THE RISE OF THE FOURTH SECTOR
Increasingly, social responsibility is gaining marketplace currency. From global conglomerates to the shop down the block, enterprises are deepening their charitable giving, while making sure to market their virtue in doing so. Such efforts are creating a so-called fourth sector. While such efforts are welcome, the blend of selling the brand while “doing good” has some inherent tension that is worth keeping front and center.
Here’s a snapshot:
Giving from large, multinational corporations even rose slightly (1.3%) in 2008, during the recession, reaching a median total per company of nearly $26 million, according to the annual survey by the Committee Encouraging Corporate Philanthropy (CECP), the international group cofounded a decade ago by the late actor and activist Paul Newman.
Motives cover a lot of territory. Some corporate moves, while creating a glow of good PR and high visibility, are out-and-out donations. For instance, early in 2008, Goldman Sachs earmarked an extraordinary $100 million to teach entrepreneurship and business to women in developing countries. Toward the end of last year, Goldman pledged $500 million to help small businesses, citing its role in the financial crisis as part of its motivation to give back.
More often, the fourth sector is an umbrella for several blended approaches that go by varying labels, from “social entrepreneurship” to “hybrid” or “for-profit philanthropy.” Whatever the moniker, the hallmark of such giving is a combination of altruism, pragmatism and marketing.
One of the most high-profile examples is Google’s DotOrg initiative—officially, Google.org. The project grew out of the well-known pledge made by founders Larry Page and Sergey Brin when the company went public in 2004. At the time, the well-heeled pair promised to reserve 1% of their total profits to “make the world a better place.” However, it wasn’t until January 2008 that the effort launched.
While Google.org funds both nonprofit and for-profit companies to “address the global challenges of our age: climate change, poverty and emerging disease,” the initiative promotes its investments in small and medium-sized for-profit businesses in the developing world. DotOrg has “committed” (but not yet granted) $100 million and has announced it will spend $175 million in an initial round of grants and investments through 2011—still multimillions short of 1% of Google’s massive profits.
At Salesforce.com, whose stock spiked in the last quarter of 2009, the Salesforce.com Foundation has a 1/1/1/1 model, delivering 1% Time, 1% Equity, 1% Product to nonprofit organizations. Since its inception, Salesforce.com and its employees have given over 40,000 hours of their time, millions of dollars in grants and products to more than 1,600 nonprofits. More traditional models include Timberland and its international employee days of service. Plus, the CECP now boasts an international membership of 175 CEOs and chairpersons, with member companies accounting for more than 40% of reported corporate giving in the US.
On the flip side, larger charities are picking up the tools of marketplace branding and using these to generate profile and revenue, too. The biggest nonprofits are spending nearly $8 billion per year on branding, marketing, and public relations, according to a 2006 study by fund-raising consultancy Changing Our World.
None of this is necessarily a bad thing, especially in an age when it’s so tough for any one cause or nonprofit to stand out from the crowd. However, it does argue a need for taking it slow. Just because you’ve heard buzz about a nonprofit “brand” doesn’t mean that organization is doing a good job.
Just remember, even for larger, more visible charities, due diligence is in order.