News & Insight

15th February 2017

£2.1 billion in corporate donations? Show me the impact.

According to the most recent Charities Aid Foundation report on corporate giving, FTSE 100 companies [1] donated an average of 1.9% of pre-tax profits, a total of £2.1 billion, in 2014. By anyone’s standards, £2.1 billion is a great deal of money. In the charity sector, ‘millions’, let alone ‘billions’, is substantial.

With billions of pounds donated in just one year, there must be a catalogue of amazing successes attributable to these vast sums. Surely years of corporate donations in the billions will have produced incredible results in the world of health, education, arts & culture, environment and other social areas.

Maybe … but examples are difficult to find.

Unfortunately, the best practices that companies often apply to most areas of business such as client acquisition, relationship management or research & development are disregarded in relation to donating to charity. On many levels this is unfortunate and irresponsible.

Even companies with strong sustainability strategies, well-articulated purpose statements and established impact investing programmes struggle with effective philanthropic programmes. The challenges can usually be attributed to lack of confidence, lack of focus or lack of expertise.

Lack of confidence

Short-termism defined as “an excessive focus on short-term results at the expense of long-term interests”[2] isn’t restricted to earning per share preoccupation and end of year bonuses obsession. Companies also expect to see quick returns on everything from key hires to sponsorship deals. Unfortunately donating to charity sometimes falls into this category as evidenced by the number of ‘charity of the year’ programmes. The problem with short-term associations is that they don’t allow companies and charities to develop strong relationships with mutual understanding of opportunities and challenges. The lack of confidence to commit to a longer-term partnership restricts ambitious goals for the partnership which could have far-reaching impact.

Lack of focus

Companies are constantly approached for donations across geographies and business units. Realising that ‘grass roots’ interactions are often most effective, it’s tempting to roll out a localised approach to corporate charitable giving with each market and / or unit responsible for its donation budget. This applies to the company’s donations as well as the stewardship of employee donations. The difficulty with this approach is that the overall impact is almost impossible to measure which results in low buy-in from employees and other stakeholders. Saying ‘no’ is difficult but imperative if a company wants to deliver a targeted and meaningful approach to its charitable giving.

Lack of expertise

The level of enthusiasm to support causes that are close to the hearts of employees, customers and other important groups is encouraging. Unfortunately, the skills required to co-develop meaningful and transformational programmes with charity partners is often underestimated. Community investment roles are often assigned to loyal employees that want to ‘give back’ or do something more meaningful within the organisation. As tempting as this solution is to retain talent, it often translates into teams of enthusiastic amateurs managing multi-million pound budgets which would simply not happen in other areas of the business. Employees throughout the organisation can play an important role in the company’s donation programme but ensuring that experienced professionals are at the helm of the corporate giving strategy is crucial.

The private sector has an important role to play in contributing to society and using its range of resources to solve problems. There are a growing number of excellent programmes that are tackling supply chain issues, access to finance, employability and strategic use of technology to name just a few.

Giving effectively to charity is only one area of a company’s corporate responsibility strategy. Often seen as a non-core activity, its status should be elevated. Managed effectively, it has the power to unite employees and other stakeholders. It can provide a focal point for the company’s purpose agenda. Most importantly, it can help to create significant impact within the chosen area of health, education, social change or other cause identified.

As companies settle into an exciting 2017, they should consider what changes they can make to their charitable giving programmes. Are they clear about what they want to achieve? Can they strive to do better? Now is the time.

[1] This almost certainly doesn’t reflect the full amount as an amendment to Companies Act in 2013 means that companies don’t have to report information about their donations. As such, 13 companies on the exchange have ceased publishing donation information.

[2] Source: www.ft.com/lexicon