Why Do Businesses Need Nonprofits?

Not long along, only a few enlightened businesses actively promoted social issues as part of their marketing and branding. Today, corporate philanthropy and corporate social responsibility are integral parts of almost every serious business plan. 

Corporate philanthropy used to primarily take the form of a financial contribution and to a lesser extent included employee volunteering. Today, more businesses are connecting their brands and products directly by identifying closely with a social issue or a specific cause or nonprofit. 

It’s not just good business, it’s doing the right thing. Doing well and doing good. Businesses are creating a positive public image for themselves, enhancing their relationships with consumers, and engendering a positive work environment.

According to the Giving USA 2019 Annual Report, giving by corporations was estimated to have increased by 5.4% in 2018, totaling $20.05 billion (an increase of 2.9%, adjusted for inflation).

Akin to corporate philanthropy, corporate social responsibility is a voluntary business practice that helps businesses be socially accountable to enhance society and the environment instead of contributing negatively to them. Both corporate philanthropy and corporate social responsibility foster customer loyalty and employee engagement and generate business value.

Socially minded businesses benefit from the halo effect of being a good corporate citizen.

It’s fairly easy to figure out why businesses have jumped on the corporate social philanthropy bandwagon and in truth, many are only practicing a very limited form of corporate philanthropy. But times are changing quickly.

Potential Risks to Businesses     

Although the upside is heavily stacked in favor of those social enterprises expressing generosity, choosing the wrong causes or nonprofit providers can be detrimental if your corporate identity is unmistakably linked to an unpopular cause, or to an unethical or negligent charity.  

Choosing the right cause is relatively easy if you connect with a cause that shares your corporate values and aspirations.  

Selecting the right nonprofit may not be that easy. Once you identify a nonprofit provider that serves the cause and/or population you are seeking to support, due diligence should begin. Here are a few ideas to get you started:

• Review the nonprofit’s digital footprint, including social media.
• Check into the nonprofit through watchdog organizations like GuideStar, Charity Navigator, or even the Better Business Bureau. 
• Call the nonprofit and ask to speak with the CEO or a board member to discuss the possibility of corporate philanthropy for their nonprofit.

The other trending area of concern is operational competence. Many nonprofits have very impressive marketing pieces and donor impact reports, but only the best nonprofits can demonstrate their current levels of operational competence and plans for ongoing improvement. 

Why Do Nonprofits Need Businesses?

The most obvious reason is revenue. For most nonprofits, donations are waning and the trendlines do not look good. 

According to the Fundraising Effectiveness Project, fundraising and the number of donors dropped during the first six months of 2019 when compared to 2018. In short, the number of donors declined 5.8% with a corresponding drop in revenue of 7.3%. That was after declining 1.1% in 2018 (a decrease of 3.4%, adjusted for inflation).

Although corporate philanthropy is not currently a direct contributor to the decline, it could add significantly in the future.

As businesses assume more and more of the social benefactor persona currently belonging to the nonprofit, donors and consumers will have less ability to differentiate where the corporate goodness ends and the nonprofit begins.  

It’s important to note that younger donors already participate in workplace philanthropy. Both Gen X and Millennial staff are four to five times more likely to participate in corporately sponsored fundraisers like walks, runs, or cycling events. 

Nonprofit leaders are already concerned about where the next generation of givers will come from. Millennials and younger generations are expressing their generosity in new ways and definitely not following the giving patterns of their Baby Boomer parents or Greatest Generation grandparents.

Potential Risks to Nonprofits     

When seeking opportunities in corporate philanthropy, it’s extremely important to choose a well-matched partner. This is a serious matter. Choosing the wrong business can tarnish your nonprofit’s reputation if you become yoked to an unpopular, unethical, or negligent business.  

Selecting the right business is not easy but there are steps you can follow. To get your feet wet, you may want to think about a similar-sized local business first. Here are a few ideas to get you started:

• See if any of your current donors give from their business accounts or ask your board members and professional advisors for potential referrals.
• Review the company’s digital footprint, including social media.
• Check their reputation in the community through the Better Business Bureau or Chamber of Commerce.

Be prepared to demonstrate the value of a partnership with your nonprofit to the companies you approach. In other words, how will their supporting your nonprofit benefit them?

Are you ready for corporate philanthropy?

For smart online tools that measure and improve nonprofit operational effectiveness, please visit The Capin Center for Nonprofit Excellence, where nonprofits, funders, and recognized experts work together for the greatest impact. We make nonprofits better. We can help yours.