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Conversation with Chris Pinney: Philanthropy is a Human Business

Posted By WINGS, Thursday, January 31, 2013


image courtesy Council on Foundations

Chris Pinney is an authority on business leadership in society. As Senior Vice President of The Alliance for Business Leadership, Pinney focuses on organisational strategy and policy and program development. Pinney is also currently a Senior Fellow with the Aspen Institute in its Business and Society Program, and was the director of research and policy at the Boston College Center for Corporate Citizenship from 2007 to 2010. In a blog for the center, he called Corporate Social Responsibility (CSR) "the new essential for business strategy and success in the 21st century."

Pinney went on to describe CSR as "a strategic response to a business environment in which companies must earn their license to operate from a wide variety of well-informed publics and stakeholders whose expectations for social responsibility continue to grow," adding that "failure to meet these expectations can result in loss of reputation and market share." He claims that giving philanthropy leaders the tools they need to communicate effectively with C-suite executives is a real challenge.

WINGS Managing Editor Chris de la Torre met with Pinney to talk about the evolution of CSR, and to lay out plans for what philanthropists and corporate grantmakers need to make it work. The following is an excerpt from that conversation.

WINGS: Corporate Social Responsibility (CSR) goes by many names, among them corporate philanthropy, corporate social investment, corporate citizenship, and socially responsible business. Is there a preferred term?

Chris Pinney: Frankly, there's a whole number of terms out there. ESG [environmental, social and corporate governance] is the latest term that's being used—corporate social responsibiltiy, sustainability—all of these terms essential refer to, at a meta level, how a company manages its impact on society. And in that context how it maximises its positive impact and minimises its negative impact on society.

The whole evolution of corporate social responsibility has had to do with the changing relationship of business in society as an institution. I've used the term 'changing social contract'. Twenty five years ago the definition of a good corporate citizen was 'obey the law, employ people, and give a little money to philanthropy and you're good'—and in exchange for taxes, government took care of everything else. In other words, as long as you obeyed the law you were responsible because government was ensuring the laws were sufficient and all of the programs were there to take care of all of those 'social' responsibilities and functions.

WINGS: Regarding the growing human capital deficit (including the civil service strata you point out will soon retire) can it be that we're simply experiencing the growing pains of technological progress? Is this whole thing overinflated or should we be worried?

CP: It's an enormous challenge. The point is that if we're looking to the institution of government to solve our problems alone, that's a very unrealistic assumption. We need the second most powerful institution in society—the private sector—to step up in a much more active way, to take responsibility for what's happening in society. For instance, the reason you see many of these businesses involved in STEM and concerned with education is because the traditional model was in exchange for taxes. Government provided a steady supply of trained labor from the public school system—workforce ready labor—and that no longer is happening. We have a huge deficit in the education system. It's not turning out the kinds of graduates that employers need in order to manage the innovation economy.

The average person coming out of school now is likely to have eight different jobs by the time they're 38, and probably half of those jobs they'll have to create for themselves, so you need a much different skill set and a much more entrepreneurial mindset. And it's not simply a matter of STEM [science, technology, engineering, math] but also the entrepreneurial skills, the soft skills—to sell themselves, to package themselves, to start enterprises—to be enterprising. These are enormous structural challenges that we face in the economy, and these are of real concern to the private sector.

WINGS: How do philanthropists work with players in the corporate and public sectors to get the goal, to move things forward?

CP: The challenge we face with philanthropy more broadly and corporate philanthropy in particular, in terms of the cultural legacy, the way it's been defined for the last 50 years in America... corporate philanthropy has been equated with charity, and that stems from a model in which you assume the real purpose of corporate philanthropy is simply to fill in the cracks here and there where existing government services and programs aren't doing the job.

Now we're in a very different situation. We're facing fundamental, systemic challenges in everything from health care and education to looking after seniors to economic development, which require a very different input than simply charity. For companies it means starting to really embrace the full concept of what philanthropy is. The word 'philanthropy' means, from the Greek, 'love of mankind'. That does not mean charity. It means if you love others you actually do whatever you can to help them empower themselves—to address the challenges out there—and that cannot be done simply through transactional charity.

You need to have a model. You need to think of philanthropy as an investment in society, and you need a balanced portfolio. Certainly you still need to be responsive—you've just been through a terrible crisis—there's always a need for charity. But if all it is is charity, it doesn't leverage a bigger effect or bigger impact. It's grossly insufficient to the kinds of needs and changes that need to happen. A smart corporate philanthropy program has a balanced portfolio of philanthropic investments, one of which is traditional charity; you'll still have employee matching gifts—things that express compassion—but you're also constantly looking for leverage opportunities to engage a much bigger input, a much bigger contribution from the company.

So if Starbucks supports cooperatives in the third world and helps those farmers organize cooperatives to improve their social conditions, it is also providing an opportunity for them to organise to a point where they may eventually become part of a supply chain for Starbucks and have a permanent economic stream that's going to help them sustain their development journey. And in the long run—particularly in the case of emerging markets—the most powerful thing corporate philanthropy can do is to help the workforce in those communities become economically self-sustaining and in one way or another connect with supply chains of larger firms, to start getting an economic foothold that will enable them to sustain the development journey.

