Can Business Beat Philanthropy at Changing the World?

The most thought-provoking philanthropy piece I’ve read this summer is the Economist feature, “The Centenarians Square Up”. The article asks which 100-year-old institution has had more positive impact on society—IBM, a $200 billion for-profit company, or the Carnegie Corporation, a $2.5 billion nonprofit foundation? It puts a creative twist on Built to Last / Good to Great author Jim Collins’ research in which he compared companies founded in the same era to deduce why some were wildly successful and others were average.

It ties into a question that we’ve lately been asking readers of Do More Than Give to consider: Given that modern philanthropy is celebrating its centennial anniversary—Carnegie Corporation was created in June 1911 as the first major U.S. general purpose foundation, ushering in the modern practice of “scientific” philanthropy—how much have donors accomplished in these past 100 years? What will it take for philanthropy to reach its full potential in the next century of giving? (see “A 'Platinum Age’ for Philanthropy Requires Donors to Change Their Ways” in The Chronicle of Philanthropy).

The Economist piece got me thinking more deeply about the evolving relationship between business and philanthropy. It used to be simple: In the not-too-distant past, if you wanted to make money, you invested in business. If you wanted to make a difference, you gave to charity. But as we explore in Do More Than Give in Practice #2: Blend Profit with Purpose, if ever the world were so neatly divided, it ain’t so today. Forward-thinking businesses now create “shared value” —a concept that Michael Porter and Mark Kramer introduced to explain how companies can become more competitive and profitable when they incorporate societal benefit into pursuit bottom line pursuits (it’s different than CSR).

Of course, most companies haven’t yet mastered the art of creating shared value, and not every executive may be up to the challenge. But there is a middle ground. Companies don’t need to retreat to the traditional mode of bifurcating business from philanthropic pursuits. Even if its main contribution to society comes through a corporate foundation, a company can enhance giving by leveraging all of its assets—including its know-how and networks— rather than only dispensing grants to worthy charities.

A good example is PNC Financial Services Group (PNC). The fifth largest U.S. bank, PNC launched Grow Up Great—a ten-year, $100 million program to improve early childhood education. But instead of simply making grants to Head Start centers and deploying corporate volunteers as tutors or mentors, PNC took a radically different approach. It also leveraged its corporate lobbying power on behalf of vulnerable youth, training each of its regional presidents on how to advocate for better early childhood education policy reform at the state and local level. The early results have been impressive: Through the advocacy of regional presidents in Pennsylvania and the personal drive of CEO Jim Rohr, PNC contributed to the passage of a $75 million line item to the Pennsylvania budget to improve school readiness programs for an additional 12,000 children.

The point is, when companies use their core business capabilities and leverage non-financial assets to tackle social problems—like their lobbying prowess and access to policymakers—they can often achieve more. Corporations like PNC embrace a wider arsenal of tools to advance social progress. And while they may not yet be fully creating shared value, they’ve moved beyond the antiquated notion of traditional checkbook philanthropy.

A hundred years ago, Carnegie introduced new philanthropic tools by pooling his millions into a general purpose foundation and giving it away “scientifically” to solve problems. The received wisdom of his day was to separate one’s philanthropy from one’s business, and the notion of corporate responsibility had not yet evolved (Carnegie’s deadly breaking of the Homestead Strike was a case in point). It may have made sense to bifurcate your business from your philanthropy at the dawn of Industrial Era, but in today’s Digital Age leading donors look for what business and philanthropy can accomplish together.

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