How philanthropy can be transformed into strategy?

Businesses across various industries around the world are operating in an ever changing and thus increasingly turbulent corporate environment. Globalisation has led to increased competition, consumer expectations are changing, there’s a growing call for transparency, a war for talent, etc.

This has increased the pressure on businesses to maintain and improve their market positions and find new avenues for growth. At the same time, businesses are under an increasing scrutiny about the impact they have on both the environment and society. Consumers expect for companies to not only take responsibility for their operations and impact, but to also proactively engage in solving various societal problems.

And while all companies are feeling the pressures from all sorts of directions, some are dealing with the situation better than others. In their bitter struggle to remain competitive some businesses look at social engagement expectations as another annoying corporate liability that they deal with in the most convenient, most superficial way. A growing number of others, however, have managed to make lemonade with the lemons they’ve been handed by internalising the expectations of the general public and using them as a source of  competitive advantage.

What these companies have done is they’ve taken philanthropy to a whole new level that has nothing to do with simple monetary donations. Not that there’s something inherently wrong with money donations, on the contrary. They are important and needed but not strategic or sustainable. As the CEO of PepsiCo, Indra Nooyi puts it:

“There’s not enough money that we can give away to be viewed as a responsible company in 200 countries. And we can’t do it sustainably. So the only way it can work is to weave responsibility into the core business of the company.”

And this is exactly what companies with a long-term vision, both in terms of their social engagement and business results, are doing: They are embedding philanthropy into their operations and thus they are making philanthropy a part of their corporate strategy. Incorporating social good into your business’ strategy and making it a true competitive advantage is a process that takes time, effort and will.  However, what I’ve outlined below are the main cornerstones to get you going in the right direction.

One: Learn to identify issues

This could be approached in two ways: either by identifying problems in the community and thinking about how your business relates to these, or by identifying problems that your business is facing which could be solved through solutions offered to the community by your organisation. You need to learn to look for the underlying reasons for issues and think about what actions could remedy the source not the symptoms of these problems. For example, Cisco did just that when it recognised the shortage of tech-educated and tech-skilled talent in some if its operational locations. What followed was an educational initiative that gave opportunities to people in those regions to learn and gain some practical skills while at the same time solved the talent shortage Cisco was faced with in these locations.

Two: Link issues to possible corporate actions & opportunities

Now that you clearly recognise the source of the problems, whether within your business or within the community, you need to be able to find convergence between fundamental societal issues and core business strategy. Not all social problems lend to a commercial solution but many do and if you can offer a solution, in terms of a product, service or in some other way, this could benefit both the community and your organisation in the long term by improving your competitive environment and boosting your position. Just as an example, PepsiCo had a problem with the quality of the corn provided by the local farmers in the province of Jalisco, Mexico. Rather than turning to other suppliers and absorbing the cost of fluctuations in transport, raw materials, etc., PepsiCo decided to lend a hand to the small to mid-sized corn farmers in Jalisco instead. By educating them and providing them with seeds, fertilisers and all that was needed to improve the quality of their crops, it also boosted the effectiveness of its supply chain and raised the living standards of the local community. In other words: hitting two birds with one stone and a definite win-win.

Three: Listen to the community for a solution

A philanthropy program is much like any other business project but it should be treated as an R&D project. That is to say, you should have a general purpose in mind but not a particular solution in mind (i.e. provide a source of nutritious food vs. provide cans of food). Why? Because for a social problem to be solved in a sustainable, healthy way, the solution should come from the community. That is why, at this stage it is crucial to not be afraid to get involved with the community, ask questions, take risks and fail. Do market research and try to really comprehend the situation. Ultimately, your goal is to understand the underlying reason for the issue at hand and figure out what the community feels the most suitable solution is. As John Reid, the CSR Vice President at Coca Cola, says:

“There is an evolutionary pathway, which begins with listening to the community and figuring out what needs to be done. This then evolves as the company develops an authentic voice in the conversation, in a manner that the community genuinely appreciates and that the culture and the corporate priorities embrace as well.”

Four: Adapt the governance structures & processes of your organisation accordingly

Once you’ve done your research and found an authentic solution (one that comes from the community) that you know will work, you need to adapt your organisation in terms of structures, communications, incentives and metrics that are designed to sustain the new behaviours and attitudes. For instance, what is essential at this stage is that employees are incentivised so that they are committed to contributing and promoting your social initiative. Giving employees a vested interest in the success of your social program is a way to build a broad-based support. So now the question is, what tools and mechanisms can you put in place which will guarantee that vested interest. There are different ways to approach this issue but at the Campbell Soup for example, the company formed several teams, each recruiting employees with different skills, and each team was dedicated to solving a particular problem (reducing child obesity, reducing environmental footprint, etc.). Corporate and team goals became individual goals, too, by integrating metrics into personal performance plans, recognition systems, and the financial incentive compensation program.

As mentioned before, integrating philanthropy into your organisation’s strategy and operations is a process that requires effort. However, it is also an investment that is justified and worth it as it is an investment in the future. Sustainability and social good are not transient trends. By engaging in solving societal problems strategically you effectively enhance the competitive context, gain competitive advantage, solidify your position in current markets of operation and are also able to spot opportunities in new markets.