WINGS: Who handles these types of portfolios on the corporate side and how do philanthropists approach the companies?

CP: In terms of approaching the company, the first thing is to think about the company as a source of support for your organisation, as opposed to seeing the company simply as a source of cash—to think of the variety of ways that company can support your organisation. For that to happen you need to think about where the possibility is—what's the alignment between the charity or the not-for-profit you're running and the interests of the company—whether it's in terms of what it produces and does, or in terms of the particular community it's impacting.

So, for example, if you're a company that's interested in economic development, it doesn't make a lot of sense to aggressively go after a company that's strictly in the food retailing business. That's not going to be its sweet spot. You are better off going after a bank or financial institution that has other obligations to be supportive of economic development initiatives. Conversely, if you're a hunger organisation working in food banks then obviously it makes the most sense to go to companies like Cargill or General Mills or Campbell's Soup, or other companies in the food business. So you have to get aligned with the company you're trying to approach, to see where there's a logical fit, because if there is one then all sorts of other things can happen beyond charity.

And secondly, if you really want to build a relationship with a company, find out who the people are who work there—what's of interest to them. Then, when you have that understanding of the company and its impact, and you've got a sense of what its business model is and what its employees care about, then is the time to approach the company. Start looking at it as the first step in a relationship, not 'if I do a proposal I'll get some cash, thank you very much'.

WINGS: How do the differences between regular grantmakers and corporate grantmakers dictate the approach each takes to solving the same issue?

CP: Primarily what most foundations—purely private foundations—put on the table is money. One can argue they have much more to offer, and what we see—the issue of where is the corpus of private foundations and program-related investments—is that there are other ways private philanthropies can support not-for-profits other than simply giving them grants. They also have knowledge. They have networks, presumably if they have a lot reports from other grantees they've done, and they may have insights and knowledge that can be of value to the particular not-for-profit and what it's trying to do.

By and large, foundations and private philanthropies are very poor at exchanging information and collaboration on a large scale. There's obviously exceptions to the rule, but by and large every foundation tends to have its own focus, its own evaluation criteria. They bring a lot of information in from reports and studies that are done and a lot of it ends up in filing cabinets and not really played back to the community. In other words, there's a huge body of knowledge there that we're not leveraging. So that's a comment on the private foundation world. These are some of the challenges that leading foundations are trying to address.

In a corporate foundation you've got a much bigger potential leverage—a much bigger asset to engage—because the philanthropy, in the case of the grants money the corporate foundation puts out, is just the tip of an iceberg for a much bigger relationship. There's a much bigger potential to leverage a bigger effect but it won't be the cash. This is the smallest piece of the equation. Think of the cash as 20% that you're using to leverage the other 80% which is the rest of the value that the company can add. That means you have to approach working with a company, not as a financial ask but as a partnership, to achieve an effect or a purpose that you both have in common, something that will be of interest to both of you. This goes for long term relationships, not necessarily for when you have an emergency. But you have to approach it with a different mindset than you will going after a traditional foundation grant.

WINGS: What else can philanthropists and corporate grantmakers offer each other?

CP: This requires a high degree of competence on both sides of the equation. There are two dimensions to this. On the corporate side, traditionally a lot of philanthropic managers came from outside the company. They were people who were hired to run the foundation. There was an arm's distance relationship between the foundation and the company, and really the two had no connection at all. That was a traditional model from 25 years ago.

Now you're moving to a much more highly integrated model where often the philanthropic foundation head is coming from inside the company itself. In other words they know the business, which is the asset, because then they're in a position to know how to leverage other resources in the company. They have credibility inside the company, they know the company and the culture and they can work with it. So it's a very different set of competencies and skills that somebody who's a business person is bringing to that job than somebody who's just an outsider whose only background is in the community, but doesn't understand to know business. This goes well beyond traditional mindsets. It goes from simply having someone who's administratively good at managing money and managing grants management, to somebody who's actually an entrepreneur inside the company, someone who's constantly looking for opportunities in their philanthropic portfolio to leverage a bigger effect in the company.

You also need not-for-profit leaders who understand business and know how to approach a business, who understand what return on investment means, who understand what performance management means, who know how to do metrics, and are prepared to make a business proposition that talks about the effect—the impact—that will be achieved, and where the potential linkages might be for the company. So the key areas are management quality, leadership, employee development, and adaptability.

A lot of big global companies, before they ever enter a new market, will build a philanthropic relationship in that new market, in that new country they're trying to enter into, to get a better understanding of what the social issues are—the context they're about to go into. So when they do enter the market commercially, they have a relationship with stakeholders. They know the society they're about the operate in, they're aware of the risks and cultural problems and they'll be better situated to start their business.

WINGS: How common is this approach?

CP: It's absolutely the leading edge of the philanthropic approach. I think global 300 companies are very much in this new model in the way they manage their philanthropy, but there are still a lot of companies that are way back in terms of their development of this kind of approach. And the same thing can be said for not-for-profits. One could argue the majority of not-for-profits just see business as a source of cash, so they miss the bigger equation altogether. Philanthropy is a human business. It's built around relationships.

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