Discover my new guide on strategic philanthropy. Learn what it is, its implications, examples, and benefits for companies.
Strategic philanthropy describes those practices in which a company helps a philanthropic foundation.
The corporation may contribute to the social cause through donations, volunteering, or sponsorship.
As defined by the University of Cambridge:
“Strategic philanthropy is […] any form of impact-driven giving that is evidence-based and uses creative planning, agile execution and diligent follow-through to achieve intended results. It encompasses a wide range of practices from traditional grantmaking through to newer models for generating impact such as venture philanthropy”.
What does strategic philanthropy involve?
Strategic philanthropy involves the assistance or participation of the company with a charitable association.
It is a process in which the corporation provides support to a nonprofit organization, using its resources and funds.
It benefits since the donating company is related to the action, forming a link with the charitable organization.
In some cases, the company may maintain a long-term relationship with the entity, becoming its sponsor.
Through strategic philanthropy, it improves its competitive environment.
Philanthropy is results-oriented, as donors seek to achieve well-defined objectives.
Companies analyze to find strategies to achieve their goals by helping charities.
Paul Brest, former dean of Stanford Law School, defines strategic philanthropy in the Stanford Social Innovation Review (SSIR).
He also explains why it requires an expected return mentality:
“It is a way of thinking that considers grants or initiatives in terms of their potential benefits, the likelihood of success, and the costs involved.”
History of philanthropy in Ecuador
Ecuador is a country with a long history of philanthropy.
It emerged approximately 170 years ago, after creating the philanthropic society of Guayas, based on Masonic ideals.
Its main objective was to help the most vulnerable in the country, achieving significant social development.
What is the difference between strategic philanthropy and social responsibility?
Strategic philanthropy is a more limited form of corporate social responsibility.
While they may seem similar, corporate social responsibility describes an organization’s attitude toward society at large.
Contributions generated by the business sector are subsequently converted into donations.
The United Nations Industrial Development Organization (UNIDO) explains:
“Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders”.
The Institute of Social Responsibility of Ecuador (IRSE) establishes as principles of social responsibility:
- The dignity of the person;
- The common good;
- Solidarity;
- Subsidiarity.
These principles are the basis of corporate social responsibility and should guide them.
What is the most significant difference between strategic philanthropy and cause marketing?
Strategic philanthropy makes use of corporate resources to realize social and organizational benefits.
It benefits both the organization and the recipient of the aid.
Cause marketing, or engaged marketing, seeks to increase the company’s profit by collaborating with nonprofit organizations.
Global Giving defines cause marketing as:
“Innovative field driven by collaboration between nonprofits and corporate partners.”
The main difference is that strategic philanthropy focuses on a partnership, while engaged marketing focuses on a company-related action.
The company increases sales and improves its brand image while contributing to the charitable cause.
Companies around the globe create cause marketing campaigns to strengthen customer relations and build public trust.
Examples of cause marketing
Candid Learning states that American Express carried out the first cause marketing action in 1983.
An example of committed marketing in the U.S. is Walmart’s “Fight Hunger. Spark Change” by Walmart, which donated $0.10 for every product purchased to the Feeding America organization.
What is an example of strategic philanthropy?
A large number of companies today are committed to strategic philanthropy.
Our family started many years ago with the Nahím Isaías Foundation, a social project in Ecuador.
We believed that we had to work and make a real effort to fulfill our dreams and succeed, but none would be vital if we did not transform the environment; only then could we move forward.
Grand Circle Travel
Since 1992, it has contributed more than $12 million to organizations dedicated to preserving historic sites, such as the Auschwitz-Birkenau State Museum in Poland.
Through this, it has also benefited its customers by maintaining close relationships with the organizations, which enable them to take unique trips.
Kraft Heinz
Intending to donate 20 million meals to food banks such as Feeding America, the company launched “Huddle to Fight Hunger”.
Thanks to this campaign, it donated a meal every time it received alike on its Facebook page.
Microsoft
It launched a volunteer grant program for its employees, in which nonprofit organizations received $25 per extra hour of work performed.
In addition, it has also made technology grants to more than 86,000 agencies.
Penguin Random House
Helped its employees repay $1200 in student loans annually.
It also offered free book excerpts on its platform to contribute to the global humanitarian organization Save The Children.
ExxonMobil
To help a charity, the company made matching donations.
It gave $3 for every $1 contributed by its workers, raising $43 million.
What are the benefits of strategic philanthropy?
Philanthropy helps many nonprofit organizations provide humanitarian aid.
It also improves the livability of many of the world’s population.
The Milken Institute’s Center for Strategic Philanthropy publication outlines the critical role of philanthropic capital.
According to the Center for Disaster Philanthropy, more than $20 billion in global philanthropic funding was invested in response to the COVID-19 crisis.
There has been a 55% increase in philanthropic giving versus other humanitarian crises such as the Ebola outbreak or Hurricane Harvey.
Ayuda en Acción explains in its annual report that, thanks to 6,731,300 corporate donations, it has been able to help more than 90,000 people in Ecuador.
The philanthropy has benefited 109,040 Ecuadorians and raised more than $2.1 million.
It has also provided 18,000 people with access to safe water.
Philanthropy helps companies to:
- Participate in charitable actions around the world;
- Contribute to sustainable development;
- Group cohesion;
- Improve the internal and external communication of the organization.
Therefore, companies receive a bonus thanks to their charity.
Why is philanthropy a clever idea for a company?
When a corporation decides to contribute part of its profits to a nonprofit organization, it is helping part of society.
In addition, it gets positive publicity for its company, thus improving its corporate image.
Therefore, philanthropy is a clever idea for a company because:
- It helps an organization;
- It improves its image;
- It promotes your company.
Investing part of your profits in a charity can help you better your position and reputation.
Conclusions
Many companies worldwide decide to contribute to nonprofit organizations to improve their positioning.
Therefore, some of the conclusions are:
- Strategic philanthropy is a charitable action that can help companies improve their corporate image;
- It is a point to take into account the corporate social responsibility of the company;
- Many corporations around the world have been carrying it out for years;
- It is a way to profit from philanthropy.
Strategic philanthropy is an excellent way to help nonprofit organizations.
At the same time, it also allows the corporation to profit by way of publicity.
