Philanthropy with purpose: Unlocking capital for positive impact
Business owners are rethinking their approach to giving in a bid to enhance its effectiveness
(This article was first published in Business Times)
A growing focus on corporate purpose is changing how we think about philanthropy. Amplified by the Covid-19 crisis and climate change, global attention on environmental, social and governance (ESG) issues has turned the spotlight on the impact companies have on the world around them.
For many entrepreneurs and business owners, this shifting focus is blurring the line between individual philanthropy and corporate social responsibility (CSR) programmes. And this is especially true in Asia, where founding families remain involved in the day-to-day operations of their businesses and exert a strong influence on their corporate philanthropy.
We see this as part of the natural evolution of philanthropy in Asia. As companies and individuals seek ways to make a positive impact, a holistic approach to giving brings all-round benefits – both for benefactors and beneficiaries. This in turn ensures a more sustained and long-term commitment to the causes they support.
For business owners, connecting their individual philanthropic activities with CSR programmes creates a more thoughtful, coherent strategy and magnifies the impact of their funds.
Philanthropists tend to be most engaged when they are donating towards a cause where they have a personal connection or deep understanding.
For example, the owner of a healthcare business may choose to endow a scholarship at the university where they studied, or fund a new hospital ward. But the rapid development of Covid-19 vaccines has demonstrated the case for intervention higher upstream. Individual donors could create a longer-term and potentially more significant impact by setting up a fund to accelerate research into medical technology or drug development.
In line with this activity, that benefactor could consider aligning their corporate activities with the same medical cause through CSR initiatives, such as matching staff donations for the research fund and encouraging staff to volunteer for medical causes.
A lasting legacy
By prioritising impact in this way, a company often finds that its charitable activities, staff volunteering programmes, and broader ESG agendas become more closely aligned, providing a strategic direction that can be formalised into a long-term approach.
This kind of focus can also strengthen corporate culture by encouraging a greater sense of unity through greater staff participation and buy-in which improves staff morale and retention. A report by the Boston College Center for Corporate Citizenship shows that, among companies that track the correlation between staff volunteering and employee engagement, 96% report that staff who volunteer are more engaged than those who do not.[1]
Research has shown that younger employees increasingly seek roles in organisations with a clear sense of purpose.[2] A well thought-out CSR programme is helpful: if a company can demonstrate a clear connection with its community, offers internships, scholarships or bursaries, it stands a better chance of attracting top talent. This realignment is also likely to prepare the company for the time when stewardship passes to the next generation of owners and managers.
By prioritising impact in this way, a company often finds that its charitable activities, staff volunteering programmes, and broader ESG agendas become more closely aligned, providing a strategic direction that can be formalised into a long-term approach.
In the shipping industry, for example, traditional philanthropy would involve the business or the business owner endowing a university scholarship in marine studies and perhaps contributing towards various charities helping vulnerable members of society.
Taking a more strategic, joined-up view may involve linking corporate giving to a business pain point such as the long-term need to reduce the industry’s dependence on fossil fuels. As well as funding a scholarship, the company could identify environmental causes that align with its corporate culture.
This effort could help address the shipping industry’s effects on the environment by leveraging philanthropic efforts to address the relevant United Nations sustainable development goals (SDGs). The company may also consider channelling some of the capital it previously set aside for CSR activities to invest in green securities or funds that are aligned with its long-term ESG objectives.
Making it formal
Specialised wealth advisors can help business owners align their giving with corporate-level philanthropy efforts.
This evolving approach to philanthropy and corporate purpose is also changing the role of intermediaries and wealth advisers. Corporate benefactors and business owners require a more consultative relationship as they seek advice on strategy, regulations, and structures. But first, they want to ensure that any new arrangements will align with existing initiatives – including any overlap with their sustainability programmes.
To act on this wish for a more joined-up approach, advisors are gaining an understanding of what entrepreneurs want to achieve in their legacy-building initiatives. This means that today’s philanthropy strategies begin with an analysis of both individual and corporate objectives.
This evaluation involves considering the business in depth, from how it generates revenue to a range of ESG factors, including risks from the energy transition, how it hires and retains its staff, and its interventions in the community.
Comprehensive analysis reveals areas where the company can have an immediate impact, both internally and further afield, by increasing and improving its responsibilities toward the sectors of industry they are engaged in.
It also brings a new discipline to what may previously have been regarded as a company’s ‘softer’ activities. Measuring and putting a value on the inputs and the degree to which they create impact brings transparency – with data serving as a benchmark against which future performance can be judged and further improvements made.
Specialised wealth advisors can help business owners align their giving with corporate-level philanthropy efforts. This often requires the use of formal financial structures, necessitating expert knowledge of trusts and fund structuring, sustainable investments, and advice on ESG risks and reporting.
As corporate philanthropy takes on a more sophisticated, holistic approach, companies can consider having an advisor to help put in place a strategy that benefits the community, environment, and the company itself – creating long-term value for all stakeholders.
Asia’s entrepreneurs have a long history of generous giving; following the global disruptions our societies have experienced in the last few years, they now have to opportunity to amplify their impact by harnessing the power of unified, purposeful strategies.