Giving to boost the bottom line

When business gives to charity, it’s about more than generosity

Giving to boost the bottom line

Thirteen years ago, the phone ringing in David Cooper’s office gave him a bad feeling. Every month, he had to turn down $1 million worth of used office furniture from businesses wanting him to take it off their hands. What a waste, he thought. But the owner of Cooper’s Office Furniture didn’t have enough space in his 50,000-sq.-foot store to accept it. Realizing there was a vast amount of used and unwanted furniture out there, Cooper started diverting some of the free items to charities since it was cheaper than paying for storage. Word of his donations grew in the community surrounding his downtown Toronto shop, and so did the number of calls begging him to take other free items like computers and clothing. Cooper founded the not-for-profit organization Supporting Today’s Underprivileged For the Future (STUFF) Canada in 1995, which brokers the exchange of surplus items between businesses and non-profit organizations in and around Toronto, at no cost.

STUFF Canada is one of the various ways in which Canadian businesses invest in their communities, as described in a new report released this week by Imagine Canada, a national charitable organization that researches and promotes the non-profit sector. The report systematically tracks the contributions of Canadian businesses to charitable and non-profit organizations, and describes the efforts of 93 companies giving back to their communities. It’s the first report in Canada to take an in-depth look at business community involvement, after a two-year survey of over 1,500 businesses to compare philanthropic initiatives of some of Canada’s largest corporations (with revenues of over $25 million per year) and other members of the broader business community.

The aim is to provide insight for the non-profit sector and companies looking to assess their contributions as more corporations realize the business benefits of having good community investment programs. “One of the interesting things was that there was a sense [for businesses] of ‘it’s the right thing to do,’ and there are other reasons to help as well. It can help their business, and for some of the larger organizations, we saw that community investment is becoming an important thing for them to recruit and retain employees,” says Georgina Steinsky-Schwartz, CEO of Imagine Canada.

The report is broken down into sections discussing the types of contributions companies make (money, products or services); where they direct their support; motivations for donating; the challenges they face; and how to encourage stakeholder support for philanthropic programs. The study found nearly 97 per cent of the large corporations surveyed donated money to charities/non-profit groups (compared to 76 per cent of businesses overall). In addition, 73 per cent donated products and 68 per cent contributed services. While it’s hard to measure the value of the indirect support these companies offer, the amount of direct help they provide is substantial—businesses reported giving $333 million in cash, goods and services across the country in the previous year.

Not surprisingly, the report found that corporations often align their philanthropic approach with business interests. Considering the increased consumer demand for environmentally sustainable, and fair trade products (Canadians spent over $38.4 million on fair trade certified coffee last year), it’s easy to see why CEOs offer up resources to promote their brand as socially aware.

More and more, executives are coming around to the realization that, far from being a drain on shareholder profits, fighting disease and helping the less fortunate is lucrative in the long run. In a 2006 study entitled “Is Doing Good Good for You? Yes, Charitable Contributions Enhance Revenue Growth,” researchers at New York University and the University of Texas at Dallas found that corporate giving increases brand loyalty, brand awareness (especially for companies sensitive to public perception) and employee retention. This in turn improves profitability by “raising employee morale and productivity.” The same study also found that for every one dollar a company allocates to its charitable giving budget, future sales grow on average by six dollars. And in keeping with Imagine Canada’s findings on corporate willingness to give, a recent global survey by The Economist found that only four per cent of businesses feel that corporate social responsibility (CSR) is “a waste of time and money.”

Imagine Canada’s assessment found that corporate support is often driven by self-interest in the sense that such giving programs assist in building a strong community and can create a ready market for their products and services. Pfizer Canada is one illustration of how “strategic giving” plays a crucial role in a corporation’s philanthropic activities. The Canadian arm of the pharmaceutical corporation gave over $20 million in 2006 to more than 1, 000 groups focusing on science and health education (which helps foster future product development), disease awareness (which teaches people about health problems and treatment), and product donation, among other priorities. The Canadian unit of the company also publishes an online list of the types of non-profit groups and activities they tend to support, helping limit the number of requests they receive from organizations that don’t match their business objectives.

Some companies have begun measuring the internal benefits of their contributions in detail. Manulife Financial conducted a study last year measuring the value of their employee volunteer programs. The company donated over $25 million to various organizations in 2007, while 18,000 employees gave 58,000 hours of their time to support causes, and discovered that employees who volunteer were three times more likely to stay with the company. “They developed leadership skills,” says Sara Saso, director of community relations at Manulife. Saso added closer bonds with co-workers and better communication skills are gained through volunteering. “It proves to us what we knew anecdotally,” she says. “That this adds value to our business.”

Roughly 90 per cent of Canadian businesses prefer giving to social service organizations, followed by health groups, post-secondary institutions and arts and culture groups—but philanthropy doesn’t come without its challenges. Three-quarters of Canadian companies in the study said they faced difficulties over increased requests for donations. Other problems were managing the expectations of multiple stakeholders or a lack of resources. But the latter doesn’t have to prevent firms from lending a hand. Direct funding accounted for the majority of contributions, but 19 per cent of all donations came in the form of sponsorship and cause marketing, according to the study.

“People tend to think only about what dollars businesses tend to give,” says Steinsky-Schwartz. “But what we were surprised at was the extent to which particularly large businesses leverage all kinds of resources to get involved in the community. There are many different ways businesses get engaged and that’s one of the key messages.”

Instead of simply cutting a cheque, Cooper says he feels fulfilled when he is able to connect almost any surplus product with local charities (five years ago, he says he was able to furnish 70 apartments for women in the Toronto area who were escaping abuse via local shelters). Much has changed for Cooper in the 13 years since STUFF Canada was founded. Over 1.1 million tonnes of goods have been diverted to charities through the organization, and he now looks forward to answering his phone.