The Rise of Corporate Philanthropy

Disintermediation continues to impact the business world, as consumers not only seek to interact with brands on a more personal level, but now also expect the brands they support to participate in causes for the betterment of society. If “the customer is always right” axiom holds true, then the business world may find itself under stronger pressure to adapt to these changing attitudes.

B Corporations

B Corporations, or mission-driven businesses, are on the rise. These businesses are “designed to make a profit but not at the expense of the people who work for it, the communities where we operate or the natural environment.”

TEDxPhilly recently featured Jay Coen Gilbert—founder of certification organization B Lab—talking about this new business trend, arguing that society should shift from a system of shareholder capitalism to stakeholder capitalism. “Governments and nonprofits are necessary,” Gilbert contends, “but insufficient to the task of solving our most challenging problems. The hard reality is that we have no choice but to harness the power of business to solve social and environmental problems.”

Over 1,000 companies are registered for B Corporation status, and over 60 million Americans say the social and environmental impact of the products that they buy (and the companies that are behind those products) matter to them rather than just the cost and quality of the product. The New York Times recently published an article reporting that major corporations are interested in impact investment with socially responsible corporations, and The Huffington Post reports that smaller shareholders are increasingly interested in Social Responsible Investment.

Gilbert concludes his talk asking a question worthy of pause: “How do we use business as a tool for social change?” Whether one’s goal is philanthropy, social change, or business growth, the introspection required in merely asking this question is undeniably a stride towards sustainability.

Redefining Corporate Success

According to a corporate giving trends report, giving increased 64% for a majority of companies from 2010 to 2013. The strongest increase was in the consumer staples industry. At CECP’s 2014 Board of Boards, CEOs reported that employees are the stakeholders who most significantly influence a business’ decision to “expand community investments.”

The Nielsen Global Survey on Corporate Social Responsibility reports that a majority of consumers indicate they are willing to pay extra for products and services from companies that are committed to positive social and environmental impact. The report indicates that the “propensity to buy socially responsible brands is strongest in Asia-Pacific (64%), Latin America (63%) and Middle East/Africa (63%).” North America comes in at 42 percent, slightly ahead of Europe at 40 percent. Fifty-two percent of respondents indicated that their purchasing decisions are in part based on the product’s packaging: “they check the labeling first before buying to ensure the brand is committed to positive social and environmental impact.”

Do these sentiments mirror actual business performance? A March 2014 report shows a two percent average annual sales increase for products that boast their sustainability on their packaging, and a five percent increase for products that marketed their sustainability throughout the market. Nielsen’s global leader of public development and sustainability Amy Fenton notes, “It’s no longer a question if consumers care about social impact. Consumers do care and show they do through their actions. Now the focus is on determining how your brand can effectively create shared value by marrying the appropriate social cause and consumer segments.”

by Jack Martin

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