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Posted on Sun, Dec 6, 2009 : 5:12 a.m.

Philanthropy is a sound business strategy

By Daryl Weinert

According to Giving USA, American corporations gave $14.5 billion to charity in 2008. Corporate gifts are critical to not-for-profits in supporting their work in education, the environment, disaster relief, community services, and the arts.

Indeed, corporate philanthropy is an important component of a company’s broader social responsibility. Many today are advocating for a more nuanced view of the success of commercial ventures.

They also suggest an expanded measurement system that, in addition to the traditional monetary returns to shareholders, also incorporates an assessment of a company’s impact on the communities where they reside and a measure of the ecological footprint of their operations. Some call this the “Triple Bottom Line: People, Planet, Profit.”

Over the past 25 years, corporate philanthropy has been transformed. Where company charity used to be an afterthought, often directed by the preferences of senior executives, most companies today regard philanthropy as a sound business practice that is in the best interest of shareholders and their organization’s broader stakeholders.

The public increasingly demands that companies be engaged citizens. An increasing number of studies have shown that corporate philanthropy can increase sales, and (according to Michael Porter and Mark Kramer in the Harvard Business Review) improve the “competitive context” in which a given company operates.

This competitive context can include corporate reputation, customer loyalty, the talent pool, brand recognition, enhancing nonprofits that support employees and their families, improving morale and retention, supporting the communities where they operate, and assisting government relations.

Higher education is a critical component of the competitive context for most companies. As outlined in this column over the past 8 months, universities are a source of talent, technology, innovative research, professional development and specialized facilities. Universities are objective analyzers of ideas and influence public policy decisions. And universities, their faculty, staff and students are potential customers. So it is no surprise that many companies choose to direct some of their philanthropy to support the work of colleges and universities, thus enhancing the effectiveness of these institutions.

Over the past 3 years, corporate philanthropy to the University of Michigan has totaled roughly $80 million, as philanthropy has become increasingly critical to the university in an era of declining state support. This corporate investment has supported myriad activities and initiatives: student scholarships, K-12 outreach, entrepreneurial programs, facility construction, competitions, student organizations, endowed professorships, laboratory equipment, general research and special events.

Corporate giving on campus takes many forms. Support can come as cash donations, donated equipment or goods (either those that a company manufactures itself, or sometimes equipment that a company no longer needs for its own business, but can be useful in a laboratory or classroom) or the time and expertise of company employees as advisors to university programs and students. Donations can be part of a formal agreement spanning multiple years and multiple initiatives, or they can be simple one time transactions capitalizing on a unique opportunity.

An additional component to corporate support on campus is “matching gifts.” Many employers have programs in place to match the charitable giving of their employees. Often, companies will match 1 to 1 (or even higher multiples in some cases) each dollar of an employee’s gift to a college or university. In this way, companies also provide their employees with some control over the direction of corporate philanthropy.

Philanthropy has become an important component of business strategy. To learn more about strategic giving opportunities for your company or to access a database of individual matching gift programs at specific companies please visit the Business Engagement Center’s website at www.bec.umich.edu/giving.

Daryl Weinert is the Executive Director of the University of Michigan’s Business Engagement Center.