Giving back can creates advantages in the for-profit world.
Recently divorced Mike Hannigan was in a grocery store looking for spaghetti sauce when he came across Newman's Own for the first time. Discovering that all the profits of the competitively priced brand were donated to charity made something to click for the office products company manager.
"As a consumer I wasn't making any sacrifice," he says. "Use business as a tool to accomplish a community goal — it made perfect sense."
In 1991 Hannigan started the office products company Give Something Back and committed to earmarking the company's profits for nonprofit organizations instead of shareholders or investors. Since then, the Oakland-based company has become the largest independent office products supplier in California and its main competitor is Staples' commercial division.
Becoming philanthropic isn't just a nice thing to do when business is booming. Donating time and resources can be an essential part of a sustainable business strategy. Plus, becoming a better corporate citizen fosters good will that can have its own rewards later. Achieving this doesn't even have to cost a dime. Here's how:
Start with a Solid Enterprise
Sound business practices make for ideal philanthropic planning. Having a stable organization, even if profits aren't soaring yet, will ease the process of incorporating giving.
"Make sure the business metrics work. The business itself has got to stand alone as a successful venture," Hannigan says. "If we charge twice as much as Staples, we can't get those customers. We shouldn't get those customers."
One of the risks involved is that a company's leadership can end up getting overly focused on the social side of philanthropy and subsequently lose track of the business platform. Hannigan says he's seen it happen, which is why in his model commerce is where the company's greatest value is developed. Without that, they couldn't continue being a community partner.
Dig Deeper: How to Build a Values-Driven Business
Incorporating Philanthropy Into Your Business: Develop a Philanthropic Strategy
Philanthropy starts not with cash but with an idea, and one of the first steps is developing a strategy around giving: what issue or issues will the company be addressing and why, what form will the philanthropy take, precisely how that will be accomplished, the long-term goal, and how that all fits into the company's core values.
"I really encourage businesses that are starting up to incorporate the triple bottom line approach," says Christopher Ellinger, co-founder of Bolder Giving Initiative, an organization based in Boston and New York that aims to inspire and support donors to give at their full potential. That approach should be written into a clear mission statement that serves as the business's moral compass.
Ellinger also suggests tapping into networks for social responsibility to get guidance and support. Prominent networks include B Corp, corporations that use business to address social and environmental problems, and the Social Venture Network. Beyond formal networks, informal ones can be valuable resources. "Reach out to people who have done it before and find out what lessons they've learned," Hannigan recommends.
Incorporating Philanthropy Into Your Business: Set Philanthropic Targets
Philanthropy has a number of forms, not just monetary ones, so the key is to find a donation structure that melds with the company's identity and plays off its strengths. Non-cash options include donating products and services, such as volunteering based on the company's unique skill sets.
For new businesses, Ellinger suggests adding philanthropic structure from the start. "It could be offering a matching grant program for employees, it could be setting up a corporate foundation," he says. One company he's familiar with matches gifts from employees, and it currently has 100 employees who each put up $1,000. Another company he knows matches at a more modest $100 per employee.
On average, a standard amount for businesses to give away falls between 1 and 2 percent of the gross profit, although there are those like Give Something Back that aim for the sky. The formula depends on the business, says Leslie Pine, senior vice president for program at the Philanthropic Initiative, Inc., a nonprofit organization based in Boston that collaborates with individuals and companies to advance the field of strategic philanthropy.
"We've worked with companies that aren't even making a profit yet," she says. "It doesn't make sense to think about a percentage, but there are other ways to get started and set that as a goal over the next three or four years." A company like that could volunteer its skills initially and then gradually commit to a percentage once it becomes profitable. Pine also advises donors to budget for philanthropy to help manage requests as they come through the door.
Incorporating Philanthropy Into Your Business: Delegate Philanthropic Responsibilities
Donating can only be effective if the employees know whom is supposed to be doing what. A common stumbling block that Pine has seen relates to how a business manages the workload associated with giving. "It can be a challenge if a business is just starting up its philanthropic effort," Pine says. "Sometimes they don't want to dedicate a staff member to implementing the program."
