It’s easy to see how the corporate foundation has gone out of fashion. In many ways it seems a relic, conjuring up an image of corporate fat cats smoking cigars and deciding the best way to avoid paying their taxes. As the prevailing thinking about how companies interact with society has evolved from corporate philanthropy to corporate social responsibility (CSR) to shared value (where companies understand how addressing social issues can help them generate a greater long-term financial return) and beyond, many question the role a corporate foundation can play in this new world.
It’s true that ideally, companies would use their core business assets–whether that’s building software, opening bank accounts, creating a social network, or mining for diamonds – to solve social problems. With a holistic strategy, they can have a much bigger impact than just writing a cheque. But it’s also true that the corporate foundation structure plays a critical role in helping business think innovatively about creating social change. When done right, a corporate foundation can create mutual benefit for companies and society at large, by pushing companies to address critical issues, and consider their stake in creating social change.
The best of both worlds
Cynics may claim that corporate foundations are just glorified tax havens, and while they may have started out that way, it’s not fair to make that generalisation any more. In fact the 100+ corporate foundations in the UK today receive no additional tax benefit from creating a separate structure. What corporate foundations can do is offer companies the chance to set up strategic programmes aligned with their business that, when done right, offer the best of both worlds: access to leverage the heft of the business, with a laser-like focus on social mission.
The C&A Foundation, funded by the family behind the C&A clothing brand, focuses on creating a sustainable and fair apparel industry. Their funding is channelled into some of the most exciting innovations in the space, but they also look to their parent company to create change from within the industry. One of the ways they do this is by partnering with the business to test new models of working, like their work in India with GoodWeave to improve supply chain transparency in the homeworker community. The foundation is able to act as an independent, yet supportive friend – helping the business to better address critical industry challenges
Speaking up where it counts
In other ways corporate foundations have the ability to address core business challenges more freely, and with less risk than their corporate parents. In the ideal scenario, the foundation can even influence how the company deals with these issues and encourage their evolution towards more sustainable business practices.
The Thomson Reuters Foundation has been an outspoken advocate for the need of governments, businesses, nonprofits and others to address modern slavery since 2012. Their unwavering support of the issue has encouraged the Thomson Reuters business not just to interrogate their own supply chain, but to help their clients do the same. In 2015 they announced an effort to create a central, global platform to assist in the fight against slavery and human trafficking in supply chains that will be quality assured and available to global corporations and financial institutions. This is a story of mutual benefit across the board.
Keeping social impact at the heart
The whole sector collectively cringed when the news broke of E.ON’s partnership with Age UK, offering a branded tariff to pensioners that was more expensive than E.ON’s cheapest rate. While blame for that particular action can certainly be distributed, one thing is clear – CSR programmes do not (nor are they required to) share the same commitment to a social mission or impact as corporate foundations. This doesn’t mean that corporate foundations don’t make mistakes, but it does mean that at every level of governance and regulation, from their own trustees to the charity commission, they are required to maintain independence and a deep commitment to their aims and objectives. CSR programmes that sit within the business don’t offer the same assurance.
So what does the future hold for corporate foundations? Probably not giving more money – recent CAF data showed that 2014 was the lowest year for corporate donations by the FTSE 100 for five years – but that doesn’t mean their impact has to fade as well. Intelligent, efficient corporate foundations can help maximise the cash donations, and work to innovate well beyond writing a cheque. Long live the corporate foundation that pushes its parent company to be better, and leverages all the assets at its disposal to create real social change.
Alisha Miranda is managing director of I.G. Advisors.