Opinion: Corporations should treat philanthropy dollars like business dollars. Here's why.

Photo by: pasja1000 / pixabay

Super Bowl viewers got to see a 1-minute advertisement showing employees of Anheuser-Busch InBev sending cans of emergency drinking water to areas hit by natural disasters. We saw an inspiring story showcasing the best of the corporate world helping people. Visiting AB InBev’s website, we can easily find a page highlighting donations from their foundation tallying $573 million over 20 years. Given how the firm promotes its corporate philanthropy, a naive onlooker might think this is a central part of their business.  

However, a closer look at the financials reveals a different picture. Comparing the $43.6 billion dollars of 2015 corporate revenue to the $10 million dollars donated by the Anheuser-Busch Foundation in the same year, company philanthropy represents about 0.02 percent of revenue. That is, for every five cases of Budweiser you buy for $10 each, the company donates about a penny. It seems audacious that this level of philanthropic giving warrants being promoted in a 1-minute Super Bowl commercial, especially given that NBC reported that a 30-second slot cost more than $5 million.  

Anheuser-Busch InBev is not an outlier. For every $100 of business sales, United States companies made charitable donations of about a dime. It is ironic that when you visit corporate headquarters, you’ll usually walk through lobbies showcasing awards and recognition from recipients of those dimes. The dimes do add up to over $18 billion.

Economists and business people have debated whether corporations should even give to charity. The Nobel Prize winning economist Milton Friedman said: “There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits.” Others believe companies have an obligation beyond profit. Bridging the gap is the notion that charitable giving is good for business because it improves employee morale and customer loyalty.  

As long as corporations are promoting their giving so heavily, it is fair to ask the question: How effective is corporate giving? The charities that corporations support almost always sound worthwhile — they are often well known or focus on causes that are universally approved of. And these nonprofits almost always do some degree of good. But my organization has a unique perspective that focuses on identifying and promoting the most cost-effective, high-impact charities.  

While many donors seek professional-caliber research for charitable recommendations, most corporations have been conspicuously absent from the “effective giving” movement. Instead, their charitable selection “research” is often done in tandem with their marketing departments. They often look for opportunities with high-profile naming rights or other features that are easy to showcase, rather than trying to do as much good as possible with their gifts. In fact, 55 percent of corporations have said that business concerns for philanthropy should be given equal or greater weight than social ones. That is, many actually believe that “effective philanthropy” means using charitable giving to improve their corporate position and bottom line.  

As a notable example, JPMorgan Chase & Co.’s Community Giving was a massive campaign to have the public vote for recipients of $5 million in grants, ultimately culminating in their financing a 2-hour primetime special on NBC — “The American Giving Awards” — to announce the winners — and promote JPMorgan throughout. The resources the company put into this initiative likely far exceeded the actual donations, not to mention how much of a distraction it was for many of the nonprofits trying to persuade people to vote for them. And all of this was to allocate donations based on a mass popularity contest, rather than using a research-driven approach.  

It is not uncommon for the resources corporations spend promoting their giving to be greater than the actual gifts. Anytime you see a company making high-profile promotion of its giving, it is worth wondering about their intent, and if that is also reflective of the research they did — or didn’t — put into selecting charities.  

Is this approach actually effective at driving corporate profits? Presumably, many think it is — otherwise they wouldn’t spend so much effort on it. However, if the public sees through the façade, it could backfire. “Greedwashing” is a term coined several years ago to describe the way corporations sometimes promote their charitable giving in order to direct attention away from bad behavior in their core business. In many ways, it could apply to much about corporate philanthropy in general.

One line of thinking is that we should praise and support corporations for the good they do with their limited giving. Another is to expect more from them — if not more money, although that would of course be wonderful, at least more consideration for high-impact giving within their charitable budgets. Wouldn’t it be great if those dimes did the most good possible?

Corporations should research charitable impact with the same thoroughness they apply to their other decisions. While some will take this approach because it is the right thing to do, it would be naïve to expect most businesses to give away money without expecting something in return. For them, the payout might be to avoid the risk that the public eventually recognizes the smoke and mirrors of their current strategies of throwing around dimes to improve their images. Ironically, corporations willing to focus their giving on effectiveness will be early-adopters, and may be viewed as philanthropic trailblazers, ultimately earning much higher reputational benefits than they do at present.  

Read more Devex coverage on philanthropy.

About the author

  • Image%2520%25285%2529

    Charlie Bresler

    In 2013, Charlie Bresler became volunteer executive director of The Life You Can Save, a nonprofit dedicated to reducing extreme poverty and its devastating effects on over 700 million people globally. Through his financial support and leadership, Charlie has helped TLYCS’s founder, Peter Singer, develop the organization from the ground up.