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The new philanthropy

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Saturday, December 01, 2007

Cover1207Targeted giving

Companies see philanthropy as a smart investment to be managed for the good of their community— and their business.

By Abraham Hyatt

Over the past 10 years, corporate giving in Oregon has undergone a profound transformation. Major sources of funding have disappeared. Employees are playing a larger role in determining the direction of their company’s philanthropy. And the business world is rethinking how it gives — and what it expects in return.

Perhaps the most powerful shift has been to “focused giving”: companies donating to or working closely with nonprofits that are directly related to their industry, as opposed to a more general, blanketed philanthropic strategy.

It’s based on a simple idea. “People found out a while ago that being involved in the community and linking that work to a product or service can help with branding and how people feel about you,” says Carole Morse, community investment officer for PGE and president of the company’s foundation.

Think of it as philanthropic investing — helping others in a way that could provide a nonmaterial payoff for your company. It’s proving to be a successful strategy for companies big and small. It’s getting rave reviews from the nonprofit world because of the deep connections it creates between companies and charitable organizations.

However, the forces that have been transforming corporate philanthropy over the past decade haven’t been all positive. Some nonprofits have been bolstered by the rise of targeted giving, while others have suffered as Oregon’s — and specifically Portland’s — business makeup has changed.

Gone are many of the “headquarter companies,” as Greg Chaillé, president of the Oregon Community Foundation, calls the businesses that once were based out of Portland and were major philanthropic sources: Georgia-Pacific, US West, US Bank, Oregon Bank, Willamette Industries, Louisiana-Pacific, Fred Meyer. The list of headquarter companies that have left the area, mostly due to mergers and acquisitions, goes on and on.

Other mid-level and small companies are now feeling pressure to take up the slack; Chaillé’s foundation found that local businesses have experienced a 49% increase in requests for donations over the past few years. Complicating matters are the growing number of young companies — businesses that may be more focused on internal affairs and global competition rather than the admirable but second-tier priority of charitable giving.

“We know that the new guard of business leaders are very concerned about the community, but I don’t think that they’re yet in a position to be the old guard of philanthropy,” Chaillé says.

When that new guard steps into the old guard’s shoes, they’re going to have a very different relationship with corporate humanitarianism than their predecessors. They’re entering a world where targeted giving is intertwining charity and corporate strategy; a world where philanthropy isn’t just a warm feeling, it’s a smart, proactive business strategy.

Welcome to the new corporate philanthropy.

NEW METHODS OF CORPORATE giving range from the familiar to the uncharted. Credit card companies, airlines, grocery stores, banks and department stores donate to charities based on consumers’ spending. Employers offer paid leave to employees who volunteer or match workers’ charitable donations. Often it has less to do with giving monetarily and more to do with an increased emphasis on sustainability or ethical responsibility.

Businesses can buy charity gift cards from companies such as CharityChoice and then give them to business associates or employees who “spend” them at a charity they choose. Six hundred and eighty of the nation’s largest retail companies, including the likes of Best Buy, The Gap and Nordstrom, are donating up to 26% of every purchase shoppers spend at the web-based, retail-store aggregator igive.com to consumer-chosen charities. Nau, Portland’s sustainability fashion wunderkind, offers a similar service as part of its day-to-day business.

And then there’s targeted giving. Simply put, it’s about marketing. But marketing in way that does more than pitch a product. There are dozens of reasons behind the trend: a new way to reach consumers, an alternative to traditional advertising or a way to stimulate future market growth.

Julia Hobbs Kivistik, executive vice president of cause branding at Cone, a Boston-based cause-branding consultant firm, says one of the biggest reasons for targeted giving is increasingly savvy consumers, employees and investors who expect companies to develop meaningful emotional connections with them by taking a stand on issues that are relevant to the business and its target audience.

“Companies want to give, and they want a kickback, but not financially or with money,” Chaillé says. “It used to be passive: Let’s help society. Now it’s more focused: Let’s change [a specific problem]. The adjectives are different.”

