The business of doing good

In the recently held 32nd annual membership meeting of the Philippine Business for Social Progress (PBSP), chairman Manuel V. Pangilinan talked about the competitive advantage of engaging in corporate philanthropy. He stressed that corporate giving initiatives, as they are happening today, are not targeted and are implemented piecemeal. Quoting the economist Milton Friedman, he stated that majority of corporate contribution programs are diffused and unfocused. Most consist of numerous modest cash donations given to local civic causes, or provide general operating support to schools or national charities in the hope of generating goodwill among employees, customers, and the community where the company operates. Rather than being tied to well-thought-out social programs, the contributions often reflect the personal impulses of executives or employees.

However, Pangilinan underscored that there is truly a more strategic way to approach it. First, corporations can funnel their contributions to a social intermediary with an organization and objective such as PBSP. Second, corporations can use their charitable efforts to improve their competitive context manifested in the quality of the business environment in locations where they operate.

A handful of companies have begun to use context-based philanthropy to achieve both social and economic gains. Pangilinan cited the Cisco Systems experience, which invested in an ambitious educational program – the Cisco Networking Academy – to train computer network administrators, thus alleviating a potential constraint on its growth while providing attractive job opportunities to high school graduates. By focusing on social needs that affect its corporate context and utilizing its unique attributes as a corporation to address them, Cisco has begun to demonstrate the competitive advantage of corporate philanthropy.

As PBSP looks at the coming year, Pangilinan mentioned some basic parameters. First, the strategic direction of PBSP will focus on alleviating poverty, applying information technology (IT) in the war on poverty, and promoting corporate social responsibility (CSR). Second, the campaign against destitution will continue to center on integrated areas resource management that brings in specific development programs on the relief of urban indigence. Third, IT attention will be directed to provide education for farmers, workers, and small and medium enterprise entrepreneurs. Fourth, PBSP’s CSR program will be predicated on inviting corporations to participate in community partnership numbers, and involvement with its many activities.

Pangilinan subscribes to the idea that the more closely a company’s philanthropy is linked to its competitive context, the greater the company’s contribution to society will be. He adds, "When corporations pursue their philanthropy in such a manner, and conduct it in a systematic way rather than being left to the charitable impulses of individual donors, context-based philanthropy can offer companies a new set of advantages that can justify the charitable investment of resources. At the same, it can unlock a more powerful way to make this world a better place."

Good Deeds, Good Deals

Corporate philanthropy is more than just a moral imperative. It is a strategic tool to create a competitive business advantage, build opportunities, subdue threats, and manage reputation risk. Company heads that regularly allocate corporate resources on "good deeds" projects justify such high investments costs by arguing that a citizenship portfolio can help integrate corporations into the social fabric of specific localities by strengthening the public bonds between the company, its employees, and identified communities.

The paper written by Fombrum, Gardberg and Barnett of the Stern School of Business, NYU describes five complementary motivations for pursuing corporate philanthropy, namely:

1) It builds community ties and maintains a license to operate. Chris Marsden of British Petroleum reveals that the benefits come in various forms, but they can all be categorized as reputation enhancements, venues for morale and personal development of employees, and platforms for the creation of a healthy company from which business can prosper.

2) It increases morale and attachment of current employees. Walter Haas Jr., chairman, Levi-Strauss, believes that if you can create an environment that your people can identify with, that is responsive to their sense of values, justice, fairness, ethics, compassion, and appreciation, they will help ensure the success of the company.

3) It prepares and attracts potential employees. More than ever, says Arnold Langbo, chairman of Kellogg Company, the success of business is directly related to the success of societies, families, and communities in preparing a competent workforce. Langbo stresses that it is good business to view corporate philanthropy not only as charity but as a wise and strategic investment in the future.

4) It develops potential customers. The long term continued success of businesses, as Sir Allen Sheppard, chairman, Grand Met, points out, depends on the existence of prosperous consumers to buy those products. A company’s involvement must be genuinely business driven, even if measuring the returns is not that easy.

5) It enacts an environment where a company can prosper. Charles Fettig, senior marketing director of Merck, emphasizes, "We’re a very successful company because we make a lot of money and we do a lot of good things." There is no direct return on corporate philanthropy projects, and there are no guarantees if there will be any, but it does make a company worth dealing with.

These sample statements capture the essence of the relationship between a company and society expressed in terms of image or reputation, reciprocity, social integration and economic performance. They justify corporate philanthropy as societal investments rather than an expense, even if all the executives quoted agree that evaluating and measuring the returns from those investments is very rarely implemented.

Despite the difficulty in directly quantifying the gains of corporate philanthropy, businesses must overcome the myopic tendency to look at it as pure expense. The beneficial link between citizenship and profitability may be a slow burn, but it will surely come, demonstrated in the more positive way the company is seen by its consumers and stakeholder groups.

Corporate philanthropy is an investment in heaven, and heaven is waiting for companies with a heart and a soul.

Investments In Heaven

Since Christmas is the season of joy and sharing, companies are encouraged to seriously consider putting their names and resources to philanthropic programs that can help improve lives. Here is a list of possible advocacies:

Rural Medical Missions

Disaster Relief Teams/Volunteer Brigades

Adopt a Future Olympic Gold Medalist

Dugong/Tamaraw/Philippine Eagle Protection and Propagation

Reading Campaign

Soup Kitchens for Street Children

Prisoner Reform Program

Electrical/Plumbing Livelihood Program

Manila Zoo rehabilitation and Maintenance

Operation Harelip

Tribal Education & Literacy

Dyslexia Awareness

Adopt-A-School

Waste Management

Art & Music Festival

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I will be delighted to receive your own list. Send it to bongo@vasia.com. Who knows, you can get a partner company to pursue an idea or two in that list. Merry Christmas!