The finance of philanthropy

in Money by Anthony Fensom
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finance of philanthropy

Big companies may have superior finances, but small and medium-sized enterprises can also engage in charity efforts and achieve business benefits. That's the message from Paul Olds, who recently established consultancy HumanKind to help businesses of any size gain from strategic corporate social responsibility (CSR) activities.

"Big business does it well most of the time, but many small businesses don't seem to have the time, energy or capabilities to benefit from CSR," says Olds. "But it's possible to get exactly the same benefits if you really think about what you aim to achieve from philanthropy."

According to Olds, being commercially successful and socially responsible "aren't mutually exclusive goals" and can help contribute to the bottom line as well as driving business growth.

"The most common benefits are the feel-good factor and possibly some positive media attention. This is just the tip of the iceberg. Much more can be achieved if appropriate planning and frameworks are put into place."

Align business goals to charity

The first task is to examine your organisation's vision and objectives, such as an improved image in the community, increased employee morale or more customers. A suitable CSR partner can then be chosen who matches your cultural and commercial values.

Olds says one example is a pharmacy donating much-needed equipment to local schools' Parents & Citizens' (P&C) associations in return for promotion in the P&C newsletter and the development of an improved customer database of younger families.

Business benefits of CSR

There are numerous benefits of undertaking CSR activities, particularly for businesses that engage strategically, rather than make donations without any defined outcome. These include:

  • Improved image within the local community and brand differentiation.

  • Greater employee morale through participation in meaningful activities beyond work.

  • Higher level of job applicants for showing corporate 'heart'.

  • Skill development through working on a campaign.

  • Product innovation through developing a sustainability mindset.

  • Cost savings, such as through using less packaging or energy.

  • Increased customer retention and patronage.

  • Access to like-minded customers.

Once a relationship with a particular charity is developed, it may be possible to go beyond traditional activities and make it part of your business planning.

How much budget to allocate?

Australia ranks behind Britain and top-giver the United States in the proportion of gross domestic product allocated to charity, at 0.69 per cent compared to 0.73 and 1.67 per cent, according to The Economist. US citizens reportedly contribute an average of 2.5 per cent of personal income to charitable causes, with many businesses setting aside up to 5 per cent of pre-tax income for contributions.

According to Olds, businesses should make a contribution for a specific purpose, without allocating a particular percentage of their budget.

"If you're spending $10,000 on a marketing activity and it's not getting results, perhaps consider doing the same for a charity that has the ability to improve your image and gain customers. It's about looking at your current marketing, human resources and charity spending and how you can make those dollars go further."

Another method particularly suitable for retailers is "cause-related marketing", where charitable contributions are made based on specific product sales, such as giving a loaf of bread for every loaf sold to a food charity.

Rather than simply discounting to win sales, giving customers a reason to choose your products can produce long-lasting benefits.

Ultimately, small business owners can engage in CSR as actively as the big corporations, albeit on a smaller scale. So, why not aid your finances while helping make the world a better place?


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This article represents the views of the author only and not those of American Express.

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Anthony Fensom

Anthony is a communication consultant at BWH Communication and a freelance writer with 15 years' experience in the stockbroking and media industries of Australia and Asia. He is a regular writer on business and other issues for publications in Australia and Japan. He consults on communication strategy to businesses ranging from private enterprises to professional service firms and publicly listed companies, with a particular interest in entrepreneurship in all its forms.

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