Philanthropy: Feel-good factor or a business opportunity?

Philanthropy may not necessarily be feel-good money gone down the drain. It can be used as social investment and ‘patient’ capital by businesses that want to develop ‘shared value’ solutions. International social business advisor Tania Ellis explains how.

Philanthropic efforts can go way beyond mere donations or one-off projects. It can help a company innovate by using funds to test new solutions, innovate and learn about potential markets while solving the world's problems. Image: Shutterstock

Philanthropy has been considered  – and in many cases rightly so – a “nice-to-have” add-on to business, or a feel-good buzz that creates purpose for the company’s employees but adding no real value to the company.

But does it have to be this way? The short answer is no. 

In the pursuit of developing a sustainable business case for corporate social responsibility, many companies have embarked on a journey in which they try to develop solutions that create value to both society and themselves.

My experience as a practitioner over the last decade has, however, proven to me that a solid business case for corporate responsibility and sustainability often requires long-term, serious efforts before social and economic returns of those efforts can be measured. 

In other words: pioneering takes time. And time is a precious commodity in a business environment fixated on the short term, where market demands dictate quick decisions, impatient shareholders rule, and quarterly earnings dominate.

Philanthropy - if used strategically - can provide space for long-term sustainability efforts and experimentation with new ‘shared value’ business solutions that can generate both value for society and the bottom line without the constraints imposed by short-sightedness.

Here are three examples:

1. Create a pipeline of social innovations with your philanthropic funds

French food giant Danone, In its effort to live up to its mission of “Bringing health through food to as many people as possible”, has turned its charity foundation Danone Funds into so-called Social Innovation Platforms.

By using its philanthropic war-chest as incubation funds for new technologies and ideas, Danone can experiment with new socially beneficial solutions that may eventually break new ground, helping Danone optimize and innovate its business.

2. Apply skilled volunteering to develop both market opportunities and talent

United States IT giant IBM has developed a triple-win solution through its Corporate Service Corps program. Here, a selection of IBM’s employees are paid to apply their professional skills on a pro bono basis - so-called skilled volunteering - over a three-month period to help communities around the world solve critical problems in business, technology and society.

This provides triple benefits: communities have their problems solved, IBM’s employees receive leadership training and development, and IBM gains greater local knowledge and insight into potential markets.

3. Give the company a start-up mindset through pro bono partnerships

A few years ago, one of our clients Danish intimate healthcare company Coloplast decided to help small social business venture Ruby Cup, which wanted to produce and sell menstrual cups for women in developing countries, but lacked the technical know-how to do so.

Coloplast saw no commercial potential in the alliance, but wanted to help; so, instead of a formalized partnership, the alliance operated as a “skunk-work” project - escaping routine organizational procedures - by some of Coloplast’s R&D employees, who within a year helped Ruby Cup’s young entrepreneurs develop their first prototype of the menstrual cup.

The project with Ruby Cup was not only a huge motivator for these Coloplast employees, it also showed them how little time was really needed to go from-idea-to-market.

In other words, the informal pro bono partnership with Ruby Cup exposed Coloplast to an entrepreneurial environment and mindset, showing Coloplast how it could improve its own product innovation processes.

As R&D manager Carsten Faltum explains: “Our greatest benefits of working with Ruby Cup were not so much about CSR, but more about innovation and exposing the organization to a dynamic start-up mindset, which our employees have been able to apply in their own everyday work.”

So what can we learn from these three examples?

Firstly, philanthropy can be used as “patient capital”, if a company wants to experiment with new and sustainable business solutions, as this enables a longer time horizon for both social and financial returns than developing solutions in a market-driven business environment.

Secondly, philanthropy can consequently be seen as social investment or as “venture philanthropy” rather than a charitable one-time donation.

Thirdly, philanthropic engagement is not necessarily all about providing capital. Time, network contacts and other business resources may, in fact, create far greater value for all parties involved.

So the next time you need to decide on charitable projects to support or donations to give, you might want to consider engaging in projects or partnerships that can not only benefit from your support, but can also help you gain insight into a societal challenge, a potential market, or a new customer segment.

It might just also bring a fresh shot of entrepreneurial energy and inject new values into your organization.

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