investing.  I will also have a list of suggested reading at the end of the presentation.

As I go through this presentation, I would like you to keep the following questions in the back of your minds:

• What are we talking about when we say CSR, or Corporate Citizenship?
• What role should your company play Community Economic Development?
• Is the definition of sustainable and scalable the same in the charitable sector as it is the for-profit sector?
• What is the responsibility of corporate funders to support innovation and risk-taking in the social profit marketplace? 
• What is your role within your company for influencing the decisions around corporate citizenship and corporate social responsibility?
• What is the role of the investors in your company in the social profit investment space?

Peter Drucker once said, “Companies are like communities, they are built on mutual respect and trust.”  In order for a company to be a good corporate citizen, not only do these values flow towards its shareholders, but these values have to flow through the employment practises, the product development and design process, the supply chain management, customer relations and community engagement.

There are a lot of buzz-words in this sector.  I will be using the terms investment in community to mean two things, corporate donations/sponsorships AND other capital-based investments that may not be directly linked to either a charity. The context in the examples will make this clearer.

Some other definitions:

Blended Value refers to a conceptual framework coined by Jed Emerson in which a company’s value cannot be solely attributed to financial performance because there so many other variables influencing that value.  Tied to triple bottom line accounting, a blended value proposition would consider their social and environmental impact on society alongside their financial performance measurement.

Shared Value is a process whereby companies develop deep links between their business strategies and corporate social responsibility.  The central premise behind creating shared value is that the competitiveness of a company and the health of the communities around it are mutually dependent. “Recognizing and capitalizing on these connections between societal and economic progress has the power to unleash the next wave of global growth and to redefine capitalism.” – Michael Porter, Harvard Business Review

Corporate philanthropy, like personal philanthropy, goes through five stages – it starts by volunteering and then moves up the “cost” ladder to highly integrated programs like the one operated by SalesForce.com.  The final stage of giving to charity is legacy planning.  For companies, this has a different meaning because your corporate brand will be tied to the organization.  An example of this is the World Series.  The name of this baseball championship game isn’t because America’s perception of itself in the world of sports, rather, it is named after a newspaper called the New York World.  The newspaper is no-longer in existence, but the legacy of their contribution to sports still lives on.

Due to the nature of certain corporate tax benefits, how you structure your annual community investment strategy is as much about social engagement as it is about tax planning.  It is important that your CFO and legal counsel are part of the discussion around how your corporate giving is going to be implemented.

I would like to take the conversation deeper today and share with you three case studies on how your company can integrate traditional corporate social responsibility models with innovation funding that will extend your impact beyond the basic social return on investment.  The essence of all three of these cases is that there is an understanding of a broader ecosystem at play.  That the role that these businesses play isn’t one that is simply dictated by traditional market forces or shareholder engagement, but rather, there is a need to look at things holistically and that success is measured not just in the triple bottom line, but in the inter-connected spaces that make up the metrics of that triple bottom line.

Corporate community engagement is evolving.

Traditional corporate engagement is best used for projects, services and organizations that have a proven track-record and the demand for innovation is limited.  An example of this might be the United Way campaign where employees are challenged to raise money in a competition between departments, sister companies and competitors.

We tend to over-use the word innovation.  I want to be clear, innovation is not creating a new radio for a car, despite what the car-ads say.  Innovation is when an organization significantly disrupts the market; like going from horse and buggy to car.  United Way plays an important role in our community, but the way they are structured and their approach to fundraising will never allow them to be innovative. There are funders who can be very innovative, either directly or through their resource allocation by funding projects and organizations that will push the needle on certain issues.

You might be familiar with the sponsorship model.  An example is the CIBC Run for the Cure supporting the Canadian Breast Cancer Foundation.  In this example, CIBC not only has the title sponsorship, but the Cancer Foundation also has access to the CIBC client base through this partnership for direct marketing.

In the early 2000’s Cause Marketing was taking hold.  This is when a market demographic was identified and an issue or a cause was aligned with that demographic and then championed by a company.  Again, the breast cancer charities, specifically those that had paid into the Pink Ribbon campaign really capitalized on this model.  Avon and Yoplait were best known for their integration of cause marketing through consumer engagement.  In both cases, a percentage of the purchase of a pink product went back to breast cancer research.  Another very successful model was the partnership between Becel and Macy’s called the Little Red Dress in support of heart disease research.  This in turn moved the campaign into Special K and other “health conscious” food products.  The objective in all of these cases is to gain market-share and consumer loyalty through point of sale or what I call retail philanthropy.

In conversations with my clients we look at corporate citizenship a little bit differently.  The approach that my clients take is one of an investment portfolio or a mutual fund of charities. 

Similar to shared value and blended value metrics, the process focuses on identifying a target market that is both a revenue generating target AND Social impact generating target.  An investment and engagement strategy is developed around these two demographics.  By taking into account the triple bottom line measurements AND the overall role that the company plays in the lives of its employees, suppliers, customers and other stakeholders as part of a broader eco-system a Corporate Citizenship program becomes more than just a way to market the brand and build awareness for a cause.

