Corporate Foundations: Four Global Trends
21 May 2014 at 9:49 am
New research into Corporate Foundations, the Not for Profit bodies established and funded by a company for the purposes of social and community investment, provides insight into key trends shaping the space on a global scale.
Corporate foundations, the Not for Profit bodies established and funded by a company for the purposes of social and community investment, continue to provide focus and structure to philanthropy or community investment, and also enable a company to express its values in a recognised non-commercial way.
UK consulting firm Corporate Citizenship recently released a new research report, Corporate Foundations – a global perspective, which included a series of in-depth interviews conducted with 21 corporate foundations in the UK, US, India, Scandinavia, Europe and Asia between early September and late October 2013.
The research was conducted in a time in which the report says many corporate foundations were “in a state of flux” – with a number of foundations being created or reviewed as a result of mergers or other significant changes in the business life cycle – and provides insight into key trends shaping the space on a global scale.
This includes defining the complex relationship between the foundation and the funding company and the concurrent integration of CSR into mainstream business and steady rise in the number of foundations – legally separate entities – being registered.
Strategic and Proactive Grantmaking
|“The ‘broad brush, small grants to many causes’ approach that is perhaps traditionally thought of for corporate foundations was not apparent, and instead we saw corporate foundations that are more strategic and increasingly focused.”|
According to the report, many foundations are defying the common expectation that they will operate in a certain way more similar to a general grant giving foundation, noting it takes significant strategic leadership and thinking to ensure that the foundation can operate as a means to an end rather than an end in itself.
The report found that very few foundations were making ‘reactive’ grants in response to external requests. Most that made grants were doing so strategically, through proactively seeking out suitable recipients and where possible creating opportunities in line with focus areas chosen by the foundation.
For most there was at least a degree of hands-on involvement, with partnerships emerging as a key consideration for many of the foundations. Their approach was described as “fewer, bigger, better,” reflecting a shift to more strategic partnerships. Most foundations had identified between one to four focus areas.
|“An increasing number of foundations are moving away from the traditional grant giving model towards a more focused and hands on approach, which in some cases draws on the expertise and knowledge of the funding company to solve key social issues.”|
Programmes were generally relevant to the business in terms of where they were conducted, with most of the foundations conducting activities in markets where the business had, or planned to have, a presence.
Conscious Definition of Relationship between the Foundation and the Business
|“Foundations that have successfully become more integrated have done so through a system of carefully thought through checks and balances to harness the synergies and exploit the linkages to the business, whilst separating ownership and control to ensure impartiality.”|
“In terms of the activities reflecting the nature of the actual business, there was definitely still a sense of caution…virtually all foundations were avoiding projects and initiatives that could be described as pump priming or catalytic funding.”
A key trend that emerged in the research was caution around the relationship between business and foundation. Despite alignment being a growing trend, there was agreement that the foundation could not be in any way self-serving. There is a sense of having ring-fenced resources that may otherwise come under threat in the dynamic business environment that exists today.
Foundations, in response, were firm in defining the scope of their activities relative to the business. This was particularly evident in sectors that were heavily regulated, such as pharmaceuticals.
Most of the foundations in this sector were actively avoiding anything that could be perceived as having a direct or indirect link with the business. According to the report, where sectors or individual companies face particular scrutiny, there is still a fear that the foundation may bring problems with regulators.
Even employee engagement could not escape caution. While some were providing employee volunteering opportunities within their programmes, others were concerned about the implication of this being seen as a business benefit.
A number had looked at how a link could be made whilst still avoiding any direct business benefit, for example linking foundation programs to the core competencies of the business, and widening the remit in order to remain related to, but separate from the commercial business.
In sectors such as mobile telecommunications, this link proved easier to make, to the extent where the foundation and the business are working together on programmes closely aligned with the core products or skills of the business.
Foundations as a Strategic Business and CSR Tool
|“A number commented on a ‘blurring of lines’ as the business becomes more involved in social issues…in those regions where sceptical observers discourage a close relationship between business and foundation, the output perhaps misses out on the added benefits that business innovation and thinking can bring.”|
The report noted that a key focus of recent reviews was that foundations were becoming more focused, strategic and in some cases aligned to the business, despite the foundation existing in a separate legal framework.
The research links this to a wider trend in CSR activity, noting that what used to fit squarely within the scope of a foundation’s work is increasingly converging with CSR programmes, with a foundation’s activities emerging as a consideration in the development of ‘inclusive business’ products and services, as well as marketing and communication.
The report suggested this could reflect a growing sense from businesses that they can legitimately look for non-commercial returns on social investment, for example, skills development.
Foundations were also increasingly aware of their impact on corporate reputation and of being a visible and accountable demonstration of giving something back.
While some foundations were established as a means of consolidating CSR activity, or as the CSR vehicle of a business, for others a foundation provided a level of “ring-fenced finance” control over activities where an internal CSR programme would not, the report said.
Measuring Inputs and Outcomes
Increased emphasis on strategy and partnerships has raised expectations that corporate foundations will deliver on their aims, bringing with it the question of measurement.
|“Leading foundations seem to be finding a successful combination of doing things right, but also drawing on business expertise to solve problems in an innovative way.”|
The report said that while many foundations had not yet grappled with more than input and basic output measurement, this was likely to change as the need to demonstrate value to both funders and beneficiaries grew.
A ‘new wave’ of foundations was identified in the research – those progressive organisations focused on problem solving, service provision, forward social agendas and innovation. It was those organisation devoting the time and energy to measurement and scoping.
An increasing number are investing in their own research or commission others to do it before undertaking any activity. Partnerships in these organisations are defined by process – from finding the right partner to establishing the right objectives and KPIs, and tracking the progress of the collaboration.
Progressive foundations are developing an understanding based on research and hands-on experience to the level of becoming issue/subject matter experts, called upon by Government to advise and shape policy and practice.
|"There is, amongst these leaders, a sense of responsibility to the future, with more than one building in a consideration of ‘what next?’, and exit strategies to ensure their legacy is a sustainable one."|
Amanda Jordan OBE, Co-founding Director at Corporate Citizenship, urges foundations to be brave in what they can achieve.
“It can be and should be a useful vehicle in achieving real social impact by helping to leverage and unlock the many assets that a business has way beyond its money,” she says.
“It should never be forgotten though that the foundation is only a vehicle – a means to an end and not an end in itself. In my view only by focusing on long term impact can these foundations be truly justified.”
“They may be separate legal entities but by maintaining strong relationships with the funder as well as beneficiaries corporate foundations can play a really valuable role in building partnerships to address the big social and environmental issues of the day.”