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Businesses tie giving to bottom line

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Philanthropy grows more strategic and focused, companies say. 

By Todd Cohen

For 15 years, Timberland has been joined at the hip with City Year.

The New Hampshire-based outdoors outfitter gives more than $1 million a year to the Boston-based youth-corps nonprofit, outfits its 1,350 corps members, and donates office space and provides mentors to City Year New Hampshire.

That relationship, central to the company’s corporate and philanthropic missions, has a “profound impact” on its corporate culture, says Celina Adams, community investment manager.

“Year by year, when Timberland employees are surveyed, they say it’s one of the most important aspects of Timberland, to have the company support their ability to give back to the community,” she says.

In an increasingly competitive global economy, companies looking for an edge increasingly are recognizing that philanthropy can boost the bottom line, experts say.

Long gone are the days when corporate giving mainly reflected the pet causes of the CEO.

Instead, corporations recognize that good corporate citizenship can improve the chances of attracting and retaining employees, customers, investors and partners.

So they are coordinating, branding and tracking their philanthropy, integrating it into their overall business strategy, and treating it as a product and service central to their performance.

Companies that align their giving with their business focus can be more effective in both, says Charles Moore, executive director of the Committee to Encourage Corporate Philanthropy.

“Companies can be more strategic if they use their own competitive strengths,” he says.

KEEPING TRACK

Corporate giving in the U.S. is big business, and companies are doing a better job tracking their giving, experts say.

U.S. corporations gave $12 billion to charity in 2004, or nearly 5 percent of all charitable giving, according to Giving USA 2005, an annual report of the Giving USA Foundation.

The Conference Board, in a report to be released in October, found that giving at home and abroad for 189 U.S. companies and corporate foundations totaled nearly $7.9 billion in 2004.

And a survey by the Committee to Encourage Corporate Philanthropy, which tracked cash gifts as well as non-cash contributions by 71 companies, found they gave $7.6 billion in 2004.

That was up from $1.6 billion given by 17 companies the group surveyed in 2001, says Moore.

He says companies in the past typically counted giving only by their foundations or corporate headquarters but did not track giving by individual business units or count business expenses related to support of charitable causes, he says.

And roughly one-third of corporate giving is generated by individual business units within a company, he says.

And his organization now is working with Chicago technology firm B2P Commerce and the Center for Corporate Citizenship at Boston College to develop metrics to help corporations measure the impact of their giving.

Corporate philanthropy is rooted in a “natural imperative to serve your communities because you’re so dependent on your communities for your employees, for your social infrastructure, and for your customers,” he says.

And giving that is strategic helps companies “play out your core values in a better way.”

BUSINESS BENEFITS

Companies increasingly are using a “triple bottom line” that measures financial, social and environmental performance, an approach of growing importance to customers, employees and investors, according to research by Cone, a Boston consulting firm.

“They’re recognizing that they have to stand for something more than the bottom line to be embraced by and relevant to their internal and external stakeholders,” says Alison DaSilva, vice president for cause branding at Cone. “That’s expected from Americans overall in their role as consumers, employees, shareholders, as well as other peer companies and companies they admire.”

Keeping an eye on competitors, she says, companies also are doing better at setting benchmarks for their corporate giving.

Strategically, she says, companies are focusing their giving on one or two causes on which they can have a big impact, creating brands around their commitment to those causes, and better promoting those brands.

They also are working to integrate their philanthropy into their overall corporate social responsibility initiatives that can range from ethics, transparency and governance to human rights, environmental issues, health and safety, and employee rights, DaSilva says.

What’s more, she says, companies are looking for ways to build philanthropy into their human-resources programs

“At the end of the day, companies are recognizing that their employees are their best ambassadors,” she says. “If they can inform employees what they are doing in terms of their philanthropy and giving, that’s low-hanging fruit. And if those employees are knowledgeable and inspired, they will go out and tell others about the great work the company is doing.”

PEOPLE POWER

A company’s philanthropy can better boost its business performance by tapping its business intelligence and expertise, experts say.

“No successful business operates in an ad-hoc manner,” Adams says. “The discipline we bring to any business planning should of course translate to our community investment platform.”
And at Timberland, employees play a pivotal role in connecting the company’s business mission to “equip people to make their difference in the world” with its philanthropic mission to “help unlock the civic potential of people.”

Each of its 5,500 employees can get paid time off for performing 40 hours a year of community service, and can apply for at least one three-to-six-month sabbatical the company offers each quarter with full salary and benefits.

The company also contributes up to $500 per employee to charities at which employees volunteer.

“When a person experiences volunteerism, it is a life-transforming experience,” Adams says. “It benefits the nonprofit and the human being, and has a feedback loop.”

Despite a cultural bias against reaping gain from charity, “linking giving to getting” is a critical strategy that companies can use to be better corporate citizens, says Kellie McElhaney, executive director of the Center for Responsible Business at the University of California at Berkeley.

“In our culture, you’re supposed to give for the sake of giving, not for the sake of getting anything in return,” she says. “You can give smarter. Companies should continue giving, but they should link it to some kind of business benefits. It makes the giving more sustainable.”

GLOBAL GIVING

As companies do a better job defining, coordinating and tracking their philanthropy, and building it into their business, they also are expanding their idea of philanthropy.

Timberland employees, for example, volunteer as mentors for nonprofit leaders.

“Increasingly, we’re encouraging that connectivity between our intellectual capital and our nonprofit partners,” Adams says.

And as U.S. companies extend their global reach, they are expanding their global giving, says Sophia Muirhead, senior research associate at The Conference Board.

“As more and more companies do business globally, they are taking their American notion of philanthropy with them to the global stage,” she says.

That growing international focus also helps account for the growing share of corporate giving contributed by eight big pharmaceutical firms, which gave $2.5 billion in
the U.S. and $876 million abroad in 2004, for a total of nearly $3.4 billion, more than any other industry.

International issues also represent a big challenge for corporate givers, said Adams.

In the face of “due-diligence” rules in the U.S. Patriot Act that require greater documentation from nonprofits about how they will use funds they raise, “the willingness of corporations to invest in small and important nonprofits working in smaller communities may be more difficult,” she says.

“It’s incumbent on the philanthropic community, including corporate grantmakers, to get together and figure out how we’re going to address this,” she says.

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