Strategic Philanthropy often means Less Philanthropy

I'm a little behind on the news ... it is vacation season after all. This evening, I came across some scary statistics in an article entitled "Corporate Social Irresponsibility" by Leo Hindery Jr. and Curt Weeden of BusinessWeek. Here's a snippet:

Twenty-five years ago, businesses allocated about 2%, on average, of their pretax profits for gifts and grants, according to a report by the Giving USA Foundation and Indiana University Center on Philanthropy. Today, companies are only about one-third as generous.

Gulp. And ... what?! I had to read it twice to be sure I had read it correctly. Given all the hype around CSR in the past few years, one would think it was just the opposite. We know that corporations have increasingly targeted their giving to causes more aligned with their business goals under the term "strategic philanthropy" (think financial literacy programs supported by financial institutions, or health and wellness programs funded by pharmaceutical companies). But if more corporations are doing this, why has the giving declined? One answer, not offered by the authors, is staring us right in the face.

The downward trends in giving are actually a result of strategic philanthropy.

In other words, when a business gets "strategic" in its giving, very often, it is cutting its overall giving rather than transferring total philanthropic dollars to one or two strategic causes. In our work, we've seen this happen many times when calling on businesses about their philanthropic programs, and the cutting doesn't always stop with the overall giving. Oftentimes, even the strategic programs aren't fully funded. By doing so, corporate leaders are missing some big opportunities.

When fully funded and done well, strategic philanthropy programs can accomplish big things: they elevate awareness for the cause and the brand, encourage multiple-stakeholder participation, create attitude and behavior changes around the cause, and position the company well with all its stakeholders: consumers, employees, government regulators, and yes, shareholders. When poorly funded, these programs often serve as mere fodder for the PR machine and never receive the buy-in from stakeholders to truly elevate the brand.

If more corporations would be strategic and increase the percentages of their pretax contributions, then we’d really be on to something.