The Business of Giving

Corporate giving is big business. In 2014, U.S. companies’ charitable contributions totaled $17.77 billion—more than the budgets of 22 states. In Minnesota, corporate grantmakers donated $740 million in 2012, up 2 percent from $727 million in 2011, according to the latest report from the Minnesota Council on Foundations.

And these are just financial contributions. Businesses are increasingly involved in other efforts, such as donating product or encouraging employee volunteer programs.

Whatever the form, corporate giving is popular and growing: In 1976, several Minnesota businesses formed a coalition to encourage charitable giving in the state. Membership in this club required a company to donate at least 2 percent of its pre-tax earnings to the community. Having 23 member companies at launch, this club, now known as the Minnesota Keystone Program, now boasts 187 businesses on its roster.

“Corporate philanthropy fits within the larger concept of corporate social responsibility [CSR] that refers to a company’s prosocial duties,” says Associate Professor of Marketing Carlos Torelli. “Companies are increasingly concerned with CSR as consumers are growing in their social concerns—think millennials, for instance. Thus, firms are responding to a shift in consumer needs to support sustainable business practices.” 

A company’s philanthropic effort, then, can be an effective tool to meet its customers’ rising expectations of the role businesses play in society, says Strategic Management and Entrepreneurship Assistant Professor Jiao Luo. Helping sharpen this tool is the relatively new concept of “strategic philanthropy,” in which companies derive value from their charitable programs, not due to the goal of enhancing their reputation or brand, but because the programs support the company’s core business objectives.

“The concept of strategic philanthropy, introduced 15 years ago, has propelled firms as funders to be more business-like in giving,” Luo says. “As a result, the majority of companies now seek concrete business benefits from their philanthropy programs, such as building knowledge about new markets and informing areas of innovation. Also, their philanthropic programs are much more targeted toward addressing some of the social and political issues that are relevant to their businesses.” 

Research shows that CSR has positive effects on consumers’ attitudes and behaviors.

“Of course, the positive relationship between CSR and consumer behavior is nuanced, and multiple factors moderate the relationship, like sincerity of motives, brand image, cause fit, and consumers’ values,” Torelli says. “Positive benefits from CSR are particularly obvious for companies that target consumers with prosocial values. CSR is less effective when consumers infer that the company’s actions are not sincere or when the company’s image is misaligned with a CSR image or with the cause that is supported.”

In an example of the former, Luo points to a study done on charity and non-charity auctions of otherwise identical products on eBay that found consumers would pay more for products that generate charitable donations. In a working paper, “Competition between Organizational Forms: Banks vs. Credit Unions after the Financial Crisis,” Luo and co-authors found that commercial banks donating to local communities were shielded from the negative legitimacy shocks posed by the 2008 recession.

There are internal benefits to corporate giving as well.

“A commitment to philanthropy also facilitates efforts to recruit and retain talented employees,” Luo says. A study done on online labor marketplaces found that workers—high-ability workers in particular—are willing to work harder for less payment when given information on the employers’ engagement in charitable giving programs.

A generous state

In terms of corporate giving, Minnesota has some of the most generous businesses in the country. CECP, a CSR coalition of more than 150 of the world’s largest companies’ CEOs, found in a 2014 survey on 2013 corporate contributions that Minnesota has the highest cash-giving threshold—$63.6 million—to qualify for the top quartile of companies giving to charitable organizations.

“I like that corporations are increasingly seeing their philanthropy as integrated into a larger corporate social responsibility strategy and seeing that larger CSR strategy as integrated into their overall corporate strategy,” says Jennifer Ford Reedy, the president of the Bush Foundation, a 62-year-old organization that supports Minnesota, the Dakotas, and the 23 Native nations within those borders. “Customers and the general public are expecting more from companies in terms of their social impact. In turn, more and more businesses of all kinds and all sizes are recognizing that doing good—or at least not doing harm—is a key factor in smart business strategy.”