The process that we walk through is a longer-term engagement.  I recently set up a program for a local company with operations in Huatulco, Mexico.  Huatulco is an interesting part of the globe because of the types of people it attracts, from environmentalists and scientists to hippies, surfers and some of Mexico’s wealthiest families.  This part of Mexico was designated a UNESCO bio-sphere and the Mexican government has been working with private industry to ensure its ongoing preservation and conservation, while still ensuring there is a viable economy.

The Oceanside Cruz del Mar project that was set up earlier this year reflected the values of the CEO.  It was important for the CEO to support the Mexican community where he and his family live several months out of the year, and where his building projects are located.  Ultimately his business goal is to engage his customers and suppliers in a new way, but it is also a way for him to connect at a local level.  The long-term relationships that he is building with the charities, other local businesses and even some multi-national companies will ensure that the project is sustainable and scalable.  He set a target of 3% of revenue from the sales of his condos to fund a community project that engages multiple organizations in creating viable solutions between tourism and environmental preservation as well as social issues facing the Zapotec Indians, the indigenous community in the mountains surrounding Huatulco.  He has turned to his business partners, suppliers and others who depend on the tourism industry to join him in these efforts, facilitating conversations between the airport authority, eco-tourism groups, and NGO’s to ensure that the problems that are being raised go beyond lip-service.  More recently he has developed a tour of his projects so that others can see, feel and experience the work that the agencies he’s supporting are doing in the community.  He has a vested business interest in ensuring the environmental integrity of region remains intact, and personal interest because his family is part of the community and seeing rampant poverty is not the society that he wants.

Corporate values are at the core of any strategy that engages community.  Taking the time to really articulate the ethos of why you do what you do, the types of people you hire and your employment standards, where you source your supplies, who you attract as investors and how you get your product to market is at the core of establishing a strong corporate citizenship program.  One of the best companies at has articulated this is Village Brewery here in Calgary.  Everything they do, from sourcing new beer ideas like the Village Gardener to the community projects they support, all go back to their social values. 

You can find the founders on Wednesday afternoons in the community space of their brewery connecting people with ideas for social change to people with resources and interests in that issue.  You will find artists showcasing their craft.  You will find business leaders grabbing a pint with an ear open for interesting goings-on about town.  Recently, I met up with Jim Button, one of the brewery’s co-founders about a charity and tech idea that I piloted last year with the Calgary Herald, Accelerator YYC and Digital Alberta called the Charity App Challenge.  We are looking to do it again, and it just so happened that there was another company looking to do something similar.  That same week Pro-Bono Lounge was announced by another small business and through the connecting points of Village Brewery several small companies are coming together to share their resources and put together a viable solution that will support non-profit organizations seeking out tech support.  All this was possible because a local company clearly articulated its corporate citizenship engagement and had it embedded in their every-day operations.

Funding innovation is the last layer to effective corporate citizenship.  But funding innovation comes with a cost… failure.  Companies who engage in innovation funding do so with and understanding that there is inherent risk involved in these types of investments.  But it also means the payoff is large.  In the cases of innovation funding, there is an expectation that the needle will be pushed on a particular issue.  This issue may not be directly aligned with the business of the company, but there is a sense from the leadership and the values of the business overall, that to not invest would be worse.  Innovation investing requires research and development, but it also allows for alternative financing models to feed the R&D beast.

SalesForce is one such company.  The SalesForce foundation was spun out of the main company when it was decided that 1% of the pre-tax revenue would be donated to charity.  The other component to this was that employees could get their own charitable donations matched up to $1,000/year.  This meant that the company had to generate enough revenue to make this possible.  It became obvious to the leadership during the growth and evolution of the business that the foundation needed to have revenue of its own.  So a few years ago the Foundation became a reseller of the SalesForce products.  They specialized not only in Software as a Service sales, but specifically that type of product and the subsequent apps that went alongside into the non-profit sector. The ability to resell the product that is at the core of the business has not only enabled the foundation to continue investing in charities, but it has allowed for organizations to support each other through the integration of SalesForce apps.  In essence they created an eco-system of change within their agency and between clients. Then they took it one step further and established the 1:1:1 Pledge – a minimum of 1% of employee time, 1% of SalesForce Products and 1% as equity investments into social enterprises are being directed into the global social profit marketplace.

These three examples, the Oceanside project in Mexico, the Village Brewery in Calgary and SalesForce in San Francisco all take an approach to corporate citizenship that is beyond the traditional cause marketing, corporate social responsibility and community investment models.  They have each looked at how their companies fit into a larger social and economic eco-system and then built their community engagement strategies around evolving the eco-system.

The dollars invested vary from percentages to revenue, to amounts per employee, to in-kind contributions.  At the end of the day, each one of these businesses can clearly state what their ethos is and why they do what they do within community.  They understand where they fit on the continuum of collective impact and social change the can generate by leveraging their expertise and connections.