18 Pros and Cons of Corporate Philanthropy

Corporate philanthropy occurs when an organization takes actions that help to improve their community or society in general. There are numerous ways that this resource is made available, from the use of volunteer efforts while keeping employees on the clock to direct monetary donations to a charitable cause. Companies can even start fundraisers or promote crowdfunding campaigns as a way to provide this service.

In the last 12 months, corporations in the United States donated over $17.7 billion to nonprofit organizations and NGOs around the world, including health and human services organizations, educational institutions, and the arts. It is an essential function of business that helps to foster employee engagement, extend the outreach of a brand, and generate more value for the corporation.

Although the decision of an organization to participate in corporate philanthropy seems like it would be a generally positive experience, there are some distinct pros and cons to consider before a Board of Directors should authorize payments or activities in this sector.

List of the Pros of Corporate Philanthropy

1. Corporate philanthropy creates a positive workplace experience.

When a corporation decides to participate in philanthropic work, then it begins to bring its employees together to create a work environment that is more positive. Working on volunteer grants, program exchanges, or community betterment projects encourages everyone to see themselves as more than just a co-worker. They become a part of the greater community that is working hard to ensure that everyone has a chance to succeed if they want to take it.

2. Corporate philanthropy increases employee engagement levels.

Companies who have higher levels of engagement from their workforce enjoy a higher level of productivity compared to employees who are just going through the motions to earn a paycheck. The difference between these two outcomes is a productivity increase of more than 200%. When corporate philanthropy is encouraged by an organization, then the collective participation of each worker creates closer relationships. That results in a happier workplace, which eventually creates the boost in productivity.

3. Corporate philanthropy creates a public image that is positive.

When organizations take the time to partner with a non-profit company or NGO, then it provides an opportunity to share through press releases, social media, and other forms of networking that they are highly involved in the welfare of their community. It creates opportunities for the brand to become visible to people in ways that may have not been possible without this action. When a company is viewed by the public in a positive way, then there are more opportunities to find future customers.

4. Corporate philanthropy enhances consumer relationships.

Customers want to purchase their products or services from companies that are doing good in the world today. They are especially interested in the organizations that work to make a positive difference at home. When corporate philanthropy is a priority, then there is more interest from the consumer base because these future customers want to associate themselves with brands that support the same causes that they care about each day.

People are motivated by choice and preference. 67% of total contributions go to a person’s top cause, even though 78% of people give to multiple charities each year. If a corporation’s primary outreach effort matches that of a consumer, then that create a powerful motivational tool for the individual to purchase something.

5. Corporate philanthropy encourages employee giving.

65% of the Fortune 500 companies currently offer matching gift programs to their employees. That means the company will match (up to a certain amount) the gifts that each worker provides to their charity of choice. Workers feel like this benefit allows their donations to reach more people and make a more significant impact on the world. Companies benefit from the positive response with more brand attention. Then the people in need receive the help they require as well. That is why corporate philanthropy is often a win/win/win situation.

6. Corporate philanthropy can result in tax incentives.

Corporations can sometimes receive a tax break when they offer a monetary gift as part of their philanthropic efforts. This advantage makes it possible to minimize the net cost of the outreach effort. The Better Business Bureau reports that organizations who pursue this method of helping others can deduct all contributions to public and private 501(c)(3) organizations up to 10% of the overall taxable income for the business that year. Since most brands do not exceed this threshold in their giving actions, they can deduct the full amount donated to charities at the end of the fiscal or calendar year.

7. Corporate philanthropy rewards shoppers for shopping.

One of the best examples of this advantage is TOMS brand shoes. When you purchase a pair to wear from this organization, then the structure of their corporate philanthropy is to give another pair to someone in need. Many organizations will donate a specific percentage of a sale to charities around the world, including ones that you choose. Amazon allows you to donate a specific portion of each purchase through their Smile program. This option creates a way for customers to feel like their money is making more of a positive impact on the world thanks to their partnership with specific brands.

8. Corporate philanthropy creates an advertising opportunity.

Whole Foods offers several 5% Days each year. On each of these occasions, 5% of the total sales from the store goes to a local non-profit organization. Instead of choosing a company based on their standing in the community, this method of corporate philanthropy allows people who work for the agency in question to share and donate directly through their actions. Target even allows customers to designate a school of choice for their portion of a donation. This process helps a company begin to develop an atmosphere of trust that will eventually extend to their overall expertise.

