Corporate Philanthropy Often Betters Their Business Model

Many top executives are besieged these days by nonprofit groups seeking help for a myriad of causes. They realize that corporate efforts to improve society can enhance their company’s reputation, but it isn’t always easy to know which projects to support.

The old model of corporate philanthropy no longer works. Steel magnate Andrew Carnegie, for example, donated millions of dollars of his fortune to build libraries, universities and museums. But he also badly polluted towns where his steel mills operated and dealt harshly with workers, even hiring Pinkerton guards to shoot at strikers.

These days civic largess won’t make up for shoddy treatment of employees, customers or the environment. Beyond decent management practices, though, corporate social responsibility — or CSR as it’s often called — presents a dizzying array of choices, from programs to recycle office stationery to funding for schools in Africa to research on global warming.

The solution for a growing number of CEOs is to focus on programs that directly relate to and benefit their businesses. "It’s very difficult for a CEO to rationalize why you’re spending a certain percentage of your top line on philanthropy," says Orin Smith, president and CEO of Starbucks. His company has been making charitable contributions since it was launched in 1971, he says, "but now we also build social responsibility into our business model."

By Carol Hymowitz

From The Wall Street Journal Online

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