In its long history, the Bush Foundation has seen the ebb and flow of charitable giving, as well as the rising of new trends.

“Some business giving is exactly the same as it has been for a long time—like local businesses sponsoring baseball teams or doing United Way drives. That’s all good and is a particularly important contribution to smaller communities,” Reedy says. “Some business giving has changed a lot—particularly for larger organizations that have dedicated staff working on their philanthropy. Corporate giving has also changed in some ways that are unique to their business setting. A lot of organizations have worked to more closely link their giving objectives to their corporate objectives. Health care companies are now more likely to tie their giving to health, rather than more general community giving.”

Reedy says she hopes the future of corporate philanthropy continues to further blur what is business and what is giving.

“I look at examples like Land O’Lakes, which has a breakeven business line working with USAID funding to help farmers around the world,” she says.

Created by Archibald Bush and his wife, Edyth, the Bush Foundation is a product of 3M, Reedy says. “William McKnight and Archibald Bush worked together to build 3M into a strong global firm, and both created foundations that have given billions to the community,” she says. “It is a powerful example of how we in Minnesota have benefited from a philanthropically minded corporate community.”

Investing in the community

Since 1953, 3M has donated almost $1.45 billion in cash and in-kind gifts.

“Specifically, we focus on three priorities: education, community, and the environment, with our people as the foundation of these investments,” says Kim Price, vice president of 3Mgives and the 3M Foundation. “3Mgives builds stronger communities through strategic social investments and thoughtful engagement of 3Mers worldwide.” 

3Mgives supports its vision by prioritizing investments in its focus areas.

“For example, 3M strives to build a robust pipeline of STEM [science, technology, engineering, and mathematics] and business talent by funding education initiatives that drive success in STEM and business,” Price says. “3M’s 40-year partnership with St. Paul Public Schools funds educational opportunities for the youngest learners. 3M also donates products to advance learning opportunities and 3Mers support schools nationwide through volunteerism.”

Price says 3M’s charitable work helps support the company’s brand promise.

“3M is a company that applies science to life. Every day, 3M scientists apply science in unique ways to create products that improve lives,” she says. “3Mgives invests in initiatives that help young people understand how science impacts their daily lives and encourages and supports interest in science.”

These investments embrace a wide range of STEM initiatives, from funding college scholarships and supporting non-tenured faculty through research grants to partnering with elementary schools to enhance learning opportunities, Price says.

“Companies are looking for ways to be more impactful and want to know that investments are making a difference, so there is more emphasis on measurement and impact,” she says. “Another key strategy for many companies is increased product donations. In 2014, 3M donated more than $50 million in products and services to non-profit organizations, including more than $1 million in respirators and other health care products to help with the Ebola crisis.”

Last year also saw the launch of 3M’s first Global Volunteer Day, in which the company engaged its people in sharing time and talent with organizations focused on youth development.

“Volunteerism is valued. A recent survey found that 3Mers who volunteered through a company-sponsored program were more likely to recommend 3M as a place to work to their friends and family,” Price says.

Like many multinational companies, 3M has been expanding its social investments to its international locations.

“Supporting international communities is an important part of the corporate social responsibility strategy,” Price says. “To help develop and implement a global social investment strategy, 3Mgives established a Global Advisory Council [GAC] that helps to inform and influence our global strategy, including driving internal coordination and collaboration. With the help of our GAC, we are building community partnerships with innovative organizations that have a deep reach into 3M international locations.”

The embrace of business and philanthropy

The General Mills Foundation is deeply committed to international support as evidenced in its mission—Serving the World by Nourishing its Communities.

Melendez agrees with Reedy that corporate philanthropy is blending into a company’s business side. “Historically, the role of philanthropy was primarily driven by a moral obligation to give back. The field focused on the fact that companies were giving, regardless of what they were giving to,” she says. “In the past, there had always been a clear and distinct separation of philanthropy from the business. Today, the two are closely interconnected.”

