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 increasing scrutiny about the impact they have on both the environment and society. Consumers expect companies to not only take responsibility for their operations and impact but 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.”

Companies with a long-term vision are embedding philanthropy into their operations. By doing so, they make it a key part of their corporate strategy. This drives both social engagement and business results. 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

Two: Link issues to possible corporate actions & opportunities

Now that you recognize the source of the problems. Whether in your business or community, you must find alignment. Connect societal issues with your core business strategy. Not all social problems have commercial solutions, but many do. Offering a solution, such as a product or service, can benefit both the community and your organisation. This can improve your competitive edge and strengthen your position in the long term.

PepsiCo for example, had a problem with the quality of the corn provided by the local farmers in the province of Jalisco, Mexico. Instead of relying on other suppliers and absorbing costs from transport and raw materials, PepsiCo chose to support small to mid-sized corn farmers in Jalisco. This decision helped strengthen their supply chain while benefiting local farmers.

By educating locals and providing seeds, fertilizers, and resources, the quality of their crops improved. This also boosted the supply chain and raised living standards, creating a win-win situation.

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. You should have a general purpose in mind, but not a specific solution. For example, focus on providing nutritious food, not just canned 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

After researching and finding an authentic solution from the community, adapt your organisation. Focus on structures, communications, incentives, and metrics to sustain new behaviors 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 broad-based support. So now the question is, what tools and mechanisms can you put in place that will guarantee that vested interest?

There are various ways to approach this issue. At Campbell Soup, for example, the company formed multiple teams, each focused on a specific problem. These teams recruited employees with different skills to address issues like child obesity and environmental impact. Corporate and team goals were integrated into individual goals. This included metrics in personal performance plans, recognition systems, and financial incentives.

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. Strategic engagement in solving societal problems enhances your competitive context and provides an advantage. It solidifies your position in existing markets and uncovers opportunities in new ones.