How to make the business case for philanthropy?

To be doing good deeds is man’s most glorious task.

These are the words of Socrates, the Greek philosopher credited as one of the fathers of Western Philosophy.

Indeed the best investment of time, effort and resources in a man’s life is doing good for others. You can never regret your gestures of kindness and generosity when you look back on them as they only enrich your life and give you a sense of fulfilment.

This being said, I don’t think that the decision of giving, doing good and philanthropy in general needs any reason or justification.  And from this point of view, philanthropy does not need a business case. It is as it’s always been and will always be: a part of our human nature.

Despite that, however, a number of businesses look for ways to justify their social efforts and their giving. Not so much SMEs where the business owner’s motivation is enough of a reason. But larger companies that are more complex, more chaotic and that have more stakeholders to take into consideration and especially shareholders, need this justification.

And I understand that – businesses, by nature, are designed with profit in mind, not social purpose. So from a business point of view, looking for a business case is justified. Yet, when I seek to justify corporate philanthropy and encourage business owners to engage in social issues it is solely because I know the potential and benefits social engagement has for both the business and society.

If you happen to be one of those businesses that needs to understand the benefits of corporate philanthropy, let me sum them up for you before I go into any further details: social responsibility & engagement offer solutions to the most painful and fundamental business challenges that almost any business faces.

Here’s what I mean:

Too many costs eating into your profits?

Many businesses suffer from rising costs the sources of which could be anywhere along the value chain. Adopting a sustainability philosophy can help you cut those costs tremendously. An effort or even an investment into becoming a greener business could in fact impact your bottom line more than you can imagine. This is more obvious in manufacturing and retail businesses than it is in the service sector, but it is equally true for every organisation. This is only part of the equation however.  If  you take social to the next level where we speak proactive social engagement, you will see that incorporating a social element into your business could for example decrease your costs for employee salaries. A number of studies have confirmed that a growing number of employees would accept jobs offering a lower monetary reward if the job gave them meaning, a sense of fulfilment and the chance to make a difference. And as you know employees are every business’ highest expense. Not to mention that by simply introducing social engagement you will improve retention thus saving an awful lot of money.  Just to give you an idea of how much: according to a report by ERE Media, the cost of replacing an employee at any level costs your business 30%-50% of their annual salary.

Experiencing growth stagnation?

As a business consultant, I meet and work with business professionals from an array of industries and sectors all the time. You would be surprised by the number of directors and business owners who complain of having plateaued at a certain profits level and not being able to overcome the profit glass ceiling. The truth is that a lot of effort and a lot of work is being thrown into maintaining the level that’s been achieved. But what people don‘t realise is that there’s a level of comfort and complacency that comes with that. If you want to grow, you need to try new things, you need to find new sources of competitive advantage, you need to gain more market share or you need to be innovative and reach out to new markets altogether. Because social engagement puts you in direct contact with the general public, it is an incredible tool for spotting trends, niches and under-served markets. It is also a great source of innovation. Consider the British telecom giant Vodafone for example. Years ago Vodafone partnered with the UK government and created a program for mobile banking services for a charity cause in Kenya. This is how they discovered that Kenya presents an untapped opportunity for their business and thus entered the Kenyan market. Vodafone is just one example however. The list of products and services inspired by a need in the community or out of environmental concern is longer than you think. That being said, the community and environment are two great places to look for new avenues for growth.

No relationship with your customers resulting in poor customer loyalty?

Another quite common complaint of business owners is that they constantly need to look for new business which consumes time, effort and consequently money. There’s nothing more valuable than customer loyalty that results in repetitive business which not only decreases your spent on business development  but also gives you some security.  I’ve said it before but the reality is that some of the most profitable and thus successful businesses out there are those whose brands ignite people’s hearts. Be it Patagonia and environmental protection or Apple and what is perceived as a cool lifestyle. These companies have passionate followers that identify themselves with what the company stands for. And in today’s world, where Millennials are growing as a proportion of the general public, what is become as an increasingly important value is the concern for the community. People care about communities, about the environment and about disadvantaged groups and they want to identify themselves with and give their money to organisations that share the same values and spirit. Just so you understand the scale of this growing trend, a Cone Communications study on Millennials and CSR from 2015 has shown that 9-in-10 Millennials would switch brands to one associated with a cause. Being able to respond to these new customer values is essential to your ability to engage with your customers and create a strong relationship with them. Thus creating loyalty and ensuring repetitive business.

If you want to make a difference and thus would like to integrate a social element into your business, what I would advise is that you look into the specific challenges your business is facing and see how these can be solved through social engagement. Regardless of whether your organisation is large or small, finding your own business case for doing good is always valuable. It gives you an extra motive to push through the difficulties of establishing your social engagement program; it increases your own and your team’s motivation and dedication to the cause; and ultimately it gives you a reason to keep up the good work and achieve much more than you would otherwise.