Philanthropic Investments Gain Momentum

Companies are moving beyond traditional forms of philanthropic giving and employee volunteering. They are adopting innovative approaches that leverage a range of company resources to have a greater societal impact. As detailed in a new report by The Conference Board ESG Center, one approach that is gaining momentum is societal impact investments, which seek to achieve social good and financial return for the company.

For nearly half of firms already making these investments, the societal impact and financial return are equally important. The findings also shed light on what specific areas companies are directing their societal impact investments: advancing economic opportunity/equality tops the list (71 percent), followed by education (59 percent), and racial equality (47 percent).

“By providing a financial return to the company, societal impact investments can be inherently more sustainable than those that simply involve writing checks,” said Andrew Jones, author of the report and Senior Researcher at The Conference Board ESG Center. “The returns on these types of investments can be recycled into new opportunities, thus providing a second bite at the impact apple. The market discipline of seeking a financial return can also help ensure funds are invested efficiently.”

Beyond societal impact investments, the report looks at the broader landscape of corporate citizenship investing and innovation. The learnings and best practices are drawn from a roundtable of corporate citizenship executives, as well as surveys and in-depth interviews.

Additional findings and insights from the report include:

Ways that Corporate Citizenship is Going Beyond Traditional Philanthropy

Inclusive procurement:

• Companies are going beyond purchasing from minority and women-owned businesses, and focusing on whether firms are operating in, and employing, individuals in disadvantaged communities. 

Company-wide approach:

• Some companies have shifted their focus from specific societal impact investing to orient their broader business strategy to achieve positive societal impact, such as bridging the digital divide in underserved communities.

 Why Corporate Citizenship is Going Beyond Traditional Philanthropy

Along with amplifying impact, companies are seeking commercial benefits:

• The market discipline of seeking a financial return can help ensure funds are invested efficiently. 35 percent of firms are looking for a market or above-market financial return.
• For nearly half (44 percent) of firms already making societal impact investments, the societal impact and financial return are equally important.

The most popular area for societal impact investments is economic opportunity/equality:

• Among the areas in which firms are directing their societal impact investments, economic opportunity/equality tops the list (71 percent), followed by education (59 percent), and racial equality (47 percent).
• Other popular areas include healthcare, community development, climate change, and poverty, all of which were cited by approximately 40 percent of respondents.

“These findings are consistent with prior work by The Conference Board, which found that CEOs and C-suite executives view economic opportunity and equality as their top-ranked ESG-social priority,” said Paul Washington, Executive Director of The Conference Board ESG Center. “As the US and global economy are poised for a slowdown in 2023, concentrating corporate citizenship efforts on areas that enhance economic opportunity and security makes a lot of strategic sense. Those are also areas where consumers and the broader public want companies to focus on.” 

How Companies are Executing Their Societal Impact Programs

Corporate citizenship typically plays the leading role in managing societal impact investments:  

• Corporate citizenship is the most common (50 percent) department that manages societal impact investments, followed by finance (25 percent), and other various departments (25 percent).

Leveraging people along with investments:

• Corporations have long promoted employee volunteering opportunities to give back to local communities. Others are going further in deploying workers in longer-term partnerships between firms and social sector organizations.

CEOs play a critical role in the decision-making and oversight of corporate citizenship:

• The CEO is critical in determining whether to engage in societal impact investing, where it is managed in the organization, and the balance of objectives.

Measuring and Reporting Impact

Companies tend to evaluate their societal impact investments internally on an annual basis:

• A plurality (38 percent) of companies report that they measure their societal impact investments internally on an annual basis; 25 percent of companies report doing this quarterly.

“Companies have a range of frameworks, tools, and approaches to draw from when measuring and disclosing the impact of projects and investments,” said Jeff Hoffman, Leader of the Corporate Citizenship and Philanthropy area at The Conference Board. “While there is no one-size-fits-all approach, they should look beyond measurement in terms of financial resources or the number of people reached, towards showing real change and long-term societal impact.”