9. Corporate philanthropy activates the reward centers in your brain.

When individuals are involved in the process of giving to charity, then it creates a response in the brain that is similar to what a person experiences when they take illicit drugs. There is a surge of endorphins and dopamine that creates a rewarding experience for everyone involved. There may be financial reasons for corporate philanthropy, but it is also a process that helps people feel good about their choices to their deepest parts of their physiology. People who are actively engaged in philanthropic work score much higher in their feelings of contentment and joy compared to those who do not give.

10. Corporate philanthropy helps to protect local communities.

There are several national safety net social programs funded by governments around the world to help the people who are in need. Disability benefits, food stamps, and Medicaid are especially helpful to Americans, but corporate philanthropy helps to take this effort to the next level. Community organizations almost always respond faster during emergency situations. They know what their communities require more than a government-sponsored program does. Corporations that get involved with this community structure can protect their community from unexpected circumstances.

11. Corporate philanthropy can improve the health of employees.

When people spend time volunteering in their community, then they score higher on key measurements of overall health than those who choose to remain uninvolved. Two crucial scores that are consistently higher are blood pressure levels and resilience during physical activities. Older adults who volunteer their time in some way have increased walking speeds, improved cognitive function, and they can even climb stairs better. People who are highly involved in corporate philanthropy also spend much less time watching television every day.

12. Corporate philanthropy reduces the rate of individual stress.

When the people who get to volunteer through corporate philanthropy can make positive contributions to their community, then it reduces the rates of stress that they experience in their life. Individuals who work with charities tend to have lower overall rates of stress in their lives, which leads to another potential drop in their blood pressure levels. This outcome helps to improve employee morale and encourages more civic engagement within the workforce – even outside of the regular business hours.

List of the Cons of Corporate Philanthropy

1. Corporate philanthropy can hamper the goals of a company.

Although giving money to people in need is never a terrible idea, the cash cost that an organization faces with this outreach effort could leave them short on funds for specific needs. Some small businesses may find that their financial returns of a philanthropic effort do not equal the cash investments that they originally made. There isn’t a guarantee that the standing of the business will increase because they get involved with charitable work. Without cash available, the future goals of the company could be hampered by this social work.

2. Corporate philanthropy may invest in the wrong resources.

When companies decide to directly invest money in their community instead of working with non-profit organizations and NGOs, then they must decide who the best manager of these resources will be to create the most impact. A team or committee must form to determine how much cash to give, where it should be given, and who will be the liaison for each amount to ensure that the funds are used as intended. These decisions can impact the length of the philanthropic effort, who can make the decisions, and determine how to stop an outreach effort if no direct benefits occur.

3. Corporate philanthropy can be a process about “who knows whom.”

Although there are many companies that work with numerous charitable organizations in their community, an equal number may decide to work with their friends or relatives instead to create a “you scratch my back and I’ll scratch yours” scenario. Many of these outreach efforts involve the networks and contacts that people have in their community. If a charitable organization doesn’t have a contact at the corporation seeking to make a philanthropic effort, then they might not benefit from the cash infusion.

4. Corporate philanthropy requires time to create a payoff.

Many companies get involved with philanthropic efforts because they expect to see a direct gain in community interest from their activities. Even when there are high levels of success that eventually come from these efforts, it can take time to build the levels of community awareness to an extent where the results are tangible. Some philanthropic efforts take several months or years to create the necessary relationships for growth. If you’re trying to generate results in days or weeks, it can be a very different experience.

5. Corporate philanthropy can create a commercialism effect on charities.

Many people follow the advice of the Bible with their charitable giving even when they are not religious. Matthew 6 says, “Beware of practicing your righteousness before other people in order to be seen by them, for then you will have no reward from your Father who is in heaven.” The goal of giving is to help more than it is to be noticed that you are helping. Companies can drive people away because of their philanthropic efforts because the work contains the stench of commercialism. That’s why organizations must understand the perspective of their core demographics before making such an attempt.

6. Corporate philanthropy is not something that all workers want to do.

Even if you are willing to pay workers their salary when they are completing volunteer hours in their community, you will find that some people do not want to participate. There are many families who are already highly involved in different outreach programs. Some work in the local food bank, others coach soccer, and there are tens of thousands of scout troop leaders helping kids to build skills for the future.

Some people don’t have the financial ability to donate money to a good cause either because they’re barely scraping by living paycheck-to-paycheck as it is. Feeling pressure from the executive team to send money to a charity in that situation can leave a bad taste in that person’s mouth.

The pros and cons of corporate philanthropy suggest that companies help others because they’re interested in an improvement of their image. Some people get helped along the way, but the ultimate goal is to increase revenues in some way. Helping one another is never a bad thing. We need more of that perspective in our world today. For this process to be effective, there must be resources available in the first place that can keep the company and the community healthy.