Why do corporates give?

What motivates companies to give to charity in cash or kind may differ, but it must be genuine to overcome public scepticism, writes Chris Johnston

There is a very long tradition of businesses donating money, goods or staff time to charitable causes, all of which falls under the umbrella of corporate philanthropy. But unlike an individual’s decision to make a donation to a Children in Need appeal or support the Ice Bucket Challenge to do their bit and have a warm inner glow, the motivation for a company to make a donation in whatever form it may take is considerably more complex. 

In the past, many companies have donated to charities because they wanted to give something back and “do good”, says Klara Kozlov, head of corporate clients at the Charities Aid Foundation. However, there is a now a growing awareness that philanthropy can be a powerful way of tackling issues that affect their business operations, as well as society more broadly. 

Philanthropy can be more than financial support

That has led to a growing number of partnerships between corporates and charities or non-governmental organisations. Ms Kozlov explains: “Companies are starting to take different approaches – there is still room for traditional philanthropy because the charity sector needs funding, but there is also a growing recognition that companies have a much more powerful role to play and have more to offer than just financial support. Their assets, both intellectual and physical, if tapped into in the right way can really help drive change.” 

Charitable giving by businesses

A prime example of this trend can be found in the Vodafone Foundation, which was set up in 1991 and spends about £45 million annually across 27 countries. Andrew Dunnett, its director, says the philosophy has changed from “we’ve done well, we should do some good” that it had at the start to “how to do good as part of doing well in business”. 

“We’ve moved away from the cheque-book charity that has symbolised corporate giving in the past. We’re giving away the same amount of money, but there is much more that we can do with our people, our technology and combining that with our charitable giving to make a difference in the communities in which we operate,” he says. 

One result of its Mobile for Good strategy, under which there has been a greater focus on connecting with the company’s technology, was the development of a mobile phone network that could be transported in just three suitcases and quickly set up in disaster zones, most recently the Philippines where a typhoon struck last November. Mr Dunnett says that 70 employees worldwide have volunteered to be trained so they can deploy a network when it is needed. 

Increasing staff satisfaction

The foundation has a clear link with employee satisfaction, he says, with its work scoring very highly on staff surveys. “When people see the power of connecting our technology to the giving and using our skills, rather than just giving, it makes a huge difference in people’s minds,” he adds. 

Another firm believer in the value of a company’s philanthropic activity to employee retention and satisfaction is Linda Minnis, chief executive of the Charities Trust, which processes donations and runs the Payroll Giving scheme. 

She says that matching funds raised by employees is often extremely popular and any attempt to change such a policy can be met with stringent opposition internally. “The good thing is that the employee has to do something to get that money – it’s not just a straightforward gift – and that’s what makes them feel good about what they are doing,” she explains. 

The philosophy has changed to how to do good as part of doing well in business

Research into organisational behaviour has found the relationship employees have with their organisation – how it makes them feel and what opportunities it offers for personal growth – is becoming just as important as their remuneration, according to Ms Kozlov. 

“There used to be a divide between who you are in your personal life and your professional life, but that is changing and people are applying the same profile to their professional life as their personal life. They need to feel authentic in the workplace and, therefore, the values of their organisation become much more important,” she says. 

Creating a corporate environment where Millennials in particular will want to work, and feel good about doing so, is the responsibility of the top levels of management, Ms Kozlov argues. “Most businesses agree that giving is good, but how you integrate philanthropy and sustainability overall really depends on the senior leadership and how they set the strategic direction,” she says. “Then the challenge is how does that percolate down to the rest of the organisation – middle management need to be supported to translate that strategy into operational reality.” 

Interestingly, the corporate sector is less generous than many may think, with companies donating about £1.6 billion annually to UK charities, according to the Centre for Charitable Giving and Philanthropy (CGAP).

How charities are funded

Individuals are responsible for donating a far greater proportion of income for charities than companies, says Jay Kennedy, policy and research director at the Directory of Social Change, which has been campaigning to encourage business to give more. The organisation says that companies often claim their shareholders will not tolerate higher levels of charitable activity, but he questions whether the issue is ever put to them. “Given the wider trends and expectations of business today, we wonder if that’s a bit of a red herring,” he says. 

Improving public perception

It is difficult to identify why some companies engage in more philanthropic activity than others, although the Charities Aid Foundation finding that 51 per cent of British adults would be more likely to buy a product or use a service from a company that donates to charitable causes will not have escaped many. “For the big names, it is about public perception and brand, but it can veer into sponsorship and marketing where the distinction between philanthropy and them promoting their own corporate social responsibility can be pretty fuzzy,” says Mr Kennedy. 

The nature of giving also varies widely, with cash being far easier to identify than in-kind donations. “There’s not a huge amount of rigour in how companies value in-kind support and calculating how ‘generous’ they are really being,” he says. 

Proportion of cash given by companies

Cash-giving has remained largely static in recent years, but in-kind giving has risen, says Cathy Pharoah, professor of charity funding at the Cass Business School and co-director of CGAP. Such measures can bring considerable benefits to a business because “in-kind giving can reinforce all kinds of other relationships a company might have with the community – sharing its expertise might help build markets for the company’s products”, she says. An example is energy providers helping to support debt management charities. 

Some companies are more willing to shout about their philanthropic activities than others, even going as far as featuring it in advertising or social media campaigns. No matter how a company decides to go about its philanthropy, Ms Kozlov believes the overriding factor for an organisation is being genuine. “The public very quickly detects when something isn’t authentic… a company can demonstrate its social purpose as long as it feels genuine, and not being used as a sales and marketing tool,” she says. 

Cash grants from companies within the UK

The corporate sector should also take heed of the Charities Aid Foundation report, which warns that many consumers believe big businesses “bank” their philanthropic activity to cash in when hit by negative publicity, rather than building public and employee goodwill through greater accountability, transparency and consistent reporting of their charitable activities. 

What it describes as the “profound disconnect between public perception of corporate giving and reality” must be addressed if companies want to maintain customer trust and loyalty in the years and decades ahead.