Corporations as New Philanthropists

Philanthropy is evolving, with corporations playing a growing role among the more traditional players in the sector. Can it be said that they are new philanthropists? Why and what does that mean?

As new actors have emerged in philanthropy, traditions are being disrupted, and philanthropic activities are becoming global and increasingly intertwined with business and politics. The evolution of philanthropy now also tends to align with the Sustainable Development Goals (SDGs) set up by the United Nations. These rapid metamorphoses are forcing us to rethink the fundamental contours of philanthropy, its objectives, players, and perhaps, its duties.

For centuries, philanthropy has been closely linked to the corporate world, mostly because philanthropic initiatives typically emanate from rich individuals or families who have accumulated wealth through their business activities. Indeed, a prerequisite for giving is having. Thus, philanthropists have, traditionally, been successful entrepreneurs willing to give to the ‘needy’ from their wealth, either directly or through foundations. A well-known example is Andrew Carnegie, a successful American entrepreneur who gave away his huge fortune almost entirely by the time of his death in 1919, on the philosophy that ‘the man who dies thus rich dies disgraced’. This is a striking instance of the relatively widespread inclination of people to return the society part of their wealth. Academic researchers found that this inclination often arises from a moral duty towards others or because of the ‘warm glow’ feeling triggered by altruistic behaviour.

Thus, in its traditional incarnation, philanthropy has been indirectly associated with business, since the entrepreneur-philanthropists have acted in their own name. This line of demarcation reflects the classical difference between the objectives of corporations and those of their owners. However, this demarcation is becoming increasingly blurry. In fact, many voices say that the focus of corporations should not be the sole interests of their shareholders. They argue that companies’ responsibility and objectives are not limited to maximizing their owners’ wealth, but encompass the interests of other stakeholders, such as employees, suppliers, or local actors – this is known as the so-called stakeholder value model. Accordingly, Environmental, Social, and good Governance (ESG) are factors that must be taken into consideration by businesses. This paradigm shift has crystallized in the concept of Corporate Social Responsibility (CSR). Accordingly, many companies have modified their purpose, governance, and sometimes even core strategies in alignment with the SDGs to contribute to fostering the public good; the B-Corps movement is nothing but an avatar thereof.

Hence, in recent years, the nature and practices of philanthropy have undergone significant transformations. Companies contribute to the common good in a way that is often not second to that of traditional philanthropists. They are becoming key actors in the philanthropy sector by also considering interests other than those of their owners.

This shift is accelerated by growing societal expectations about the immanent duties that companies must fulfil. This is true irrespective of the legal ‘obligation’ to do so, and whether it derives from hard or soft law. Such expectations come from consumers, proxy advisors, and public opinion. To avoid ‘social sanctions’ (e.g., product boycotts or investor exclusions), which is a risk that most companies cannot afford, they proactively take actions to meet these expectations. In a globalized world, this is akin to philosopher Rousseau’s contract social. This contract – a global and unwritten one – is about striking balance among the various stakeholders in light of the current global challenges. If the relationship is too unbalanced, social unrest will prevail; there are currently many signs that we might be getting closer to such instability.

Thus, nolens volens, companies have become modern philanthropists, complementing the important role of the more ‘traditional’ actors of the philanthropy sector. Owing to the new corporate actors, their quantitative importance has increased considerably. Concerning its scope, it is no longer limited to religion, health, education, welfare, culture, civic, and community affairs, but now increasingly focuses on other existential dimensions of society, such as climate change. We adhere to the view that the global and key challenges of our future are the endangered environment and the need to alleviate social inequalities stemming from an increasing concentration of wealth. In this context, we believe that corporations as new philanthropists play a key role in tackling these crucial problems in our society.

Sémia Bey is a project manager at the Geneva Centre for Philanthropy of the University of Geneva (GCP), and Henry Peter is a full Professor at the Faculty of Law and Head of the Geneva Centre for Philanthropy of the University of Geneva (GCP).

This article is culled from Alliance Magazine.

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