How Companies Get Philanthropy Wrong—And How They Can Get It Right

No more charity. We need a new model of corporate responsibility that embeds social good outcomes right into daily operations.

Corporate philanthropy has remained largely unchanged over the years: make as much money as possible on one side of the equation, and give a (small) portion of it away for tax purposes on the other side. If your donation happens to contribute to the public good, so much the better.

There is one glaring problem with this approach: It’s not sufficient to tackle the problems facing our society today. These epic challenges—climate change and global inequality are at the top of the list—are driving up costs to businesses. While it’s possible to ignore in the short term, in the long term these can and likely will cripple businesses. For example, if Africa is the next big consumer growth market, and climate change disproportionately affects this region, you can see where this could lead.

Companies that maximize profits at all costs—perhaps by producing environmentally unfriendly products—cannot atone for their sins or offset the damage by donating to the Environmental Defense Fund or the Ocean Conservancy. Likewise, an annual check written out to Doctors Without Borders or UNICEF is not enough to solve global health and education problems. This is not about the considerable value these global nonprofits deliver, it’s about the misguided intention behind the check-writing, that profits and impact are decoupled.

We need a new model of corporate philanthropy that embeds charitable and sustainable outcomes into the DNA of daily operations—recognizing that this is good for business and society. There are a number of terms for this. I use philanthrocapitalism, a new application for an older term, to mean using the business to have a measurable, long-term impact on society’s epic societal and environmental challenges, while adding value to the core business at the same time.

DOING WELL AND DOING GOOD

If we view the corporate landscape through this lens, we can see that this new model has already taken root in a number of organizations. Innovative companies, always reading market dynamics and pricing signals, tend to charge ahead of existing government policy in terms of regulation and oversight. We’ve seen this numerous times with financial engineering, the rise of the sharing economy and now, climate change. Corporate philanthropy and sustainability programs still have a place but pioneering companies understand that this is not enough. The situation now necessitates action on a global scale, in alignment with business priorities.

Most people don’t think of self-driving cars as a social cause, but hundreds of thousands of lives will be saved annually by this innovation, through a sharp reduction in auto accidents. Taken in this light, more than making money through advertising, Google’s pioneering efforts in the autonomous vehicle field start to look like a great example of philanthrocapitalism: a simultaneous effort to bring an innovative product to market while at the same time reducing a social ill.

Tesla is already doing this by creating shareholder value at the same time it's creating societal value. The better Tesla does as a company—i.e. the more of its cars are in use on the streets—the better we all are as a society. Yes, you can argue that the embedded energy in one vehicle is more than the lifetime carbon offset of a Tesla Model S, but that’s changing quickly as manufacturing processes improve and product lifetimes are extended.

Even Facebook and Apple consider the impact they have in their virtual environments and how it can improve society at large: think of Amber alerts to all iPhone users, or promoting organ donation through Facebook.

OUT WITH THE OLD

Larry Page famously said rather than giving his billions to philanthropy, he’d give it to Elon Musk, founder of Tesla, SpaceX, and SolarCity, a capitalist who is pursuing world-changing ideas. This is a completely new way to think about corporate contributions to societal welfare, and it absolutely makes sense. The old modus of philanthropy will address today’s challenges with nearly the same efficacy as Elon’s big ideas (can we get the Hyperloop built, please!).

By re-thinking the net present costs of environmental and societal challenges and coming up with new solutions, corporations can transform corporate social responsibility from a cost center to a value center. That’s what we’re doing at Autodesk, with initiatives like ourCleantech Partner Program, which grants our software to early-stage clean technology companies, and the Autodesk Foundation, which exclusively supports nonprofits using design to drive positive environmental and social impact. And our customers are beginning to do this as well.

This shift comes not a moment too soon—the world’s problems can’t wait.

-FastCompany