Now, corporate philanthropy is looked upon as an asset that has the ability to drive great value for companies and communities, Melendez says.

“In many cases, companies have used philanthropy to drive positive change on challenging societal issues, to engage employees, and to create new business markets,” she says.

Melendez says General Mills’ points of philanthropic focus tie into the areas it can greatly impact—hunger and nutrition wellness.

“We work hand-in-hand with the leadership team as well as brand teams to carefully consider when and where we make charitable investments to ensure all of our work aligns with our company purpose and values,” she says. “We are focused on awarding larger, strategic, and impactful grants and we are focused—now more than ever—on measurement and impact, as we have a duty to demonstrate that our philanthropic investments are making a true difference in our communities.”

Demonstrating impact can be challenging but it is paramount. Key stakeholders are now asking foundations to measure and clearly articulate the impact related to the investments they make. “They are also being asked how their investment ties to the business; how they add value,” Melendez says.

Meaningful impacts

Target has measured its impact in part by high school graduation rates.

“In 2010, we set a goal to double our support for education to reach $1 billion by the end of 2015. In addition, we knew that the country was facing a dropout crisis with nearly one million students not graduating on time,” says Target Corporate Social Responsibility Senior Director Tracey Burton. “I’m happy to say that we just recently reached our ‘$1 billion for education’ milestone. Much of our support has focused on classroom resources and helping children read proficiently by the end of third grade, because those who can read are far more likely to graduate from high school ready for college and career.”

Since Target made its commitment in 2010, the U.S. high school graduation rate steadily rose to a record 81.4 percent in 2013. The goal is to reach 90 percent by 2020. “We know there’s still work to be done, and that big issues like these won’t be solved by one company or organization alone,” Burton says.

Community giving has always been a cornerstone of Target. Since 1946, the company has given five percent of its profit—today totaling $4 million per week—back to the communities in which its customers and employees live and work.

“We give, not only because we believe it is good for business, but because we believe corporations have unique skills and resources to contribute to keeping communities healthy and vibrant,” Burton says. “We increasingly look to philanthropy as one part of our corporate social responsibility portfolio. We’ll always evaluate our giving strategies to be locally relevant based on the needs of our guests and communities, but we’re also looking at how we leverage our giving to address broad societal issues.”

And giving is not just done through dollars. It can take the form of marketing advice, offering technical support or management expertise, or volunteers.

“Volunteerism is a huge part of who we are as a company,” Burton says. “In 2014, our team members volunteered more than 1 million hours of their time to support community initiatives.”

Engaging employees

One of the biggest assets a company has is its team members, says Mike Monahan, ’76 MBA, senior vice president of external relations at Ecolab and president of the Ecolab Foundation.

As a service company, Ecolab charges its employees to assist customers with their problems and to do what it takes to get the job done right.

“We think that business philosophy directly transfers to what we do in our philanthropic activities, in which we want to work to improve our communities and view associate engagement as an important part of our efforts,” Monahan says. “We want our associates to be proud of where they work, and while part of that is what they do to assure our customers do well, another critical part is doing well for the communities in which we live and work. We believe that is the right type of leadership to espouse and feel it is an important factor in producing better engagement among our associates.”

Ecolab’s interlocking of its business and philanthropic practices has paid dividends: The company has been named as one of the world’s most ethical companies for nine straight years by the Ethisphere Institute, selected as one of the world’s most admired companies by Fortune magazine this year, and ranked number nine on Corporate Responsibility Magazine’s 100 Best Corporate Citizens list of 2015.

“We are fortunate in that by doing what is right, Ecolab has received recognition, not only as an ethical corporation, but also as a leader in making the world a better place,” Monahan says.

Making the world a better place

Ann Judge takes a phrase from American diplomat and scholar John Sloan Dickey: “The world’s troubles are [our] troubles.” For Judge, chief human resources officer of Bristol-Myers Squibb and ’91 MA-IR, these words are a call to action.