Regence Blue Cross Blue Shield funds a program that provides everything from health care to psychological, social and spiritual support to terminally ill kids and their families at Doernbecher Children’s Hospital at Oregon Health & Science University. NW Natural, with its “We Grew Up Here” slogan, focuses much of its philanthropy on community-building projects. TAZO Tea has created a program that’s improving quality-of-life issues in tea-growing areas of India. Oregon’s boutique chocolate companies spend a portion of their profits on creating sustainability in the cacao industry. Nike, which is also a major giver in Oregon, donates $10 million worth of goods each year to Mercy Corps for adolescent girls around the world.

Mark Ganz, CEO of Regence Blue Cross Blue Shield of Oregon, points to one other factor that makes targeted giving appealing: By focusing on specific causes or organizations, it gives companies philanthropic staying power — a way to do a lot of good in only a few places, rather than a “Johnny Appleseed,” as Ganz called it, approach to spreading funding across a broad spectrum. It means saying “no” more often, he says, but it means making a bigger difference.

GivingChart1207.jpg WHILE SOME OREGON COMPANIES are looking for ways to focus their giving, others are leaving town. There are mixed opinions on how that loss has affected the state’s nonprofits.

Ganz thinks there’s still a lot of money in the business community for philanthropy. The changing corporate environment, he says, has required a lot more creativity on the part of nonprofits that are asking for funds.

On the other hand, Paul Dudley-Hart, Mercy Corps’ director-at-large, says that finding money has been more difficult. Andy Nelson, executive director of Hands on Portland, agrees. “It challenges us,” Nelson says, “but in the meantime it creates funding shortfalls.”

How big a shortfall is unknown. “It’s virtually impossible to get those figures at a local level,” says Chaillé. There are no places to report charity on tax forms, no lines on an SEC filing to enter annual contributions. Which means there are no ways to compile comprehensive giving data on a statewide level.

The only way to find that information is through a survey of businesses, which the foundation tried a few years ago. “We had a very low return rate,” he says. Carol Lewis, CEO of Philanthropy Northwest, agrees about the lack of data. Undaunted, her organization is going to attempt its own survey in the near future.

Lewis’ hypothesis, based on her conversations with businesses, is that local giving follows national giving trends. Which are down. But also up. This year, the Illinois-based nonprofit Giving USA estimated that donations by corporations and corporate foundations around the nation hit $12.7 billion in 2006 — a 7.6% decrease from the year before.

However, if you take out the disaster-related spike in philanthropy from the year before (i.e., Hurricane Katrina), then corporate giving is estimated to have increased 1.5% in 2006. Or you can use the Chronicle of Philanthropy’s numbers that show corporate giving among 81 major companies climbed 6% last year to $3.8 billion.

WILL THOSE NUMBERS GO UP or down in the years to come? Either way, companies and nonprofits say the biggest change in the near future will be the role employees play in determining the direction of a company’s giving. The number of businesses that partially or fully match giving by employees is on the rise. So are company-sponsored volunteer days. Nelson, with Hands on Portland, attributes the change to a generational shift in workers.

“Giving isn’t going to be enough,” he says. “Younger employees are pretty suave. They want to know what [a company] is doing, and they want to be a part of it.”

That involvement by workers, says Nelson and others, will create a cycle: Companies will encourage workers to take part in charitable works, employees will feel more connected to their employers, companies (if they don’t already) will see volunteerism as an effective way to build teamwork and loyalty, and on and on.

The ripples extend out past individual businesses. Mercy Corps’ Dudley-Hart says that when disasters happen around the world, employees mobilize fundraising quickly and are more likely to get support from a company foundation for larger contributions. “They’re willing to act far more quickly with [non governmental organizations] they trust, and so we get a quicker response. What a key thing that is,” he says.

However, there are also drawbacks to targeted giving. Namely, issues that don’t have a connection with any industry end up suffering. Some argue that because individual giving makes up such a large portion of donations (80% on average, according to Lewis with Philanthropy Northwest), then corporate funding shouldn’t be a priority for some organizations.

But for small nonprofits teetering on that thin line between just-enough-to-get-by and shutting down, giving up on that type of funding may not be an option. The growing number of symbiotic relationships between companies and nonprofits, corporations and employees undoubtedly will have a critical impact on some of Oregon’s largest social issues. Whether there’s enough money to go around remains to be seen.

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