How Corporate Foundations Are Innovating for Social Impact
By Cathy Moscardini
In times of tumultuous change with so many political uncertainties and big global challenges, companies are questioning what role they want to play in their local and global communities. Some corporations answer this question by setting up a corporate foundation. Our new research suggests that some foundations are fast-becoming the leaders in social innovation. We call them the “Game Changers.”
Corporate foundations can be defined as a legally separate entity whose primary income is derived in some way from a corporate source. While not every organization finds this to be the best model, many value the structure as a safe space. Foundations can provide an arms-length vehicle for creating social change, and a framework of good governance and transparency. Setting up a foundation can also mean that funds are protected from commercial fluctuations of the company, and the separate legal nature means that foundations are required to put the beneficiaries’ needs ahead of any other stakeholder, including the founding or parent company. All this can help promote a climate of forward thinking, boldness and innovation.
Some companies today are thinking about a purpose beyond profit. But for most, short-term financial returns remain the driving priority. This means that many businesses cannot invest in a product or service with a great social impact if it has lower or longer projected financial returns. The idea may not make it to market. That’s where foundations can come in. We have started to see that because corporate foundations are not required to make financial returns, they are able to use the expertise and knowledge of the parent company to deliver services, solutions or products with a massive social impact in real shared value approaches.
While not every corporate foundation is innovating, our new research suggests that change is afoot across the globe. The traditional philanthropic grant-making model (that supported causes on an ad-hoc basis) has transformed into a new, more strategic approach to maximizing social impact. Our study has shown that although financial stability remains a vital concern of corporate foundations to deliver greater impact, many leading foundations are now leveraging the relationship with their parent companies to launch innovative operating models which deliver game-changing programs.
So what sets these entities apart? These game-changing foundations are ruthlessly focused on maximising long-term social impact for beneficiaries. They achieve this through harnessing the business acumen and networks of the parent company. Our report identifies six key characteristics that the Game Changers are exploring in order to innovate for impact:
- Business Acumen By leveraging the expertise and knowledge of their parent companies, game-changing foundations go one step further than facilitating employee volunteering and in-kind donations. They develop products that address a social need and deploy trained experts to deliver high-value, scalable programs.
- Strategic Alignment Game Changers align their strategy to complement and leverage the parent company’s business focus by addressing issues relevant to the industry or geography of the parent company. They adhere to strict legal independence from the parent company, but deliver relevant, common-sense alignment.
- Focused By focusing their programs in a small number of defined focus areas, the Game Changers apply their business acumen, and leverage their expertise through strategic alignment. Impact requires focus.
- Engaging The Game Changers engage with delivery partners, communities, governments and others to advocate for change and create impactful solutions to global problems.
- Impact Measurement Game-changing foundations that measure their impacts are able to understand the difference that their programs are making. Using this information, they adapt and improve their strategy to make it even more impactful.
- Sustainable Financing Thinking about investments as a tool for social change, game-changing foundations are embracing social investment models that generate both financial returns and social impact.
Many corporate foundations remain cautious of tapping into their relationship with their parent companies for fear of risking the independence required by law in many jurisdictions. Cultural and established norms also play a role, varying by sector, in limiting what role foundations are expected to play. But we’ve seen many different levels of operational independence which lie within the realms of being a separate legally entity. Being independent means that a foundation must exist only to further charitable purposes for the public and trustees must act wholly in the interests of the charity. The Game Changers featured in our report demonstrate that they are able to use the experience and knowledge from the parent company to maximize impact for beneficiaries while remaining legally independent.
For all foundations, impact for beneficiaries must remain the focus. And for the Game Changers, they will make use of the resources and expertise available through their parent companies to create the greatest impact possible. In these uncertain times, one thing seems sure: corporate foundations have some exciting times ahead.
The full report by Corporate Citizenship entitled “The Game Changers: Corporate Foundations in a Changing World” can be downloaded here.
About the author:
Cathy Moscardini
Senior Researcher
Corporate Citizenship
Cathy Moscardini is a Senior Researcher at Corporate Citizenship, a corporate responsibility and sustainability consultancy with a team of 45+ based in London, Melbourne, New York, San Francisco, Santiago and Singapore. Cathy works across a variety of clients and industry sectors on projects including community investment and corporate foundations, strategy, corporate purpose, LBG and the Sustainable Development Goals. She has worked with clients such as Abbott, De Beers, Diageo and Unilever, and has recently been involved in Corporate Citizenship’s work on Gender Diversity in the Workplace. Corporate Citizenship also manages LBG, the global standard for measuring corporate community investment, on behalf of its 220+ corporate and corporate foundation members.
