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Many companies striving to be good corporate citizens today face an internal tug of war between giving attention to community initiatives that address social problems and the growing demand to make environmental issues paramount.
What’s the role of corporate foundations in 21st century corporate citizenship?
By Chris Pinney, Director of Research and Policy, Boston College Center
Corporate foundations and philanthropy were the primary vehicle and in many cases, the “face” of corporate citizenship for most large companies for much of the late 20th century. Today, this is rapidly changing as corporations work to meet new expectations for corporate responsibility and citizenship.
The public no longer judges a company by what it “gives” philanthropically but much more fundamentally by what the company “does” both in its business practices and in the way it works with others to address social challenges. In this context, corporate citizenship is now measured by the impact and contribution of the business as a whole, from its products and services to the way it manages its operations and supply chain, to how it supports communities and social development.
When it comes to community support, the public wants business to provide more than simply “charity.” People are looking to businesses to be active partners with others in leveraging all of their capabilities to help address social and environmental challenges. This poses new challenges to corporate foundations and traditional models of corporate philanthropy. When asked in a 2007 McKinsey poll to identify the three tactics they rely on to manage socio-political issues, only 12 percent of executives noted philanthropy and only 10 percent said they saw this as effective. The public seems to concur when it comes to the importance of philanthropy in corporate citizenship. When asked in a recent 2009 GlobeScan global poll to define the key elements of corporate citizenship, only 5 percent of respondents identified philanthropy, down from 12 percent in 2008.
For corporate foundations to remain a relevant and a value-added contributor to corporate citizenship there is an urgent need to review and explore how they can more effectively help their companies address 21st century corporate citizenship challenges. These include
- What role can corporate foundations play in the development of the broader corporate citizenship agenda for their company?For many companies there is often a significant disconnect between the “philanthropic” activities of the foundations and the broader corporate citizenship issues the company is trying to address. How can this gap be closed? Can or should corporate foundations play a more active role in educating and helping their firms in the development of their broader corporate citizenship strategy from sustainability to human rights? Should corporate foundations be more active in the public policy arena?
- What role should corporate foundations play going forward in the company’s broader social engagement and community involvement strategy? As companies move from a model of social engagement based on transactional support for others to a social partnership and shared-value model of engagement, the role of foundations as a primary “face” and vehicle for community support is changing. In the emerging shared-value and community investment model of community engagement, corporate foundations and their philanthropic resources become just one part of a package of corporate resources designed to significantly impact a particular social issue. To sustain this investment like any other also requires that companies be able to measure the business value as well as the social value of these investments. In this shared-value model of full engagement, we need to better understand where foundations can best add value, both as a catalyst for this larger relationship and a participant in it. One of the challenges facing corporate foundations in the shared-value model of community engagement is the legal restrictions on the benefit a company can receive for a philanthropic “gift”. This may make it more attractive for initiatives specifically designed to create measurable value for the company to be supported through other funding windows not subject to the legal constraints of a foundation.
- How do current models for the incorporation and management of corporate foundations help or hinder companies as they try to create greater value for both the company and society. While the vast majority of corporate foundations are incorporated as “non-operating” foundations, in recent years some companies, in particular those in the pharmaceutical sector, have established “operating” foundations, which can better support and manage direct services contributions of the company (in 2006 pharmaceutical foundations contributed $2.6 billion in in-kind contributions). Are there other alternative models such as these for structuring and managing corporate foundations so that they are more effectively integrated and aligned with the business?
These questions will be explored in greater detail at our upcoming International Corporate Citizenship Conference in a session titled “Adapting to 21st Centure Reality: Corporate Foundations in Transition.” They are also the foundation for a broader research initiative on the future of corporate foundations that is being launched by the Boston College Center for Corporate Citizenship and the Council on Foundations. For more information on how you can get involved with this important initiative, please contact Chris Pinney, Boston College Center director of research and policy, at pinneyc@bc.edu, 617-552-4299, or Allison Lee, senior research associate, at Allison.lee.1@bc.edu 617-552-1552.
