Invest in Community

Is corporate giving compatible with business growth?

For consumer brands – yes.

6:1- that’s the ratio of increased sales to corporate donations that companies in retail and financial services might expect.

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A study of 251 firms on the Taft Corporate Giving Directory showed consumer-focused firms like Walmart, Ford and Citibank had higher sales, net income and market value following their donations than their peers in industry-focused firms. On average, a $500,000 increase in charitable contributions generated $3 million in sales. This equates to $6 in sales for every $1 donated for companies in retail or financial services.

For businesses like IBM and Mobil serving industry or government sectors rather than the individual consumer, corporate giving did not result in the same financial gain.

Takeaway
For consumer-facing organizations, corporate giving is an effective tool to generate mutual benefits for your organization and a given cause. For industry-facing organizations, consider alternative ways to drive sustainability activities that benefit your bottom line. This website offers plenty of options.
Source: Lev, B., Petrovits, C., & Radhakrishnan, S. 2010. Is doing good good for you? How corporate charitable contributions enhance revenue growth. Strategic Management Journal, 31: 182-200.
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Case Study

Grow Impact and Benefits through Strategic Community Investment

Great-West Life

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Like many corporations, Great-West Life once received and fulfilled charitable requests ad hoc, with no overall strategy other than a desire to do the right thing.

“We needed a strategy around corporate giving that aligned with our values as a diverse, socially responsible financial services organization and with the challenges in the communities where we live, work and conduct business.” For consumer-facing organizations, corporate giving is an effective tool to generate mutual benefits for your organization and a given cause. For industry-facing organizations, consider alternative ways to drive sustainability activities that benefit your bottom line. This website offers plenty of options.
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Framework

Corporate giving is just one approach. Use the Social Change framework to explore 19 mechanisms for effective social investments.

When is corporate giving risky?

When your reputation is tarnished.

One-time donations from poor corporate citizens do not contribute to an improvement in stock price.

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In 2005, Hurricane Katrina devastated the southern United States. The ripple effect of economic turmoil travelled through the entire country and left few companies unaffected. In a study of Fortune 500 firms affected by Katrina, those with bad reputations that chose to make charitable contributions to citizens and companies affected by the hurricane experienced no significant stock price returns or reputational improvements.

Takeaway
Corporate giving will not make up for past mistakes.
Source: Muller, A. & Kraussl, R. 2011. Doing Good Deeds in Times of Need: A Strategic Perspective on Corporate Disaster Donations. Strategic Management Journal 32: 911-929.
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When you give too much.

For all organizations, there is a point of no returns. At this point, giving stops paying off and actually hurts financial performance.

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Data from 817 firms listed on the Taft Corporate Giving Directories revealed that after a certain point corporate donations stopped paying off. For every company, the direct costs of corporate giving – time, money and resources – eventually outweigh the financial return.

When corporations become too generous, investors and other stakeholders may develop legitimate concerns about the use – and misuse – of corporate resources.

Takeaway
Know how much is too much for your firm. Excessive giving can negatively impact financial performance.
Source: Wang, H., Choi, J., & Li, J. 2008. Too little or too much? Untangling the relationship between corporate philanthropy and firm financial performance. Organization Science, 19(1): 143-159.
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