MANAGING CORPORATE GIVING

From INSEAD Knowledge (http://knowledge.insead.edu)

Nothing galvanizes people more than a global disaster. When the Asian tsunami struck in December 2004, there was an outpouring of grief, and subsequently aid and relief was shipped to the affected countries.

However, when Renee Acosta, CEO of Global Impact, a U.S.-registered nonprofit organization, was contacted by corporate partner Wells Fargo Foundation to help in this crisis, she was a little surprised.

Global Impact, which had focused for decades on charitable workplace fund-raising, did not usually get involved in disaster relief fund-raising. But it decided to accept this unusual request and so a partnership which included three corporate members -- Wells Fargo, PepsiCo and California Pizza Kitchen -- was formed, with Global Impact as the administrative partner. Within 72 hours, Global Impact set up a link for the intranets of their corporate partners to a new Web site, through which employees from the three companies could learn about charities on the ground and make credit card or payroll donations. 

By early 2006 Global Impact had entered a private-public partnership with four American CEOs to administer funds raised to aid the victims of the 2005 Atlantic hurricane season, and later that year it was tapped to be the administrative partner in a U.S.-Lebanon partnership, comprised again of four CEOs raising funds to invest in communities following the destruction resulting from political conflict.

With scenarios like these becoming more commonplace, corporate giving has become more complex. This increased complexity, in turn, has prompted the need for clear processes in order to ensure its effectiveness and sustainability.

A recent case study conducted by INSEAD professors Margaret Hanson and Luk Van Wassenhove with research associate Orla Stapleton chronicles the changing political and social environment of global giving in the U.S. post-9/11. The study also explores how Global Impact became a trusted intermediary between private and corporate philanthropy on the one hand, and their global member charities on the other.

In the past, charitable workplace giving, in the U.S. at least, was more focused on domestic needs, such as early childhood, health, and social services. Today, charitable giving has a more global outlook. Companies and their employees reflect a global economy and disasters are global events, drawing in individuals through the media, heightening concerns for innocent victims across the globe.

Between 1995 and 2006, Global Impact's charity revenues grew to $141 million from $6 million, with most of the growth coming from the private sector. A catalyst for this change was that less funding was available from a shrinking public sector, so Global Impact had to search for new sources of funding for their member charities. Concurrently, business leaders were also paying more attention to the nonprofit sector, in part due to the public debate over social responsibility.

Though on an upswing, private corporate giving does have its challenges. These include greater demands for increased transparency and results, as well as making sure that it is in line with the corporate values of the company.

"The big difference is the amount of transparency demanded by modern donors. They want to see how their charity dollar goes to work. They want a tax deductible receipt. They want to go online and track how their money is spent," says Hanson, a Senior Research Fellow and Adjunct Professor of Economics and Political Science at INSEAD.

"Employees don't always want to donate administrative overheads, so Global Impact might sometimes separate out the administrative fee, and find a corporate philanthropy grant, so that employee giving goes straight to service the disaster relief," she says.

Non-governmental organizations (NGOs) are not exempt from scrutiny either. Though the volume of donations to U.S. charities surged in the wake of the 9/11 attacks, so did the level of public scrutiny over how NGOs were allocating these funds.

"I think that humanitarian organizations today understand that if they want money from the corporate sector which they know they need, then that transparency comes with it. And the better they can show that they can use the money well and wisely, the more probability for them to get more funds," says Van Wassenhove.

In order to better serve the needs of its member charities and corporate America, Global Impact set a precedent by first altering its own business model. Acosta took transparency to even greater heights within her nonprofit organization, complying with all the legislation directed at the corporate sector.

Auditors were given free rein to anything they wanted to check, and they reported directly to the board, instead of Acosta. This became the standard to which Global Impact would operate, putting in place an annual compliance report that addressed nonfinancial risks, prepared by the audit committee.

Next came a thorough screening of its member charities. Each charity was required to undergo an annual application and review process, with onsite visits conducted every three years.

Still Acosta maintains her company doesn't tell its members how to do their job, but supports them and introduces them to companies and employees who want to give. Global Impact aims to increase accountability, track financial flows and increase the traceability of the charitable dollar.

Indeed corporate giving has a new face. Though it is old fashioned philanthropy at its core, accountability has become paramount, in tandem with an ever-increasing global stakeholder engagement.

"An important part of social innovation," says Hanson, "is fitting the business model to a dynamic social and political context and finding the opportunity."