Who Said Corporate Philanthropy Should Get the Axe?

In a recent conversation with a leading company, I was asked whether companies, by creating shared value, no longer needed to engage in corporate philanthropy.  If companies are solving social problems through their business, why bother with philanthropy?

In fact, it would be a mistake to suddenly expect companies to solve social problems exclusively through their business activities. Without philanthropic resources, they may even make it harder to reach their goals. During FSG’s ten-year history, many leading companies have demonstrated that corporate philanthropy can address social needs and add competitive business value while still avoiding self-dealing.

In the context of shared value creation, one way that corporate philanthropy can play an important precompetitive role is in strengthening cluster development by:

  • Educating the private sector, including competitors. The Syngenta Foundation for Sustainable Agriculture promoted public-private partnerships (PPPs) in agriculture through convenings and research to ensure global food security. PPPs, involving companies like Syngenta, Bayer CropSciences, Monsanto and DuPont, have helped to increase access to new seed technologies in developing countries.
  • Getting smarter about potential long-term opportunities. Medtronic Foundation’s support to Partners in Health to integrate care for non-communicable diseases (NCD) into primary care settings in rural Rwanda has informed the company’s understanding of health systems and policy. PIH’s model is training nurses and other healthcare providers on prevention as a key component of NCD care, as well as treatment.

Practitioners out there who are managing corporate foundations and philanthropic programs should take heart that these examples are “making the case” for the role of philanthropy in creating shared value.  But these efforts need to be managed as a portfolio of closely aligned activities that includes philanthropic investments and are guided by a focus on achieving specific social objectives as a company.

As companies look to create shared value, the focus of their philanthropic portfolio may shift as a result.  The portfolio today may allocate a larger proportion of its resources to community giving and a relatively small proportion to shared value investments, such as those highlighted in the above examples. But let’s be clear about the purpose of each activity:

  • Community giving can enhance a company’s reputation, foster goodwill, and give companies license to operate. These activities, while useful for the company, are typically not held to the bar of “achieving social impact.”
  • Shared value investments are aligned with the company’s effort to solve specific social problems through their business activities. These investments should increase the likelihood that the company will succeed.

If companies are serious about shared value creation, they should be looking for opportunities to increase the share of the philanthropic portfolio that aligns with shared value creation.

But please don’t get out the axe.

What role do you see corporate philanthropy playing in shared value creation? Please share your perspectives.

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