“Companies have new opportunities to mobilize philanthropy to help solve these problems around the globe,” she says. “Area knowledge, core competencies, geographic reach, voice, and influence are all assets that can be brought to bear—and which can create more shared value than just financial contributions alone.” 

These assets are embodied in the evolution of the Bristol-Myers Squibb Foundation, which is celebrating its 60th anniversary this year. “The foundation started out with giving to host communities, matching employee donations, and disaster relief,” Judge says. “This evolved to include dedicated grant programs for biomedical research, science education, and pathways to medical careers for minority students.”

In 1999, the foundation created the $100 million Secure the Future initiative to address the HIV/AIDS epidemic in the five most heavily affected countries in sub-Saharan Africa. This program has grown to $180 million in grants and more than 240 partners funded in 22 countries. Since 2000, seven additional grant-making programs have been launched in alignment with Bristol-Myers Squibb’s strategic therapeutic areas, including Delivering Hope (hepatitis B and C in Asia), Bridging Cancer Care (cancer nursing in Central and Eastern Europe), and Specialty Care for Vulnerable Populations and Lung Cancer.

Mobilizing a company core competency through employee engagement, the foundation launched FinanceGIVES in 2011 to deploy finance employees to work for up to three weeks with non-profits in the Secure the Future program in Africa. This helped both the non-profits improve their capabilities in financial management and the employees in developing their leadership, teambuilding, and cultural adaptability skills.

“The future of corporate philanthropy turns on creating even more value and impact,” Judge says. “Today it means much more than financial contributions and support for worthy causes. It also means engagement and partnership—being meaningfully engaged in addressing challenging health, social, and environmental issues, and facing them with others through partnerships that harness the strengths of business, government, non-profit organizations, academia, and most importantly, affected people and communities.”

The state of giving in Minnesota

A conversation with Trista Harris, president of the Minnesota Council on Foundations

Corporate grantmaking is vital in Minnesota. In 2012, company foundations and giving programs comprised just nine percent of the state’s 1,450 grantmakers, but they gave 47 percent of all grants for a total of $740 million.

As a state, Minnesota is lucky. We have 17 Fortune 500 companies headquartered here, which puts us at number two per capita in the country. However, corporations distribute grants more widely than other types of grantmakers, especially as companies merge and become more global in nature. In 2012, 71 percent of Minnesota’s corporate grant dollars went out of state, reflecting businesses’ goals of supporting their headquarters’ communities in Minnesota along with facilities in other parts of the nation and world where they increasingly have employees and customers.

How has the concept of business giving evolved over the past several years?

Companies have made several types of changes to their community involvement in recent years. They have strengthened links between business goals and giving priorities, which has sometimes led to a narrowed giving focus.

Companies have also intensified collaborative efforts, working with other businesses, nonprofits, and government agencies on tough social problems. They are investing money, expertise, and much more in large-scale joint efforts. Hunger-Free Minnesota, a statewide coalition that aims to close the 100 million missing-meal gap, is a prime example of Minnesota’s corporations and nonprofits joining forces for the greater good. Each organization involved with Hunger-Free Minnesota is augmenting its cash giving with noncash donations of employee time and talent, which is also a growing trend.

What has been driving these changes?

Younger consumers are more conscious about where they spend their money, which has led companies to be more transparent with their corporate giving and corporate social responsibility efforts. In addition, consumers have instant access to information, and can use apps like Buycott to very quickly ensure that a purchase aligns with their values.

Younger employees are also more concerned about the reputations and social impact of their employers, and they are more apt to speak out regarding their concerns. Companies that fail to reflect the concerns of their customers and employees won’t continue to thrive.

Are there any areas of concern?

I have a concern that Minnesota’s rich corporate-giving history won’t continue. Today we have fewer and fewer CEOs who are recruited locally, and thus they are unfamiliar with our state’s expectations on giving back. It used to be that Minnesota CEOs were familiar with these expectations, including joining the boards of nonprofit organizations. This culture doesn’t exist in the same way now than it did historically.