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A Conversation With Margaret Coady, Director, Committee Encouraging Corporate Philanthropy

October 07, 2010

Coady_cecp (In her role as director of the Committee Encouraging Corporate Philanthropy, Margaret Coady leads the organization’s long-range strategic and operational planning, conducts research, and runs the annual Excellence Awards in Corporate Philanthropy Awards competition. CECP has just issued Shaping the Future: Solving Social Problems Through Business Strategy, a new report based on research by McKinsey & Co. The following Q&A was conducted by Laura Cronin, director of the Toshiba America Foundation. Cronin wrote about two new education-themed documentaries, Testing Teachers and Waiting for Superman, in her last post.)

Laura Cronin: Your latest report asks a really big question: What will corporate involvement in social issues look like over the next decade? Forecasting and generalizing across industries and national boundaries is pretty challenging, but you were able to come up with an organizing principle for business leaders charged with managing social engagement that you call Sustainable Value Creation. What does the term mean? And how is it being put into practice?

Margaret Coady: We define Sustainable Value Creation as a self-reinforcing state of corporate behavior that simultaneously delivers bottom-line results and community benefits. It's a dense definition, but the underlying concept is simple: Companies should take an active role in helping to solve social problems that are in the companies' best interests to solve.

In the report, Sustainable Value Creation is actually the best of four possible future scenarios that CECP and McKinsey think business and society face over the next decade. The three less-optimal scenarios we identify are called "Dangerous Mismatch," "Dual Capitalism," and "Vicious Circle." Which of the four scenarios comes to pass will depend on two things, in our view: the level and consistency of society's expectations of business; and the extent to which corporations take a leadership role in addressing societal problems.

A handful of cutting-edge companies have already taken the first steps toward Sustainable Value Creation, several of which are detailed in short case studies included in the report. One example is the Western Union Company, a global leader in money transfer services with locations in over two hundred countries and territories and winner of CECP's Excellence Award in Corporate Philanthropy in 2009. With over two hundred million people working outside their country of birth and sending billions of dollars to their families back home every year in the form of remittances, Western Union sees a clear business benefit from engaging in the immigration debate and helping these potential customers succeed in their new communities. The company convenes forums among policy makers, businesses, civil-society organizations, and academic institutions to advance the debate about immigration and migrant rights. It also supports leading-edge research that helps drive dialogue on the issue, which can promote positive effects on customers' quality of life, which in turn is good for business.

LC: Your research found that 77 percent of CEOs believe that embedding social engagement into business strategy is the most important action they can take to address social problems. How are your member corporations putting that priority into practice? And how does that approach differ from more traditional corporate philanthropy?

MC: Sustainable Value Creation is intended as an add-on layer to a company's ongoing community engagement initiatives, such as employee matching-gift programs, signature philanthropic initiatives, corporate foundation giving, product donations, pro bono service, and employee engagement campaigns.

The Sustainable Value Creation model encourages companies to continue to maintain their current programs but also look for ways that their core business can be applied to solving social problems. We've found that companies typically limit the dollar value of what they give using traditional means [Ed. note: around 1 percent of pre-tax profit, according to CECP's annual Giving in Numbers data report], just as they would for any business expenditure.

With Sustainable Value Creation, there is no limit to how much a company invests because, by the very definition of the concept, Sustainable Value Creation directly helps the company's ability to compete.

Readers might ask: If the business is explicitly enhancing its profit along the way, is it really altruism? Isn't it just more of what's good for business? We encourage people to read the report, where we address those questions directly and share the perspectives of leading CEOs on the topic.

The keys to putting these ideas into practice are also discussed in the report, including creating the right corporate structure, choosing the most relevant social issue to address [Ed note: this is absolutely critical, and the report includes an "Issue Ripeness Map" to help companies take this first step], granting authority to those charged with implementation, measuring progress, and communicating results.

LC: Since CECP was established in 1999, a great deal has changed in the world of corporate philanthropy. How would you recommend that nonprofit leaders think about interacting with corporations now? What is the role of the nonprofit fundraiser in this new environment? And how are partnerships getting formed these days?

MC: The companies we surveyed are eager to collaborate with nonprofits and with other companies in their industry/supply chain to solve social problems important to their business, but new organizational structures and actions are likely to be necessary in order to achieve results. While the players largely will be the same, the ways they structure their relationships will have to include some innovative approaches.

Unfortunately, one trend that we saw throughout the recent economic downturn was that companies were not actively taking on new projects and forming new partnerships with nonprofits. Instead, they chose to direct their limited resources to nonprofits with which they already had a history. The exceptions to this were health and community causes, which saw funding increases as companies tried to help cover the acute needs in the georgraphic regions where they operate. We expect that as the economy improves, the appetite for new projects also will improve.

Regarding fundraising, our corporate members strongly encourage nonprofits to always spend considerable time researching the causes that are important to the businesses they approach for funding and other forms of assistance. Given the trend toward Sustainable Value Creation, this may require moving beyond understanding the company's community goals and instead understanding ts larger business strategy. It's a labor-intensive process, and unfortunately we're not aware of a perfect mechanism to shortcut the work, but investing in an understanding of where the company is headed over the next decade and connecting your proposal to those goals can be the beginning of a long and fruitful partnership.

That was the case with McDonald's Corporation. Concerned about forecasts of declining global fish stocks, the company partnered with Conservation International, a nonprofit organization focused on sustainable approaches to development, to implement a sourcing strategy consistent with the Marine Stewardship Council's principles of sustainable fishing. In this instance, CI looked ahead to issues with the potential to affect McDonald's desire to create a more sustainable supply chain and was able to connect its work to the company's goals. We expect to see more partnerships in that spirit going forward.

LC: Paul Newman was a co-founder of CECP and was successful in persuading many business leaders to follow his example of providing financial and other resources to nonprofit organizations. The Newman's Own brand has generated more than $300 million for the common good in just twenty years, a truly remarkable achievement. Do you know of any other companies that are embracing Newman's wonderful legacy? Have you come across anyone creating an exciting new business in order to fuel a charitable purpose?

MC: We've been tracking the progress of the B Corporation model. B Corporations represent a new kind of approach to business that uses the power of the markets to help solve social and environmental problems, along the lines of the Shaping the Future report. To qualify for B Corp status, organizations have to meet three criteria: one, they must have in place transparent and comprehensive standards of social and environmental performance; two, they are required to legally expand their corporate responsibilities to include consideration of stakeholder interests; and three, they are expected to amplify the sustainable business and for-profit social enterprise message. To date, there are a hundred and sixty certified B Corporations in thirty industries, and we're looking forward to watching as this innovative movement evolves.

In addition, CECP's Excellence Awards in Corporate Philanthropy recognize companies and nonprofits that exemplify our Standards of Excellence: innovation, CEO leadership, dedication to measurement, and partnership. Last year’s recipients were Intel Corporation, General Mills, The Boston Beer Company, and Partners in Health, which was the recipient of our NGO award and was nominated by Eli Lilly & Company. All of them are wonderful examples of companies or organizations working to leverage their unique resources to address social problems important to their business.

-- Laura Cronin


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