The Impact of Corporate Giving on Nonprofits: The Good, the Bad and the Ugly

Americans viewed the nonprofit sector as a sanctuary for do-gooders in the past. It's no longer so. It used to be that corporate leaders gave lip service to philanthropy. However, that's changed too. Now philanthropy and social good are getting ever-more baked into corporate business models. Moreover, the change is disruptive.

For example, younger generations don't have an issue with cryptophilanthropy, and many don't mind investing in for-profit, impact-investing companies. Ultimately, this changes the very idea of philanthropy. For generations — and indeed, through the 20th century — philanthropy in America meant giving to nonprofit organizations. Moreover, the government incentivized it with charitable tax deductions.

Inevitably, new generations and ways of doing things are fundamentally changing how we view the idea of philanthropy. Of course, technology's driving innovation and disruption, but so are the companies and corporations that don't want to get caught leaning on their back foot. In other words, corporations want to stay relevant for their image and the bottom line. As a result, they see how the wind's blowing and are exploring going beyond simply writing checks to nonprofits.

In short, nonprofits are no longer the only organizations receiving investment money from funders and investors.

Corporate Giving and Philanthropy

Corporations have long been supporting nonprofits. However, it was seldom at the same level as regular individuals. But if you look at corporate social responsibility programs, giving and other methods of corporate social good, it's the corporate sector that can affect a nonprofit's longevity. It doesn't take much to see immense anxiety and uncertainty in society. As a result, there's been a massive loss of trust in institutions, such as government, religious organizations and, yes, even nonprofits.

The entities where there's been trust are in corporations. Perhaps it's because corporate brands are powerful and, in some cases, have supplanted the GDPs of whole countries. Or maybe it's that corporations understand that consumers want them to lift all boats and not just the ones of the shareholders. So the elements of philanthropy have shifted to one much more aligned with business ideas, including data, measurement, and ROI.

Business and philanthropy interact and interrelate. More than ever, philanthropy is a business need, and it's something where corporate America understands it needs to be heavily involved in doing. Additionally, corporate-related executives are looking for experience and expertise in social good, which they could now find in the for-profit sector. As a result, you'll find more corporate social responsibility departments and nonprofits in the same office, and there's more fluidity for nonprofit leaders to enter the corporate world for work.

The Good

Historically, I think it’s fair to say as a metaphor that nonprofits were seen as the class of middle persons. They were facilitators and did the work of providing essential services to those in need. Moreover, nonprofits advocated for change and often offered leadership opportunities in the community. But that paradigm changed.

Reading the tea leaves, some of the most forward-thinking and innovative nonprofits made the radical leap to become the new movers and shakers. For instance, we could look at charity: water and its program, The Pool, which fundamentally shifted how nonprofits could look at compensation in the sector. I remember the firestorm it created when it was launched in 2019.

The very idea of The Pool came from the corporate world. Essentially, it's funded by business executives who donate their shares from other companies. In other words, funding from IPOs and other liquidity events reward the nonprofit team at charity: water. It's a stroke of genius because the idea that nonprofit workers need to earn little is a myth.

The Bad

There's certainly a lot of good that comes from philanthropy and corporate giving. But it's the bad that can be vexing and problematic. Once upon a time, the good people of an area donated their time and money to improve the community and environment. These people helped build the schools, hospitals, parks and housing; designed new infrastructure; and forged new trade routes, which connected cities and the globe. And so it went down through time.

However, today, most communities are still the same and living with 20th century standards, which is low compared to where we need to be more than 20 years into the 21st century. In other words, for the U.S. to compete with the rest of the world — and, yes, that includes China — we need to have a robust infrastructure in place. That means that someway, somehow we have to invest in boring stuff, such as high-speed rail, world-class airports and renewable energy.

In the past, there was the idea of the community, and nonprofits served as our space for social good for everyone. But that idea's falling away in the rearview mirror. It seems that now it's more of an individualistic, you're on your own, attitude. And while I very much believe in corporate philanthropy and social good, the reality is that corporations get created to make money. Their main priority is not to the benefit of all. That’s not how it works. Overall, this could be a problem for sustainability and social good because it creates a subculture of apathy that blunts philanthropy and the common good.

The Ugly

The nonprofit sector is supposed to be inclusive. But a rapidly growing and, for better or worse, unaccountable corporate industry is trying to wrestle that role from nonprofits. In other words, it’s an open secret that some corporate leaders want to decimate nonprofits and perhaps the very idea of the sector.

All you have to do is look at the recent antics of Elon Musk, who's found enormous joy in trolling the sector. For years and years, professional fundraisers heard from enormously wealthy executives that they would like to give at a higher level. Still, they weren't going to do it because so and so nonprofits didn't have the infrastructure or would never demonstrate the right level of impact to make the ROI worth it. Of course, there was always the idea of not trusting that nonprofits would do what they said they would do.

And for years, this game of circular chicken has gone on to the frustration of many nonprofit leaders. While it’s good to see private sector support for philanthropy, some nonprofit executives have started to wonder if corporate philanthropy's real aim is essentially to eliminate the nonprofit middle person.

Do I think we'll end up in that scenario? Not necessarily. Corporations aren't in the primary business of social good. Again, they're in the business of making money — until they figure out, in a scalable way, how social good could make their money. And there's more traction now to that idea than there's ever been.