Why and How to Avoid the Detrimental Effects of Charitable Giving as Your Corporate Social Responsibility
Today, you’re hearing more and more about this concept of Corporate Citizenship through Corporate Social Responsibility. Although there’s been a lot of talk and action about it as of recent, it’s not new. Actually, Corporate Social Responsibility was first introduced into the business world back in 2007/2008.
CSR was developed by businesses as a way to combat the increasing mistrust consumers had when it came to business. The global financial crisis of 2007 left society feeling like businesses did less social good and more social harm through market economy, operations, and profits. This resulted in the beginning of what I would consider the move towards a demand for Conscious Capitalism. Businesses could feel the loss of trust and so CSR was introduced taking on various names like Corporate Citizenship, Stakeholder Management, Business Ethics, Social and Environmental Responsibility, Corporate Social Responsibility, and Diversity and Inclusion.
At the time, most CSR efforts were those of charitable donations or philanthropic efforts, however, as people started to gain more access to information, and society became more intelligent, it became increasingly obvious charitable donations and philanthropic efforts were no longer going to cut it.
Fast forward to 2020, in my opinion, charitable donations and philanthropic efforts do more harm for your company than good, especially if it’s your primary CSR initiative. Let me explain why.
1) Charitable Donations Are Lazy
If your primary CSR initiative is charitable giving, I’m going to tell you now, that’s lazy AF! By writing a cheque to one or many of your “favorite” charities, you’re telling your team and stakeholders you’re not really interested in investing your time and energy into understanding your company’s negative impacts.
2) Charitable Donations Are Tax Write-Offs
Anyone who’s been around the block knows cheques to charities come with benefits. They’re called tax write-offs. The bigger the cheque, the bigger the tax deduction your company can make. So, it’s easy to see why a company would opt for charitable giving. It’s also easy to judge a company for doing just that. It’s seen as self-serving, again, not for social good but for private interest.
3) Charitable Donations Don’t Create Real Impact
When you’re giving money you’re doing just that, giving money. That’s not real impact. Real impact is real action, however, when you give charitable donations, real action or real impact isn’t always the case. Many charities aren’t as efficient with their money management as we’d like them to be.
Technically, they’re a business as well so, typically, your donation will go towards administrative costs, fundraising efforts, and, then, programs and aid. The bigger the charity, the more you’re seeing go towards administrative and fundraising costs versus programs and aid.
4) Charitable Donations Aren’t Measurable for Impact
Now, let’s talk about programs and aid. When the money does go towards an actual cause, it’s hard to manage as there are varying ways to “measure” impact when it comes to charities and nonprofits. As you start to dig into the data, it becomes increasingly harder and harder to determine whether the money being used for programs and aid are actually doing any real work.
Don’t get me wrong, some charities do provide measurable impact that’s beneficial to the focus they’re working on, however, many charitable efforts don’t come close and typically are criticised for getting it wrong in terms of creating meaningful impact.
5) Charitable Donations Come Off as Lip-Service
Last but not least, when your company is giving charitable donations, especially to a charity who may be taking a bigger cut for their administrative and fundraising costs, it comes across as an insincere “effort” by the company to create meaningful impact. This can turn into a PR disaster especially in this cancel culture!
So what should a company do instead of charitable giving?
1) Assess your Risk Then Move
No matter what you’ve named your department, your Corporate Citizenship needs to be on purpose and meaningful. This means you need to start with assessing your risk first. Have an honest look at your company and it’s output.
What’s your sector?
What’s your industry?
What are your values?
What can you do better?
What International Standards do you want to apply?
These types of risk assessment questions will help you develop your foundation for meaningful impact. Now, charitable donations might be a part of your initiatives, however, you’ll quickly realize you can make more of an impact with your dollar than just giving it to an organization.
2) In House Impact Has Greater Tax Benefits & Better Optics
You’re in business, I get it. Your primary interest should be your bottom line, ensuring you’re keeping money in the company. That’s why charitable donations are so attractive especially when you’re able to retain a large portion of the initial donation amount through write-offs.
I argue there’s a better way to do this. Not only can you find beneficial tax advantages from an operational stand-point of running in-house initiatives but you can also find funding that’s available for companies looking to create social and environmental sustainability impacts.
Also, a major byproduct of in-house initiatives vs charitable giving is the optics. The PR of implementing impact through in-house initiatives is far more appealing to your stakeholders than you giving money to charities. It’s a win win!
3) Create Real Impact
As a brand, you don’t do things half-assed. The same principle should be used for your CSR initiatives. You want to take bold, meaningful action that represents the real values of both you as a company and your stakeholders. Although donating can be a source of impact, you’re much more likely to create real impact through product innovation, operational changes, industry setting standards, and more. You’re in charge of the type of impact and the magnitude of impact your company wants and can make when diverting from charitable donations.
4) Measurable Impact
Let’s be frank, benchmarking, KPIs and measurement data is foundational to a successful business. Without any of that, it’s simply the blind leading the blind and we know how that goes. When keeping your CSR in-house, you can set up measurement parameters that help you establish successful initiatives. You can set up primary defining points and impact assessment points to better determine whether you’re creating meaningful impact or not. This information is also vital for you as a company to use in order to communicate to your various stakeholders the value and need of your CSR efforts.
5) Avoid Criticism
When you donate less and do more in-house with your CSR initiatives, you come off as sincere, as a company who truly cares and is willing to put their money where their mouth is. You show your stakeholders Corporate Citizenship is an integral part of your business model. You show your stakeholders CSR is vital to the success of your company and this world, and you’re willing to roll up your sleeves to do the work. That sounds like a PR dream to me!
As you can see, the optics and benefits of creating in-house CSR impacts vs charitable donations are extremely huge. It definitely takes some work to get the foundation of your Corporate Citizenship solid, however, once you’ve laid the groundwork, and you are clear on your values, mission, and principles, you as a company are poised to create massive impact and be valued for it by your stakeholders.
So, if you’re a company that’s used to primarily giving in the means of charitable donations vs. in-house CSR initiatives, I urge you to reconsider your methodology of Corporate Citizenship to be more efficient and effective.