Corporate Philanthropy: Ally or Competitor?

According to the “Giving USA 2015” report, corporate giving reached $17.7 billion in 2014, a 13.7 percent increase over the prior year. That dollar amount, while substantial, represents just 4.9 percent of overall giving in the U.S., placing corporate giving fourth behind individuals, foundations and bequests in total contributions.

But corporate giving is growing—and fast. Its double-digit growth from 2013 to 2014 was second only to foundations (at 15 percent). A study by Indiana University Lilly Family School of Philanthropy projected it to grow 4.6 percent in 2016 and 4.7 percent in 2017. And according to “Giving in Numbers 2014,” companies providing paid-release volunteer programs increased from 54 percent in 2012 to 59 percent in 2014.

It all points to an increased emphasis on philanthropy in the corporate sector. Here, we’ll explore what that means for nonprofits.

Competitor or Ally?
First, the obvious: Corporate philanthropy is a good thing for nonprofits. While it pales in comparison to the $258.51 billion in individual giving in 2014, the $17.7 billion given by corporations is still a huge amount. That number would be much higher if it included contributions from corporate foundations—the top 100 alone totaled $22.4 billion in 2014, according to Foundation Center—and donations from individuals like Bill Gates and Mark Zuckerberg, whose massive contributions are the direct result of corporate success.

And funding is only the beginning. Volunteer programs, cause-
marketing partnerships, awareness initiatives, board leadership—these and other corporate-assisted efforts provide nonprofits the kind of non-monetary support that isn’t reflected in the dollar figures, but is no less important.

By all accounts, the environment is a healthy one. Corporate funding and support should continue to grow overall, especially as large companies begin to take corporate social responsibility more seriously. (And they will—a 2014 Nielsen survey found that 42 percent of U.S. consumers are willing to pay more for products and services from a “socially responsible” brand.)

But there could be some downsides.

“Nonprofits increasingly will face competition from for-profits for cause-related marketing dollars,” Nick Ellinger, vice president of strategic outreach for Mothers Against Drunk Driving, told us in January. “It used to be that the choice in charitable giving was between sponsorship and cause-related marketing, and if a for-profit had a nonprofit wing, it was a foundation set up to fund existing nonprofits. Increasingly, however, for-profit companies will see the benefit of setting up their own nonprofit arms—or quasi-nonprofit arms—to own a cause.”

In other words, corporations have figured out that they don’t necessarily need to partner with nonprofits to meet social responsibility goals. The stats bear this out. According to Giving in Numbers 2014, the number of companies providing pro bono service programs increased from 40 percent in 2012 to 51 percent in 2014. Ellinger cited AT&T’s “It Can Wait” distracted-driving campaign as an example. “They are doing many things a nonprofit would normally do—collecting petition signatures and pledges, distributing awareness materials, and providing programmatic tool-kits—without the nonprofit,” he explained.

“An alternate model is PetSmart Charities, which is a separate nonprofit supported by the corporate structure, including with cause-related marketing at the register,” said Ellinger. “In both cases, the for-profit branding is prominent, and AT&T is even able to use the cause sign-ups as a for-profit lead-generation tool.”

This setup effectively allows a corporation to double down on social responsibility. It looks good for a corporation to donate to a charity. It looks better for a corporation to form a charity of its own. By cutting out the middleman—in this case, established, independent nonprofits—and keeping things in-house, the corporation essentially collects twice on public goodwill.

Still, it’d be alarmism to view this kind of corporate philanthropy as an existential threat to the nonprofit sector. Few corporations have fully divested themselves from nonprofits in this way, and it’s unlikely the PetSmart Charities model will become the standard any time soon, if ever. Nonprofit partnerships are still too valuable.

“Yes, there are corporate social responsibility plans for corporate programs to operate as their own quasi-nonprofit programs, but think of the opportunity for corporations to bring an existing agency or several 
existing agencies under their umbrellas to carry out their corporate social responsibility agendas,” said Gary Laermer, senior vice president and chief development officer for YMCA of Greater New York. “This could expand partnerships beyond just providing funding, but also providing operational support, strategic direction, an entire new staff and volunteer leadership pool, and the potential strength of combining strong brands.”

Changes Ahead
That doesn’t mean corporate philanthropy isn’t changing. Laermer noted that one major shift already underway is the growing focus 
on demonstrating impact. Corporations are putting big money into nonprofits, and they want to know exactly how that money is being spent. This has always been a challenge for nonprofits—communicating impact to donors—but, here, the stakes are higher. The amounts are larger. As corporations become more involved in corporate social responsibility and more invested in the outcomes, it will only get trickier.

“With the ever-increasing access to real-time data, corporations expect the nonprofit sector to keep pace with the latest data-collection and management tools and decision support systems available,” said Laermer. “That can be challenging, because there is certainly a gap in the nonprofit’s access to these sophisticated data-collection tools and the talent to manage to these tools.”

"We've got to be partners helping to align the needs of charities with the objectives of businesses, more than conduits for solicitation."

Then there are the fundraising challenges. For many corporations, philanthropy is more than just social responsibility—it’s an integral part of business strategy. As noted earlier, consumers want to buy from socially responsible companies. Smart corporations know that, and meticulously craft their giving strategies to align with their brands and resonate with audiences. It’s up to fundraisers to work within those constraints.

“Corporate giving has evolved from vendors swapping checks on behalf of their clients to a focused and critical part of a corporation’s business,” said Craig Shelley, CFRE, vice president of Orr Associates Inc. and vice president, board of directors for the Association of Fundraising Professionals, New York City Chapter. “That’s tied giving to employee engagement and brought more attention and a more thoughtful approach. Those are good things. But it has made more work for fundraisers. We’ve got to be partners helping to align the needs of charities with the objectives of businesses, more than conduits for solicitation.”

Getting Involved
For smaller nonprofits, tapping into the $17.7 billion in corporate support might seem a daunting task, especially as American Cancer Society and other massive organizations continue to roll out corporate partnerships. But it’s not impossible.

“Getting started with a corporate-giving program is not that much different than soliciting individual gifts,” said Laermer. “It starts with the people around the table, your relationships and your capacity to steward to a corporate donor, like any other. Building the friendship on a community that enables an agency to build advocates within a company is a great place to start.”

Another good starting point? Smaller companies. It’s easy to look at huge grants from mega-corporations like Wal-Mart or Bank of America and get starry-eyed, but it pays to maintain realistic expectations.

“Have you tried starting with regional companies?” said Adam Weinger, president of Double the Donation, an agency that works with nonprofits to increase matching-gifts revenue. “They’re often much more receptive to the outreach efforts of smaller nonprofits. They’re familiar with your community and receive a fraction of the requests that a large multi-national corporation receives.”

Weinger also recommended approaching businesses almost as a startup would approach investors—by demonstrating how your organization fills a market niche. Identify something a company needs that your nonprofit can provide, and work from there. “What would cause the business to say, ‘This was a fantastic partnership that benefited our customers, employees and community?’ Is there an event you can co-host? Can you find businesses that serve the same target audience?” 
Weinger explained. “If you can make a strong business case, you can lay the foundation for a long-term relationship.”

For Craig Shelley, those long-term relationships are key. They represent opportunity—so long as nonprofits keep rising to the challenge. “More resources devoted to good deeds is a great thing,” he said of corporate philanthropy as a whole. “It will require our sector to broaden the definition of itself and continue to become more creative in how we attract philanthropic investment.